<PAGE> 1



                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 20-F

(Mark One)

    [ ]   REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE
          SECURITIES EXCHANGE ACT OF 1934

                                       OR

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

                    For the fiscal year ended April 30, 1999

                                       OR

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

            For the transition period from .......... to ...........

                         Commission file number: 0-19696

                                   MERANT plc
             (Exact name of Registrant as specified in its charter)

                                England and Wales
                 (Jurisdiction of incorporation or organization)

       The Lawn, 22-30 Old Bath Road, Newbury, Berkshire RG14 1QN, 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.

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: 143,672,697 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  X         No ___
          ------
Indicate by check mark which financial statement item the Registrant has elected
to follow.

          Item 17  __    Item 18  X
                         ----------

<PAGE> 2

                               TABLE OF CONTENTS


                                                                            Page

General Introduction...........................................................1

PART I

Item 1.   Description of Business..............................................2
Item 2.   Description of Property.............................................12
Item 3.   Legal Proceedings...................................................13
Item 4.   Control of Registrant...............................................13
Item 5.   Nature of Trading Market............................................14
Item 6.   Exchange Controls and Other Limitations Affecting Security Holders..15
Item 7.   Taxation............................................................15
Item 8.   Selected Financial Data.............................................18
Item 9.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations...............................................19
Item 9A.  Quantitative and Qualitative Disclosures About Market Risk..........19
Item 10.  Directors and Officers of Registrant................................19
Item 11.  Compensation of Directors and Officers..............................22
Item 12.  Options to Purchase Securities from Registrant or Subsidiaries......22
Item 13.  Interest of Management in Certain Transactions......................23

PART II

Item 14.  Description of Securities to be Registered..........................23

PART III

Item 15.  Defaults Upon Senior Securities.....................................34
Item 16.  Changes in Securities and Changes in Security for Registered
          Securities and Use of Proceeds......................................35

PART IV

Item 17.  Financial Statements................................................35
Item 18.  Financial Statements................................................35
Item 19.  Financial Statements and Exhibits...................................35

Signatures....................................................................42

<PAGE> 3

                              GENERAL INTRODUCTION

     This annual report contains  translations of certain amounts from GB pounds
to U.S.  dollars.  These  translations  have been made at the noon buying  rates
published by the Federal  Reserve Bank of New York on the relevant  dates.  They
should not be construed as  representations  that the GB pound amounts  actually
represent the U.S. dollar amounts or could be converted into U.S. dollars at the
rates indicated or at any other rate. In its consolidated  financial  statements
MERANT  uses  exchange  rates  which are  published  at the close of business in
London,  and  which  therefore  may  differ  from the  noon  buying  rates.  For
additional  information  on exchange  rates,  see  "Management's  Discussion and
Analysis  of Results of  Operations  and  Financial  Condition  - Exchange  Rate
Fluctuations"  on pages 29 and 70 of the MERANT Annual Report Detail included in
MERANT's  Annual  Report to  Shareholders  for the year  ended  April  30,  1999
contained  in the Report of Foreign  Issuer on Form 6-K  furnished to the SEC on
August 27, 1999, which sections are incorporated in this Form 20-F by reference.
On April 30, 1999, the noon buying rate was $1.61 per GBP 1.

     We publish annual reports containing annual audited consolidated  financial
statements  and  opinions on the  financial  statements  by  independent  public
accountants.  Financial  statements  are prepared in accordance  with U.S. GAAP,
expressed in U.S. dollars,  and also in accordance with U.K. GAAP,  expressed in
GB pounds.  U.K.  GAAP  differs from U.S.  GAAP in,  amongst  other  areas,  the
treatment of mergers,  of goodwill and other intangibles  acquired in connection
with the  purchase of  subsidiaries,  in the methods of  computing  earnings per
share, and in other disclosures and presentation.

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

     Each of these  reports is furnished  to The Bank of New York as  depositary
under a deposit  agreement  (see Item 14). The  depositary  generally  will mail
these reports to record-holders of American depositary receipts, or ADRs. MERANT
also furnishes to the depositary all notices of shareholders' meetings and other
reports  and  communications   that  are  made  generally  available  to  MERANT
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 not required to
file quarterly  reports with the SEC.  However,  we began  furnishing  quarterly
reports to the SEC on Form 6-K on a voluntary basis in June 1997.  These reports
include the results for the  applicable  fiscal  quarter in a format  similar to
that of a Form 10-Q. Also, we are not currently required to file  electronically
with the SEC but as of March 1997, we began  voluntarily  submitting our filings
electronically to the SEC.

     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  for the years ended
April 30, 1999, January 31, 1998 and January 31, 1997 have been delivered to the
Registrar of Companies  for England and Wales.  The  auditor's  reports on these
accounts were unqualified.

     On November 30,  1998,  MERANT  changed its fiscal year end and  accounting
reference  date to April 30 from January 31. In this Form 20-F and the financial
statements  incorporated  in this Form 20-F by reference we use the terms fiscal
years  1999,  1998 and 1997 and the 1998  transition  period to mean the  fiscal
years  ended  April 30,  1999,  January  31,  1998 and  January 31, 1997 and the
three-month period ended April 30, 1998. MERANT submitted a Transition Report on
Form 20-F to the SEC on February 26, 1999 covering the 1998 transition period.



<PAGE> 4

     DataDirect,  Micro Focus and PVCS are registered trademarks, and MERANT and
Egility are trademarks,  of MERANT.  Certain other trademarks belonging to other
companies  appear in this annual report and are the property of their respective
owners.

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

General
-------

     MERANT plc was  incorporated  in England in March 1983 as a public  limited
company  under  the  Companies  Acts  1948 to 1981 of Great  Britain  under  its
original  name,  Micro  Focus Group plc.  In May 1983,  the  company  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, the company became listed on the Nasdaq National  Market.  On February 16,
1999, the company changed its name from Micro Focus Group plc to MERANT plc.

     MERANT  designs and develops  computer  software  for business  application
development  and  provides  related  support  services.   Our  solutions  permit
developers to develop,  deploy,  maintain and test software applications for use
on a wide  range of  hardware  and  software  platforms,  from the  Internet  to
personal   computer   workstations  and  mainframe   computers   throughout  the
enterprise.

Industry Background
-------------------

     The computer software industry is divided into many categories, including:

     *    operating systems such as UNIX and Windows;

     *    end-user  software  applications  for the average desktop user such as
          spreadsheet and word processing programs,

     *    application  development tools such as compilers and rapid application
          development tools,

     *    enterprise-wide  packaged  software  applications  which  are  sold as
          packages and then customized for each enterprise  based upon the needs
          of the individual user, such as accounting software, and

     *    custom  applications which may address a wide variety of needs but are
          typically  created for a single  enterprise  to meet unique  corporate
          objectives.

     Within that  industry,  MERANT's  core  business  is to provide  enterprise
application development solutions. We provide application development tools that
are used to create and improve the computing applications of an enterprise,  and
related support and training services. Our solutions enable businesses to:

     *    transform  enterprise  applications  for the changing  technology  and
          business requirements of the e-business environment,

     *    manage the application development process,

     *    provide integrated data connectivity across the enterprise,

     *    extend legacy applications to the Internet, and

     *    create an e-business strategy and develop e-commerce applications.

                                       2
<PAGE> 5

Solutions
-----------

     MERANT  operates  in  four  business  segments,  as  indicated  below.  The
solutions  provided  by each  segment are  marketed  throughout  the world.  The
segments are:

     APPLICATION CREATION AND TRANSFORMATION,  or ACT - This includes the MERANT
Micro  Focus  range  of  products  and  services,  which  enables  customers  to
accelerate  e-business  by  maintaining,  transforming  and  extending  business
applications. The product lines are:

     *    Application  Extension:  designed to enable  customers to extend their
          COBOL assets to the web and other distributed platforms.

     *    Mainframe Development: designed to enable customers to maintain legacy
          applications and increase  productivity by extending their development
          environment to the workstation.

     *    Application Transformation:  designed to transform legacy applications
          for  euro-readiness and Year 2000 compliance,  including  remediation,
          verification, testing, due diligence and reporting requirements

     APPLICATION  DEVELOPMENT  MANAGEMENT,  or ADM - MERANT's ADM solution helps
provide quality throughout the application  development  process. It consists of
the PVCS series, a series of products that enable software  developers to manage
software configuration and change in a team development environment,  such as on
a LAN or the Internet. The PVCS series includes tools for software configuration
management, process automation, issue management, web content management and web
application  development.  The ADM solution  leverages  team  development on the
local area  network or the Web,  while  supporting  multi-operating  systems and
multi-tool environments.

     ENTERPRISE  DATA  CONNECTIVITY,  or EDC - MERANT's  EDC  solutions  address
enterprise data access,  connectivity and integration.  MERANT  DataDirect helps
customers integrate corporate data assets across new and existing systems,  from
the  mainframe  to the  Internet.  DataDirect  provides  organizations  with  an
information  platform,  permitting  flexible  response  to market  dynamics  and
preservation  of investment in existing  resources.  It supports widely accepted
standards, including ODBC, JDBC and OLE DB, and major operating systems and data
sources.  DataDirect  offerings also include solutions to deploy  cross-platform
applications accessing multiple data sources.

     ENTERPRISE  CONSULTING  SOLUTIONS,  or ECS - MERANT's enterprise consulting
solutions are a flexible suite of  customizable  solutions  designed to meet the
full spectrum of an organization's transformation to e-business,  remaining Year
2000 compliance requirements, validation and verification efforts, euro currency
conversion  and  other  mass  change  initiatives.   ECS  provides  support  for
companies'  strategic   technology-related   business   initiatives,   including
developing e-business strategies and deploying e-commerce intranet, extranet and
Internet  applications,  and helping  development  organizations  improve  their
processes and operations to attain software development standards.

     MERANT EGILITY - This is the MERANT framework for rapidly enabling existing
businesses  to  compete in  e-business,  and  provides  solutions  for  creating
e-business strategy,  building e-business and e-commerce intranet,  extranet and
Internet   sites,   extending   legacy   applications,   integrating   data  and
applications, managing web content and developing web applications.

                                       3
<PAGE> 6

Support and Training Services
-----------------------------

     MERANT  offers its customers a wide variety of support  services  which are
intended to help  customers  gain the benefits  from the  solutions  that MERANT
delivers.  Customers  who  purchase  maintenance  services  benefit  from MERANT
SupportNet,  which provides technical support,  and product maintenance releases
and updates, a web-based customer  community for sharing  information  regarding
MERANT products and other support services.

     MERANT  also  provides   comprehensive   fee-paid  education  and  training
solutions  through MERANT  University.  Training  offerings include both on-site
training and training at a MERANT training  center and are focused  primarily on
the use of MERANT solutions.

Sales and marketing
-------------------

     MERANT markets and  distributes  its products on a worldwide  basis through
multiple  channels.  Sales  are made  directly,  using a  combination  of field,
telesales,  third parties distribution and the Internet. We have local sales and
marketing operations in the U.K., the U.S., Australia,  Belgium, Canada, France,
Germany, India, Italy, Japan, the Netherlands,  Portugal,  Singapore,  Spain and
South Africa. Our direct sales effort is augmented with a network of independent
software vendors,  dealers,  distributors,  original equipment manufacturers and
value added resellers in 40 countries around the world.

     During the last fiscal year, sales by geographic region were distributed as
follows:  60% in the U.S.,  19% in the U.K.,  6% in Germany,  10% in the rest of
Europe (excluding the U.K. and Germany), 1% in Canada, 2% in Japan and 2% in the
rest of the  world.  As of April 30,  1999,  MERANT's  sales  and sales  support
organization  consisted of 225 people in the United States, 193 people in Europe
and 30 people located in other countries.  MERANT has distributors  representing
its products throughout the world.

     Our  end-user  customers  consist of  corporate  data  processing  centers,
independent  software  vendors,  individual  software  developers,   value-added
resellers and computer equipment manufacturers  worldwide.  The customer base is
broad, and no individual  customer  accounted for more than 10% of total revenue
in fiscal years 1999,  1998 or 1997.  Additionally,  MERANT's  business does not
concentrate on any specific industry.

Telesales

     Telesales representatives  concentrate on sales at the project level and to
smaller  accounts,  selling  to  individual  developers  and  project  managers.
Telesales  representatives  concentrate  their  efforts  on one  solution  area.
Telesales  are  supported  by mailings  to lists of  prospective  customers  and
advertising in selected trade magazines.  MERANT also offers special  promotions
and incentives from time to time aimed at introducing  MERANT's  products to new
users.

Field Sales

     Our field sales  personnel  are located in several major cities in the U.S.
and  throughout  the  world,  offering  local  sales and  technical  support  to
customers and prospects. Field sales personnel also concentrate their efforts on
one  solution  area within a defined  geographical  region.  Field sales  builds
long-term  relationships  with our largest customers and prospects.  Field sales
personnel  assist  prospective  and current  customers in  evaluating  needs and
solutions and guide them in the  evaluation  and use of MERANT  products.  Field
sales personnel focus their efforts  primarily on large corporate  prospects and
customers.

                                       4

<PAGE> 7

Third Parties

     In addition to our own field sales and telesales  organizations,  we market
our  technologies  and  products  through  a global  network  of third  parties,
including:

     *    independent software vendors, or ISVs

     *    value-added resellers, or VARs

     *    original equipment manufacturers, or OEMs


     *    other dealers and distributors.

Through third party  alliances,  MERANT enables  selected ISVs and OEMs to embed
and sell MERANT  technologies  in their own products.  Alliances with other ISVs
include joint development and marketing arrangements.  We also have arrangements
with VARs,  dealers and  distributors to resell our products in markets which we
cannot cost effectively serve on a direct basis.

Internet

     We also use the Internet as a marketing and sales  channel.  We promote our
products  and  services  and offer  demonstration  and  evaluation  versions  of
products on a trial basis.  We also  conduct  prospect  identification  and lead
generation programs over the Internet. We intend to continue to embrace Internet
technology to develop and deliver new products and to provide  better and faster
service to customers.

Research and Development
------------------------

     MERANT has a policy of consistently  updating its software products for the
various operating systems consistent with customer demand. Each new release adds
greater   functionality  and  more  features  to  the  products.   Research  and
development expenditures in fiscal 1999, the three-month 1998 transition period,
and fiscal years 1998 and 1997, represented approximately 14%, 12%, 15%, and 21%
of MERANT's revenue.  Those  expenditures are quantified in the following table,
which also discloses the costs  capitalized  and the amounts of  amortization of
capitalized costs for each period.

<TABLE>

<S>                                               <C>            <C>            <C>            <C>

In millions of U.S. dollars                        Year           Three          Year           Year
                                                  ended           months         ended          ended
                                                 April 30,        ended        January 31,    January 31,
                                                  1999           April 30,        1998           1997
                                                                   1998

R&D expenditures, before capitalization           $53.6          $13.7          $56.2          $60.6
Costs capitalized as software product assets       (8.5)          (2.5)         (10.3)         (17.7)
Amortization of previously capitalized software    14.8            3.3           14.9           21.4
R&D charge                                        $59.9          $14.5          $60.8          $64.3

</TABLE>

     MERANT has signed license and distribution  arrangements  that enable it 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. For the year ended April 30,  1999,  revenue from
these products accounted for approximately 2% of our total net revenue.

     The products  that we ship are comprised  primarily of printed  material on
paper and software programs copied onto diskettes,  tape media or CD-ROM.  These
raw materials are widely available.

                                       5

<PAGE> 8
Employees
---------

     As of April 30, 1999, MERANT had 2,018 employees,  of whom 484 were located
in the U.K.,  1,119  were in the U.S.  and 415 in other  countries.  None of our
employees  is  represented  by a labor  union.  MERANT has  experienced  no work
stoppages and believes its relations with its employees are good.

     MERANT has adopted policies with regard to issuance of share options to its
employees.  We have an  ongoing  policy of paying  cash  bonuses  based upon our
financial performance relative to plan. These policies, together with our sales,
marketing  and  financial   practices,   are  designed  to  encourage   employee
performance and minimize employee  turnover,  although there can be no assurance
that these policies and practices will be successful.

Recent Acquisitions or Dispositions
-----------------------------------

     During fiscal 1999, MERANT completed three business combinations.

     On May  15,  1998,  we  acquired  all  the  share  capital  of our  Italian
distributor,  Micro Focus Italia,  s.r.l.,  for total cash consideration of $4.6
million. On August 13, 1998, we acquired all the share capital of our Australian
distributor,   Advanced   Software   Engineering   Pty  Ltd.,   for  total  cash
consideration  of  $2.5  million.  These  transactions  were  accounted  for  as
purchases under U.S. GAAP.

     On  September  24,  1998,  we  completed  a merger with  INTERSOLV,  Inc, a
Rockville,  Maryland-based  provider of software  solutions that  facilitate the
development,  delivery  and  deployment  of business  information  systems.  The
transaction was accounted for as a pooling of interests  under U.S. GAAP.  Under
the terms of the agreement,  each share of INTERSOLV  common stock was exchanged
for 0.55 MERANT ADSs. In addition,  each outstanding option or right to purchase
or acquire shares of INTERSOLV  common stock was assumed by MERANT and became an
option or right to purchase or acquire MERANT ADSs with appropriate  adjustments
to the price and number of shares based on the  exchange  ratio of 0.55 ADSs per
INTERSOLV  share. The merger was structured as a tax-free  reorganization  under
U.S. tax law. MERANT issued  approximately  12.6 million new ADSs  (representing
approximately  63.1  million new ordinary  shares) in exchange  for  INTERSOLV's
common  stock  and  share  equivalents  outstanding,  which  at the  time of the
completion of the merger represented approximately 46% of MERANT's share capital
on a fully-diluted  basis.  Prior to the merger,  INTERSOLV was a public company
listed on the Nasdaq National Market.

     Since  the end of the  current  fiscal  year,  on August  3,  1999,  MERANT
acquired  all the share  capital  of  Essential  Software  Inc.,  for total cash
consideration  of up to $15  million,  subject  to the terms of the  acquisition
agreement.  Essential Software,  Inc. was an Internet professional services firm
based in Raleigh, North Carolina, which did business as The Marathon Group. This
transaction is intended to be accounted for as a purchase under U.S. GAAP.

Risk Factors
------------

MERANT'S  OPERATING RESULTS MAY FLUCTUATE,  AND ANY FLUCTUATIONS COULD ADVERSELY
AFFECT THE PRICE OF MERANT SECURITIES

     MERANT's  future  operating  results  are subject to  quarterly  and annual
fluctuations.  If MERANT fails to meet the  expectations of securities  analysts
and investors as a result of any future  fluctuations in its quarterly operating
results, the market price of MERANT securities would likely decrease.  We expect
that our  results  may  fluctuate  in the future  due to a variety  of  factors,
including:

     *    demand for our products,

     *    the size and timing of customer orders and the lengthy sales cycle,

     *    product life cycles,

     *    our ability to introduce  and market new and enhanced  versions of our
          products on a timely basis,

     *    the   introduction   and   acceptance  of  new  products  and  product
          enhancements by us or by our competitors,

     *    customer order deferrals in  anticipation of new or enhanced  products
          or technologies,

     *    the timing of product  introductions  or  enhancements by us or by our
          competitors,

     *    technological changes in the software industry,

     *    changes in the mix of distribution channels through which our products
          are offered,

                                       6

<PAGE> 9


     *    purchasing patterns of distributors and retailers,  including customer
          budgeting cycles,

     *    the quality of products sold,

     *    price and other competitive conditions in the industry,

     *    changes in our level of operating expenses,

     *    changes in our sales incentive plans,

     *    the cancellation of licenses during the warranty period,

     *    non-renewal of maintenance agreements,

     *    the effects of extended payment terms  (particularly for international
          customers),

     *    economic conditions generally or in various geographic areas, and

     *    other factors discussed in this section.

MERANT'S INSIGNIFICANT BACKLOG AND LONG SALES CYCLE COMBINED WITH COSTS THAT ARE
FIXED,  MAKE IT DIFFICULT FOR US 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 and timing of, and our ability
to fill, orders received in that quarter.  In addition,  the purchase process of
our customers typically ranges from a few weeks to several months or longer from
initial  inquiry  to order,  which  makes the timing of sales and  license  fees
difficult to predict.  Because our staffing and operating  expenses are based on
anticipated  total revenue levels,  and a high percentage of our costs are fixed
in the  short  term and do not  vary  with  revenue,  small  variations  between
anticipated  orders and actual orders, as well as 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, MERANT's
quarterly  operating  results and cash flow would  suffer from a lost or delayed
sale.  Moreover,  if significant  sales occur earlier than  expected,  operating
results for later quarters may suffer.

MERANT'S  REVENUE COULD DECLINE IF CUSTOMERS  DEFER SPENDING UNTIL AFTER TURN OF
THE CENTURY

     Many of MERANT's existing and potential  customers could implement policies
that  prohibit or  strongly  discourage  making  changes or  additions  to their
internal  computer systems prior to or shortly after the turn of the millennium.
If existing or potential  customers delay purchasing  products and services as a
result of Year 2000 issues,  we could  experience lower revenues until customers
resume more normal buying  patterns.  We anticipate that demand in the Year 2000
product and service market will decline,  perhaps rapidly, in anticipation of or
shortly  following  the Year 2000. We also  anticipate  that demand for our Year
2000 compliance  products and services may decline  significantly as a result of
new technologies, competition or other factors.

SEASONALITY CAN CAUSE MERANT'S OPERATING RESULTS TO FLUCTUATE

     MERANT's 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, 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  recognize 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.

MERANT's  revenues could decline if there is a decline in the demand for or use
of the COBOL language or mainframe computers


                                       7

<PAGE> 10

     A substantial  portion of MERANT's net revenue is derived from products and
related services for mainframe application development in the COBOL language and
COBOL compilers running on workstations and personal computers. We expect that a
substantial  portion of our net revenue will be derived from these  products and
services in the future.  As a result,  our future operating  results depend upon
continued  market  acceptance and use of the COBOL language.  Any decline in the
demand for or market  acceptance or use of the COBOL language or mainframes as a
result  of  competition,  technological  change  or other  factors  could  cause
MERANT's revenues to decline.

IF MERANT FAILS TO ADDRESS YEAR 2000 ISSUES  ADEQUATELY,  IT MAY LOSE REVENUE OR
INCUR SIGNIFICANT ADDITIONAL COSTS

     MERANT's products are used in IT systems  containing  third-party  hardware
and  software,  some  of  which  may  not be Year  2000  compliant.  Many of our
customers  use legacy  computer  systems  that are  expected to be  particularly
susceptible to Year 2000 compliance issues.  Various commentators have predicted
that a significant  amount of litigation  may arise out of Year 2000  compliance
issues.  Customers or former  customers may bring claims or lawsuits  against us
seeking  compensation  for losses  allegedly  associated with Year  2000-related
failures.

     Although we believe  that our Year 2000  readiness  efforts are designed to
appropriately  identify  and address  those Year 2000 issues that are within our
control,  our efforts may not be fully effective.  The novelty and complexity of
the issues presented and our dependence on the preparedness of third parties are
among the factors that could cause our efforts to be less than fully  effective.
Moreover,  Year 2000 issues present many risks that are beyond our control, such
as the  potential  effects of Year 2000  issues on the economy in general and on
our  business  partners  and  customers  in  particular.  In  addition,  we  may
experience  significant  additional  expenses for  unforeseen  Year 2000 issues,
including those out of our reasonable control.

IF OUR NEW PRODUCTS OR PRODUCT ENHANCEMENTS FAIL TO ACHIEVE CUSTOMER ACCEPTANCE,
OR IF WE FAIL  TO  MANAGE  PRODUCT  TRANSITIONS,  OUR  BUSINESS  REPUTATION  AND
FINANCIAL PERFORMANCE WOULD SUFFER

     MERANT is 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 MERANT TO LOSE CUSTOMERS

     Software  products  as  complex  as those  offered  by MERANT  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 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 MERANT'S
COMPETITIVE POSITION

     MERANT's success depends upon its proprietary software technology.  Despite
the  precautions we take to protect our proprietary  rights,  it may be possible

                                       8
<PAGE> 11

for a third  party  to copy or  otherwise  to  obtain  and use our  products  or
technology   without   authorization,   or   to   develop   similar   technology
independently. Policing unauthorized use of our products is difficult, and while
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.  Patents  have been  granted on  fundamental
technologies  in  software,  and patents  may issue that  relate to  fundamental
technologies incorporated into our products.

OUR PRODUCTS MAY INFRINGE ON THE INTELLECTUAL  PROPERTY RIGHTS OF THIRD PARTIES,
WHICH MAY RESULT IN LAWSUITS AND PREVENT MERANT FROM SELLING OUR PRODUCTS

     There are currently no notices or pending  claims that  MERANT's  products,
trademarks or other proprietary  rights infringe the proprietary rights of third
parties.  However,  third parties could assert infringement claims against us in
the future. If it is necessary or desirable, we may seek licenses under disputed
third party  intellectual  property rights.  However,  these licenses may not be
available on  reasonable  commercial  terms,  if at all. 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 of its
products.  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 favor.  In the event of an adverse  ruling in any  litigation,  we may be
required to pay substantial damages,  discontinue the use and sale of infringing
products,  expend significant resources to develop non-infringing  technology or
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,  we believe  that  software  developers  may become
increasingly  subject to  infringement  claims.  Any claims  against us, with or
without merit, as well as claims MERANT initiates 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 SHARE

     Rapid  technological  change and aggressive  competition  characterize  the
markets in which  MERANT  competes.  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 that may be less
costly or provide better performance or functionality than our products. Some of
our current and prospective  competitors in our product and service markets 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 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,  MERANT 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.

MERANT IS SUSCEPTIBLE TO GENERAL ECONOMIC CONDITIONS

     MERANT's  revenue and results of operations are subject to  fluctuations in
general  economic  conditions.  If there were a general  economic  downturn or a
recession in the United  States or other  significant  markets,  we believe that
current or prospective  customers  might reduce or delay their  purchases of our
products or services, leading to a reduction in our revenue.

                                       9
<PAGE> 12

INTERNATIONAL  SALES  ACCOUNT FOR A  SIGNIFICANT  PORTION OF OUR TOTAL  REVENUE,
WHICH EXPOSES MERANT TO THE BUSINESS AND ECONOMIC RISKS OF GLOBAL OPERATIONS

     In fiscal  years 1999,  1998 and 1997,  sales to  customers  outside of the
United States represented approximately 40%, 35% and 37%, respectively, of total
revenue.  MERANT  intends to  continue to expand its  operations  outside of the
United States and enter additional international markets, and commit significant
time and resources to developing  international sales and support channels.  The
risks inherent in conducting international business generally include:

     *    exposure to exchange rate fluctuations

     *    longer payment cycles

     *    greater  difficulties in accounts receivable  collection and enforcing
          agreements

     *    tariffs and other restrictions on foreign trade

     *    U.S. export requirements

     *    economic and political instability

     *    withholding and other tax consequences

     *    restrictions on repatriation of earnings

     *    the burdens of complying with a wide variety of foreign laws.

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

     Several of our senior  management  personnel are  relatively new to MERANT,
including  the Chief  Executive  Officer and Chief  Financial  Officer,  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 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  key  personnel  of  acquired  companies.  We do not  have  employment
agreements   with  most  of  our  key  personnel  that  ensure  their  continued
employment,  and we do not  maintain  key person life  insurance on any of these
persons.

IF  MERANT  IS UNABLE TO MANAGE  GROWTH  EFFECTIVELY,  OUR  OPERATIONS  WOULD BE
DISRUPTED

     MERANT has recently  experienced a period of rapid growth, which has placed
a  significant  strain  on our  financial,  management,  operational  and  other
resources. If this rapid growth is maintained,  these strains will continue. Our
management,  personnel,  systems, procedures and controls may not be adequate to
support existing and future operations.

MARKET VOLATILITY MAY CAUSE THE PRICE OF OUR SECURITIES TO DECLINE

     The market price of MERANT's  securities has experienced  significant price
volatility,  particularly since the announcement in June 1998 of the merger with
INTERSOLV,  and  volatility  may occur in the  future.  Factors  that may have a
significant impact on the market price of our securities include:

     *    actual or anticipated fluctuations in our operating results

     *    changes in financial estimates by securities analysts

     *    announcements of technological innovations

     *    new products or new contracts by us or by our competitors

     *    developments with respect to patents, copyrights or proprietary rights

     *    conditions and trends in the software and other technology industries

                                       10
<PAGE> 13

     *    adoption of new accounting standards affecting the software industry

     *    general market conditions

     Furthermore,  the stock market has 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  cause  the  market  price of  MERANT's
securities to be volatile.

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  acquisitions  of  INTERSOLV  in  September  1998 and of Essential
Software,  Inc. in August 1999. 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  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
expenses  related  to  goodwill  and  other  intangible   assets.  In  addition,
acquisitions involve numerous risks, including:

     *    difficulties in the  assimilation of the operations,  technologies and
          products of the acquired companies,

     *    difficulties  in managing  diverse  geographic  sales and research and
          development operations,

     *    the diversion of management attention from other business concerns,

     *    risks of entering  markets in which we have no or limited direct prior
          experience, and

     *    the potential loss of key employees of the acquired company.

THE RIGHTS OF MERANT'S  SHAREHOLDERS MAY DIFFER FROM THE SHAREHOLDER RIGHTS OF A
U.S. CORPORATION

     The right of shareholders and, therefore,  certain of the rights of holders
     of ADRs, are governed by English law, including the Companies Act 1985, and
     by MERANT's Memorandum and Articles of Association.  These rights differ in
     many respects from the rights of shareholders in typical U.S. corporations.

U.S. JUDGMENTS MAY NOT BE ENFORCEABLE AGAINST MERANT

     MERANT is a public limited company  organized under the laws of England and
Wales. Judgments of U.S. courts, including judgments against MERANT,  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 OUR OPERATING RESULTS TO FLUCTUATE

     The majority of our net revenue arises in U.S. dollars, while our costs are
incurred   approximately   equally  in  U.S.   dollars  and  other   currencies,
predominantly   GB  pounds.   Consequently,   fluctuations  in  exchange  rates,
particularly  between the U.S.  dollar and the GB pound,  may have a significant
impact on our operating  results,  notably when  expressed in GB pounds.  During
fiscal  1999,  fluctuations  between  the U.S.  dollar and the GB pound were not
significant,  and net exchange rate gains or losses on operational  transactions
were immaterial.

                                       11
<PAGE> 14

Forward-Looking Statements
--------------------------

     This Form 20-F contains,  and  incorporates  by reference,  forward-looking
statements  that are based on the  beliefs of  MERANT's  management,  as well as
assumptions made by and information  currently available to it.  Forward-looking
statements are subject to the safe harbor created by the U.S. Private Securities
Litigation  Reform Act of 1995,  which  provides  that MERANT can be exempt from
liability  for making  forward-looking  statements  if  cautionary  language  is
included  along  with  the  statements.  When  used  in this  report  and in the
documents  incorporated  in this report by reference,  words such as anticipate,
believe,  estimate,  expect,  intend and similar  expressions,  are  intended to
identify forward-looking statements.  These statements reflect the current views
of MERANT or its  management  with  respect to future  events and are subject to
risks, uncertainties and assumptions. In addition,  statements concerning future
matters  and  other  statements  that  are not  historical  are  forward-looking
statements. These might include:

     *    the features, benefits and advantages of our products,

     *    the development of new products, enhancements or technologies,

     *    business and sales strategies,

     *    developments in our target markets,

     *    matters  relating  to  distribution   channels,   proprietary  rights,
          facilities needs, competition, litigation and our Year 2000 readiness,

     *    future gross margins and operating expense levels, and

     *    capital needs.

     These statements reflect the current views of MERANT or its management with
respect  to  future  events  and  are  subject  to  risks,   uncertainties   and
assumptions.  Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect,  our actual results,  performance
or  achievements  in fiscal 2000 and beyond could differ  materially  from those
expressed  in, or implied by,  these  forward-looking  statements.  Factors that
could cause or contribute to material  differences  include, but are not limited
to,  those  discussed  above in Part I, Item 1 of this report  under the heading
"Risk Factors",  as well as those discussed  elsewhere in this report and in the
documents  incorporated  in this report by reference.  You should not regard the
inclusion of forward-looking  information as a representation by us or any other
person that the future events, plans or expectations  contemplated by us will be
achieved.  MERANT  undertakes no  obligation to release  publicly any updates or
revisions  to  any  forward-looking   statements  that  may  reflect  events  or
circumstances occurring after the date of this Form 20-F.

ITEM 2.   DESCRIPTION OF PROPERTY


     MERANT owns its worldwide  headquarters,  which  consists of  approximately
80,000  square  feet of  office  space  located  on an 8-acre  site in  Newbury,
England.

     MERANT also leases office space for its sales, distribution and development
operations. Major facility leases include the following:

Location            Purpose                       Facility size (square feet)
--------            -------                       ---------------------------
Mountain View, CA   U.S. West Coast               56,000
Rockville, MD       U.S. East Coast               74,000
Beaverton, OR       Sales & development           48,000
Philadelphia, PA    Sales & development           26,000
Morrisville, NC     Sales & development           39,000
St. Albans, U.K.    Sales & development           20,000

                                       12
<PAGE> 15

     MERANT  also  maintains  facilities,  principally  sales  and  distribution
offices around the world. In the U.S. these are located in Boston,  MA; Chicago,
IL; Gaithersburg,  MD; Greensboro, NC; Irvine, CA; Rutherford, NJ; New York, NY;
and  Raleigh,  NC.  Outside the U.S.,  MERANT  maintains  offices in Toronto and
Montreal,  Canada; Paris, France; Munich, Germany;  Barcelona and Madrid, Spain;
Lisbon,  Portugal;  Tokyo,  Japan;  Bangalore,   India;  Melbourne  and  Sydney,
Australia; Duffel, Belgium; Amersfoort,  Netherlands; Rome and Milan, Italy; and
Singapore.

     The total of rental  payments for all  facilities for fiscal 1999 was $12.1
million. All leases are subject to renewal clauses and rent increase provisions,
which are typical of similar leases in the relevant geographic areas.

     MERANT  believes that its premises are generally  suitable and adequate for
the purposes for which they are used.

ITEM 3. LEGAL PROCEEDINGS

     In December 1998 and January 1999, seven class action securities complaints
were filed in the U.S.  District  Court for the  Southern  District  of New York
against MERANT 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 complaint, which was filed on June 9, 1999.
The lead  plaintiffs  seek to have the  matter  certified  as a class  action of
purchasers  of the ADSs of  MERANT  during  the  period  from  June 17,  1998 to
November 12, 1998,  including the former  shareholders of INTERSOLV who acquired
ADSs in connection with the merger involving the two companies. The consolidated
complaint  alleges various  violations of the federal  securities laws and seeks
unspecified  compensatory  damages  for  alleged  failure to  disclose  material
nonpublic  information  concerning  MERANT's  business  condition and prospects.
MERANT has filed a motion to  transfer  the matter to the  Northern  District of
California.  MERANT  has  also  filed  a  motion  to  dismiss  the  consolidated
complaint.  Plaintiffs'  opposition to this motion is due shortly. The Court has
not yet ruled on either the motion to transfer or the motion to dismiss.  MERANT
intends to defend all of its litigation vigorously. However, due to the inherent
uncertainties  of  litigation,  MERANT  cannot  accurately  predict the ultimate
outcome of the litigation.  Any unfavorable  outcome of litigation could have an
adverse  impact  on  MERANT's  business,  financial  condition  and  results  of
operations.

ITEM 4. CONTROL OF REGISTRANT

     As far as is known to MERANT,  the company is not  directly  or  indirectly
owned or controlled by one or more corporations or a foreign government.

The following  table  discloses the numbers of shares held as of October 5,1999,
by:

     *    any  person who is known by MERANT to be the owner of more than 10% of
          its shares; and

     *    all directors and officers as a group.


Identity of person or group             Amount owned           Percent of class
---------------------------             ------------           ----------------
Fidelity Corporation                    15,875,645                   11.0%
Bank of New York (1)                    31,337,530                   21.7%
All directors and officers as a            354,765                    0.2%
group (14 persons)

(1)  Held  beneficially  as the  depositary of MERANT's ADSs for which ADRs have
     been issued.

     MERANT knows of no arrangements  the operation of which may at a subsequent
date result in a change of control of MERANT.

                                       13
<PAGE> 16

ITEM 5. NATURE OF TRADING MARKET

     MERANT's  ordinary shares are listed on the London Stock Exchange and ADSs,
each  representing  five ordinary shares,  are traded in the United States.  The
ADSs are  evidenced  by ADRs  issued  by the  depositary  under  the  terms  and
conditions of the deposit agreement.

     In 1992,  MERANT listed its ADSs on the Nasdaq  National  Market where they
currently  trade under the symbol MRNT.  When MERANT  obtained  its listing,  it
received a waiver of Nasdaq's  corporate  governance  requirements that were not
then  commonly  observed  by  companies  organized  in the U.K.  (which  include
requirements for at least two external directors and an audit committee).

     The following table presents for the periods indicated -

     *    the high and low middle market  quotations for the ordinary shares, as
          derived from the Daily Official List of the London Stock Exchange, and

     *    the equivalent U.S.  dollar prices  translated at the noon buying rate
          on the date of each high and low quotation.

<TABLE>

<S>                                     <C>                 <C>                 <C>                 <C>

                                        High                Low                 High                Low
                                             (in GB pounds)                          (in U.S. dollars)
                                        -----------------------                 -----------------------
Fiscal year ended January 31, 1998:
First quarter                           2.75                2.04                $4.46               $3.29
Second quarte                           3.85                2.65                 6.45                4.30
Third quarter                           4.66                3.27                 7.55                5.35
Fourth quarter                          5.66                3.88                 9.44                6.52
Three months ended April 30, 1998       7.18                5.10                11.76                8.59
Fiscal year ended January 31, 1999:
First quarter                           6.75                4.27                10.99                7.15
Second quarter                          4.80                1.90                 7.89                3.23
Third quarter                           2.40                0.97                 3.98                1.64
Fourth quarter                          1.52                1.06                 2.48                1.71

</TABLE>

     The table  below  shows the  highest  and lowest bid prices for the ADSs in
U.S.  dollars  as  reported  by the  Nasdaq  National  Market  for  the  periods
indicated.

                                        High                Low
                                            (in U.S. dollars)
                                            -----------------

Fiscal year ended January 31, 1998:
First quarter                           $22.50              $16.38
Second quarter                           33.38               21.25
Third quarter                            39.13               26.25
Fourth quarter                           47.50               32.88
Three months ended April 30, 1998        60.63               39.13
Fiscal year ended January 31, 1999:
First quarter                            57.25               32.00
Second quarter                           39.38               15.25
Third quarter                            19.63                7.90
Fourth quarter                           12.56                8.13


                                       14
<PAGE> 17

     The following  table provides  detail of shares and ADSs held in the United
States.  Since  certain  of these  shares and ADSs were held by brokers or other
nominees,   the  number  of  record   holders  in  the  United   States  is  not
representative  of the number of beneficial  holders or of where the  beneficial
holders are resident.

                                        Ordinary shares          ADSs
                                        ---------------          ---------
Held of record in the United States          2,056,208           6,267,506
Percent of ordinary shares outstanding            1.4%               21.8%
Record holders                                      79                 146

ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS

     There are currently no U.K. laws,  decrees or regulations that restrict the
export or import of capital, including foreign exchange controls, or that affect
the  remittance of dividends,  interest or other  payments to non-U.K.  resident
shareholders  or ADS holders.  There are no limitations  under English law or in
MERANT's Memorandum and Articles of Association relating to the right to hold or
exercise  voting  rights  attaching  to the  shares or ADSs that  apply  only to
non-U.K.  shareholders.  However,  English law  currently  forbids  ownership of
shares or ADSs by, or payment of dividends to, the governments of Iraq or Libya,
persons exercising public functions in Iraq or Libya, or any resident of Iraq or
any person treated as a resident.

ITEM 7. TAXATION

     The  following  is  a  general  summary  that  does  not  address  all  tax
consequences of the ownership of MERANT's  ordinary shares or ADSs. This summary
is based on U.S. federal income tax law and administrative practice and the laws
and  practice  of the  United  Kingdom  in effect on the date of this Form 20-F.
Future  legislation,   regulations,   administrative  interpretations  or  court
decisions could change these laws either prospectively or retroactively.

     Shareholders or ADS holders should consult their own tax advisors as to the
particular tax consequences to them of ownership of MERANT's  ordinary shares or
ADSs.

     In particular, this summary:

     *    does not address U.S. estate, gift, state or local tax laws

     *    does not address  foreign law other than that of the United Kingdom as
          it would affect U.S.  holders  (persons  resident in the United States
          and not  resident  in the United  Kingdom,  under the  current  double
          taxation convention between the United States and the United Kingdom).
          Non-U.S.   holders  may   experience   significantly   different   tax
          consequences and should consult their own tax advisors.

     *    does  not  take  into  account  the  specific   circumstances  of  any
          particular   shareholders  (such  as  tax-exempt   entities,   certain
          insurance   companies,   broker  dealers,   shareholders   liable  for
          alternative minimum tax,  shareholders that actually or constructively
          own 10% or more of  MERANT's  voting  shares,  shareholders  that hold
          shares  or ADSs  as part of a  straddle  or a  hedging  or  conversion
          transaction, or shareholders whose functional currency is not the U.S.
          dollar), some of which may be subject to special rules.

                                       15
<PAGE> 18

U.K. Income Taxation of Dividends
---------------------------------

     No dividends have ever been paid by MERANT. However, in the event dividends
were to be paid in cash and denominated in dollars, the following would apply.

     MERANT  will not be required  to account  for  advance  corporation  tax in
respect of  dividends,  nor will it be required  to withhold  tax at source when
paying a dividend.

     Individual  shareholders  resident in the United  Kingdom for tax  purposes
should  generally be entitled to a tax credit in respect of any dividend,  which
they can offset against their total income tax liability.  The amount of the tax
credit  is equal to 10% of the total of the  dividend  and the tax  credit  (the
"gross  dividend"),  which is also equal to  one-ninth  of the amount of the net
cash  dividend.  The gross  dividend is included in computing  the income of the
individual holder for U.K. tax purposes.

     For  taxpayers  liable to income tax at rates not  exceeding the basic rate
the rate of income tax on dividends will be 10% of the gross  dividend,  and the
tax credit will discharge the income tax liability on the dividend.  Higher rate
taxpayers  will be  liable  to tax on the  dividend  at the rate of 32.5% of the
gross dividend; the tax credit will be set against but not fully match their tax
liability on the dividend and they will have to account for additional tax equal
to 22.5%  of the  gross  dividend  (which  is also  equal to 25% of the net cash
dividend  received) to the extent that the gross  dividend,  when treated as the
top slice of their income, falls above the threshold for higher rate income tax.

     U.K.  resident  taxpayers  who are not liable to U.K. tax on the  dividends
will not be entitled to claim repayment of the tax credit attaching to dividends
paid by MERANT.  Tax  credits  on  dividends  paid in respect of shares  held in
personal  equity plans or individual  savings  accounts will be repayable  until
April 5, 2004.

     A U.K.  resident  corporate  shareholder  will not  normally  be  liable to
corporation  tax in respect of any  dividend  received,  and will not be able to
claim repayment of tax credits attaching to dividends.

     A  shareholder  who is not resident in the United  Kingdom for tax purposes
will  generally not benefit from any  entitlement to a refund of any part of the
tax credit.  Special rules apply in the case of U.S. corporate shareholders that
are:

     *    resident in the United Kingdom, or

     *    corporations at least 25% of the capital of which is held, directly or
          indirectly,  by persons that are not individual residents or nationals
          of the  United  States  and that  satisfy  certain  other  conditions.

Further special rules may apply if the shareholder:

     *    is a  partnership,  an estate  or a trust  that is a  resident  of the
          United States,

     *    is exempt from  taxation  in the United  States on  dividends  paid by
          MERANT, or

     *    owns 10% or more of the class of shares of MERANT paying the dividend.

US Federal Income Taxation of Dividends
---------------------------------------

     Under the current double income tax  convention  between the United Kingdom
and the United States and domestic U.S. federal income tax law, an eligible U.S.
holder  will  be  subject  to U.S.  federal  income  tax on the sum of the  cash
dividend paid by MERANT plus a tax credit amount to which the U.S.  holder would
be  entitled  if it were a U.K.  taxpayer.  Dividends  paid  out of  current  or
accumulated  earnings and profits (as  determined  for U.S.  federal  income tax
purposes) will generally be taxable to a U.S.  holder as foreign source dividend

                                       16
<PAGE> 19

income, and will not be eligible for the dividends received deduction allowed to
corporations.  Subject to certain conditions and limitations, a U.S. holder will
generally be entitled to a credit against its U.S. federal income tax liability,
or a deduction in computing its U.S. federal taxable income,  for all or part of
the tax credit amount.  The rules relating to the  determination  of the foreign
tax credit are  complex and  eligible  U.S.  holders  should  consult  their tax
advisers  to  determine  whether  and to  what  extent  a tax  credit  would  be
available.

Taxation on Capital Gains
-------------------------

     Under the current double income tax  convention  between the United Kingdom
and the  United  States,  each  country  generally  may  tax  capital  gains  in
accordance  with the  provisions  of its domestic  law.  Under present U.K. law,
residents of the United  States who are not resident or  ordinarily  resident in
the  United  Kingdom  will not be liable for U.K.  capital  gains tax on capital
gains made on the disposal of shares unless they were held in connection  with a
trade carried on in the U.K.  through a permanent  establishment.  An individual
shareholder  who has on or after  March  17,  1998,  ceased  to be  resident  or
ordinarily  resident for tax purposes in the United Kingdom for a period of five
years and who  disposes of shares  during that period may also be liable to U.K.
taxation on capital gains (subject to any available  exemption or relief).  U.S.
residents  who are also liable for U.K. tax may be liable for both U.K. and U.S.
tax in respect of a gain on the  disposal of ADSs.  However,  subject to certain
limitations, these persons may be entitled to a tax credit against their federal
tax liability for the amount of the U.K. tax paid in respect of the gain. A U.S.
resident  holder of an ADR will be liable  for U.S.  federal  income  tax on the
gains to the same extent as on any other gains from sales of shares.

U.K. Inheritance Tax
--------------------

     Under the current double estates and gift taxation  convention  between the
United States and the United Kingdom,  shares held by an individual  shareholder
who is domiciled  for the purpose of the  convention in the United States and is
not for the purposes of the  convention a U.K.  national  will not (provided any
tax chargeable in the United States is paid) be subject to U.K.  inheritance tax
on the disposal of shares by way of gift or upon the  individual's  death unless
the shares are part of the business property of a permanent establishment of the
individual in the United  Kingdom or, in the case of a shareholder  who performs
independent  personal  services,  pertain to a fixed base situated in the United
Kingdom.  In the  exceptional  case where the shares  are  subject  both to U.K.
inheritance tax and to U.S. federal gift or estate tax, the convention generally
provides for double taxation to be relieved by means of credit relief.

U.K. Stamp Duty and Stamp Duty Reserve Tax
------------------------------------------

     Charges to U.K.  stamp duty and/or  stamp duty  reserve tax ("SDRT") may be
imposed in respect of, inter alia, the following transactions:

     *    the transfer of an ADS,

     *    the transfer of a share,

     *    the deposit of a share with the custodian and the subsequent  issue of
          an ADR, and

     *    the transfer of a share on surrender of an ADS.

     This section discusses in turn each possible charge.

     No U.K.  stamp duty will be payable on any transfer of an ADS provided that
the instrument or transfer is executed and remains  outside the United  Kingdom,
nor will there be any  liability  to SDRT in respect  of any  agreement  for the
transfer of ADSs.

                                       17
<PAGE> 20

     Ad valorem stamp duty will be charged on conveyances or transfers of shares
at the rate of 1/2% of the consideration, if any, for the transfer.

     SDRT  will be  imposed,  at the rate of 1/2% of the  consideration  for the
transaction,  if an  agreement  is made for the sale of  shares,  unless a share
transfer  instrument  in favor of the  purchaser  or its nominee is executed and
duly stamped.  SDRT is in general  payable by the  purchaser of the shares,  but
regulations  have been made which provide for  collection  from other persons in
certain circumstances.

     Ad valorem stamp duty will be imposed on any instrument transferring shares
to a nominee or agent for a  depositary  which then issues  depositary  receipts
(such  as the  ADRs).  Where  the  instrument  is  liable  to  stamp  duty  as a
"conveyance  on sale",  because it completes a sale of shares or ADSs,  then the
rate of duty will be 1 1/2% of the consideration for the sale implemented by the
instrument.  Where the transfer  instrument  is not stampable as a conveyance on
sale,  then the rate of duty will be 1 1/2% of the market  value of the security
transferred by the instrument.

     There is also a potential  charge to SDRT which will apply where shares are
transferred to a nominee or agent for the depositary under an arrangement  under
which the  depositary  issues ADRs.  SDRT will be payable by the depositary at a
rate of 1 1/2% of the  consideration  for the  transfer,  or  where  there is no
consideration,  1 1/2% of the market value of the  securities  transferred.  The
charge to SDRT will,  however,  be reduced by the amount,  if any, of ad valorem
stamp duty paid on the share transfer instrument.

     A transfer of shares from the  depositary or its agent or nominee to an ADR
holder, or a person designated by the holder, on cancellation of an ADS which is
liable to duty as a  "conveyance  of sale"  because it  completes  a sale of the
shares,  will be liable to ad valorem stamp duty,  payable by the purchaser,  at
the rate of 1/2% of the consideration,  if any, for the transfer.  Transfers not
liable to duty as a "conveyance on sale" will be liable to a fixed stamp duty of
50p.

Other U.S. Issues
-----------------

     As of October  5,  1999,  MERANT is not a  controlled  foreign  corporation
("CFC"), a passive foreign  investment  company ("PFIC"),  or a foreign personal
holding company ("FPHC"), and MERANT does not anticipate becoming a CFC, PFIC or
FPHC.  Neither  MERANT nor its advisers have a duty or will  undertake to inform
U.S. shareholders of changes in circumstances which would cause MERANT to become
a CFC, PFIC or a FPHC. U.S.  shareholders  should consult their own tax advisers
concerning the status of MERANT as a CFC, PFIC or FPHC.

ITEM 8.         SELECTED FINANCIAL DATA

Selected Consolidated Financial Data
------------------------------------

     The Selected Consolidated  Financial Data in U.S. Format on page 16 and the
Selected  Consolidated  Financial  Data in U.K.  Format on page 57 of the MERANT
1999 Annual Report Detail are incorporated in this Form 20-F by reference.

Exchange Rates
--------------

     The  following  table  shows  the noon  buying  rates for GB pounds in U.S.
dollars per GBP 1.

                                       18

<PAGE> 21

<TABLE>

<S>                                <C>                 <C>                 <C>            <C>
Fiscal period                      Average *           High                Low            Period-end

Year ended January 31, 1995        1.55                1.64                1.46           1.58
Year ended January 31, 1996        1.57                1.61                1.51           1.51
Year ended January 31, 1997        1.58                1.71                1.49           1.60
Year ended January 31, 1998        1.64                1.70                1.58           1.63
Quarter ended April 30, 1998       1.66                1.69                1.62           1.67
Year ended April 30, 1999          1.65                1.71                1.59           1.61

     *    The  average of the  exchange  rates on the last day of each  calendar
          month during the period.

</TABLE>

     On October 5, 1999, the Noon Buying Rate was $1.65 per GBP 1.

     Fluctuations in the U.S. dollar/GB pound exchange rate will affect the U.S.
dollar  amounts  received  by ADR holders on  conversion  by the  depositary  of
dividends  paid in GB  pounds  on the  shares  represented  by the  ADRs.  These
fluctuations  may also affect the relative market prices of the ADSs in the U.S.
and the shares in the U.K.

     For  information  on the effect of exchange rate  fluctuations  on MERANT's
results of operations,  see "Management's  Discussion and Analysis of Results of
Operations and Financial Condition - Exchange Rate Fluctuations" on pages 29 and
70 of the MERANT 1999 Annual Report Detail,  which sections are  incorporated in
this Form 20-F by reference.

Dividends
---------

     MERANT has never paid cash dividends on its shares. MERANT has investigated
the possibility of paying dividends and reviews the issue from time to time.

     If dividends were paid, they would probably be paid in GB pounds.  Exchange
rate fluctuations would affect the U.S. dollar amounts that shareholders,  or in
the case of ADR holders the depositary,  would receive on conversion of dividend
payments into U.S. dollars.

ITEM 9.   MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

     Management's Discussion and Analysis of Results of Operations and Financial
Condition for fiscal years 1999, 1998 and 1997, and for the  three-month  period
ended April 30,  1998,  which is  contained  on pages 17 through 30 and pages 58
through 71 of the MERANT 1999 Annual Report Detail, is incorporated in this Form
20-F by reference.

ITEM 9A.        QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     For information on market risks to which MERANT's business is exposed,  see
"Management's  Discussion  and Analysis of Results of  Operations  and Financial
Condition - Market  Risk" on page 30 of the MERANT 1999  Annual  Report  Detail,
which section is incorporated in this Form 20-F by reference.

ITEM 10.        DIRECTORS AND OFFICERS OF REGISTRANT

     MERANT's  Memorandum  and Articles of  Association  provide that there must
always  be at least two  directors,  unless  otherwise  determined  by  ordinary
resolution of MERANT. At each annual general meeting, one-third of the directors
who are  subject to  retirement  by rotation  (rounded  down where the number of
directors does not divide by three) retires from office.  Executive officers are
not subject to this rule, but have always  retired by rotation,  even though not
required to do so.

     Executive officers serve at the discretion of the Board of Directors.

                                       19

<PAGE> 22

     The directors and executive  officers,  effective  October 5, 1999,  are as
follows:

Board of Directors
------------------

Name                    Position                       Date Elected or Appointed
----                    --------                       -------------------------

Michel Berty            Director                                September 1998

Kevin Burns             Director                                September 1998

Gary Greenfield         Director                                September 1998

                        President and Chief Executive Officer   December 1998

J. Michael Gullard      Director and Chairman                   May 1995

Harold Hughes           Director                                December 1993

Barry Lynn              Director                                September 1999


Executive Officers
------------------

Name                    Position                               Date Appointed
----                    --------                               --------------

Ken Sexton              Senior Vice President; Chief            December 1998
                        Financial Officer and Secretary

Panos Anastassiadis     Executive Vice President,               September 1998
                        Worldwide Distribution

Greg Gehring            Senior Vice President and               September 1998
                        Chief Information Officer

Dean Genge              Senior Vice President,                  September 1998
                        Corporate Marketing

Buff Jones              Senior Vice President and               December 1998
                        General Manager, MERANT PVCS

Richard Van Hoesen      Senior Vice President, and General      December 1998
                        Manager, MERANT Micro Focus

Andrew Weiss            Chief Technology Officer                May 1999

Gary Wright             Senior Vice President,                  September 1998
                        MERANT Consulting

     Biographical information for the directors and officers is shown below.

     Mr. Berty has been a non-executive director of MERANT since September 1998.
Prior to that  date,  he was a  non-executive  director  of  INTERSOLV.  He is a
founder of MBY Consultants, Inc.

                                       20

<PAGE> 23

          Mr. Burns has been a non-executive  director of MERANT since September
     1998.  Prior to that date he was  Chairman of  INTERSOLV.  He is a Managing
     Principal of Lazard Technology Partners.

          Mr.  Greenfield  became a director of MERANT in September  1998.  From
     1996 until that date, he had been Chief Executive Officer of INTERSOLV.  In
     December 1998, he became MERANT's Chief Executive Office and President.

          Mr.  Gullard has been a  non-executive  director  of MERANT  since May
     1995. He was elected  Chairman in March 1996. He is General  Partner of the
     venture capital firm of Cornerstone Management.

          Mr. Hughes has been a non-executive  director of MERANT since December
     1993. He is Chief Executive Officer of Pandesic LLC.

          Mr. Lynn became a non-executive  director of MERANT in September 1999.
     He is the Chief  Executive  Officer of Be eXceL Inc.  and the  Principal of
     Where Eagles Soar Inc.

          Mr.  Sexton  joined  MERANT  in  December  1998  as  its  Senior  Vice
     President, Finance & Administration, Chief Financial Officer and Secretary.
     Previously,  he was Senior Vice  President,  Finance &  Administration  and
     Chief Financial Officer of INTERSOLV.

          Mr.  Anastassiadis  joined MERANT in September 1998 as its Senior Vice
     President,  Worldwide  Distribution  upon the completion of MERANT's merger
     with  INTERSOLV,  and became MERANT's  Executive Vice President,  Worldwide
     Distribution  in May 1999.  Previously,  he was Senior Vice  President  and
     General Manager of INTERSOLV's Data Connectivity business unit.

          Mr.  Gehring  joined  MERANT  in  September  1998 as its  Senior  Vice
     President  and Chief  Information  Officer upon the  completion of MERANT's
     merger with INTERSOLV.  Previously,  he was Senior Vice President and Chief
     Information Officer for INTERSOLV.

          Mr.  Genge  joined  MERANT  in  September  1998  as  its  Senior  Vice
     President,  Corporate Marketing upon the completion of MERANT's merger with
     INTERSOLV.  Previously,  he was Senior Vice President,  Corporate Marketing
     for INTERSOLV.

          Ms.  Jones joined  MERANT in March 1998 as its Senior Vice  President,
     Business  Development.  In  December  1998,  she  became  its  Senior  Vice
     President and General Manager, MERANT PVCS.

          Mr.  Van  Hoesen  joined  MERANT  in  March  1998 as its  Senior  Vice
     President and Chief  Financial  Officer.  In May 1998,  Mr. Van Hoesen also
     became the Secretary of MERANT. In December 1998, he became its Senior Vice
     President and General Manager, MERANT Micro Focus.

          Mr. Weiss joined MERANT in May 1999 as its Chief Technology Officer.

          Mr.  Wright  joined  MERANT  in  September  1998  as its  Senior  Vice
     President,  MERANT  Consulting  upon the completion of MERANT's merger with
     INTERSOLV.  Previously, he was Senior Vice President and General Manager of
     INTERSOLV's Enterprise Application Renewal business unit.

          There are no family  relationships  between  any of the  directors  or
     executive officers. There are no arrangements or understandings between any
     executive officer or director and any other person under which an executive
     officer or director was or is to be selected to such position.

                                       21

<PAGE> 24

ITEM 11.        COMPENSATION OF DIRECTORS AND OFFICERS

          For the  fiscal  year  ended  April  30,  1999,  the  total  amount of
     compensation  paid to  directors  and  officers  of  MERANT  (a total of 22
     persons) was as follows:

In thousands:                                U.S. dollars         GB pounds
                                             ------------         ---------
Salary                                              2,397             1,453
Bonus                                               1,325               804
Directors' fees                                       236               143
Compensation for loss of office                     4,149             2,514
Pension, retirement and similar benefits              117                71
Other benefits                                        189               114
                                             ------------         ---------
TOTAL                                               8,413             5,099

Chairman                                              166               101

Bonuses were payable under three  different  cash bonus  programs.  Each program
sets operating plans, and bonus amounts are paid based upon MERANT's performance
against the operating plan. Further  compensation  information is provided under
"Remuneration  Committee's Report - Executive Directors' Remuneration Policy" on
pages 12 through 15 of the MERANT 1999 Annual Report Detail,  which compensation
information is incorporated in this Form 20-F by reference.

ITEM 12.  OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES

     MERANT currently operates four share option plans:

     *    the 1991 Share Option Plan
     *    the 1994 Group Employee Benefit Trust
     *    the 1996 Share Option Plan
     *    the 1998 Share Option Plan

     These MERANT plans provide for the granting of options to purchase ordinary
shares in MERANT to MERANT employees and  consultants.  MERANT currently has the
authority to grant share options under the 1998 Share Option Plan.

     When MERANT merged with INTERSOLV, it adopted INTERSOLV's 1982 Stock Option
Plan, 1992 Stock Option Plan and 1997 Employee Stock Option Plan, and the option
plans  previously  assumed by INTERSOLV  from  companies  which it had acquired.
Under the merger  agreement,  each  outstanding  option or right to  purchase or
acquire shares of INTERSOLV  stock was assumed by MERANT and became an option or
right to purchase or acquire ADSs in MERANT, with appropriate adjustments to the
price  and  number  of  shares  based on the  exchange  ratio  of 0.55  ADSs per
INTERSOLV  share.  No further  options have been or will be granted  under these
INTERSOLV  plans.

     When MERANT  acquired XDB Systems,  Inc, it assumed XDB's 1992 Stock Option
Plan and 1996 Stock Option Plan. In accordance with the  acquisition  agreement,
the  outstanding  options under these XDB Plans were  converted  into options to
acquire MERANT shares. No further options have been or will be granted under the
XDB Plans.

     At October 5, 1999, there were  outstanding  stock options under the MERANT
plans,  INTERSOLV plans and XDB plans to purchase a total of 15,589,381 ordinary
shares with  exercise  prices  ranging from GBP 1.05 to GBP 7.15 and  expiration
dates ranging from July 2001 to September  2009. At the same date, the following
directors  (and  directors and officers as a group) held options to purchase the

                                       22

<PAGE> 25

number of shares presented opposite their names in the following table:


<TABLE>
<CAPTION>

<S>                                             <C>             <C>                               <C>
                                   Number of shares         Option price, in GBP               Expiration date
                                   ----------------         --------------------               ---------------
Michel Berty                                 50,415*                        3.49               October 5, 2007
                                             10,000                         2.94               September 16, 2009


Kevin Burns                                 546,565*                        5.02               February 15, 2006
                                             10,000                         2.94               September 16, 2009

Gary Greenfield                           2,819,550*                        6.42               May 1, 2008
                                          3,250,000                         1.05               January 4, 2009

J. Michael Gullard                           50,000                         2.13               June 2, 2004
                                            250,000                         1.67               June 21, 2006
                                             20,000                         2.94               September 16, 2009

Harold Hughes                                50,000                         3.00               August 19, 2002
                                             10,000                         2.40               June 16, 2004
                                             10,000                         2.94               September 16, 2009

Barry Lynn                                   10,000                         2.94               September 16, 2009

Directors and officers as a group         8,538,075*                        3.91               May 1, 2008
                                          3,250,000                         1.05               January 4, 2009
                                          3,725,000                         1.06               December 15, 2008
                                            250,000                         1.67               June 21, 2006
                                             50,000                         2.13               June 2, 2004
                                             10,000                         2.40               June 16, 2004
                                             60,000                         2.94               September 16, 2009
                                             50,000                         3.00               August 19, 2002

*    Asterisked  items  represent  the share  equivalents  of options  issued by
     INTERSOLV,  which were  converted  into  options to  acquire  MERANT  ADSs.
     Options  were issued by INTERSOLV  at various  prices and dates;  the table
     discloses  average  grant  prices and the latest  expiration  dates.  These
     options are denominated in U.S. dollars, and for the above disclosures have
     been  converted to pounds  sterling  using the noon buying rate as of April
     30, 1999 ($1.61 = GBP 1.00).

</TABLE>


ITEM 13.  INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS

     The  information  required by this item is  incorporated  by reference from
"Remuneration Committee's  Report-Executive Directors' Remuneration" on pages 12
through 15 of the MERANT 1999 Annual Report Detail.


                                     PART II

ITEM 14.  DESCRIPTION OF SECURITIES TO BE REGISTERED

The Registrant has elected to respond to this item.

                                       23

<PAGE> 26

Description of ordinary shares
------------------------------

     The rights of MERANT's  shareholders  are  determined by the Memorandum and
Articles of  Association  and by current  English  law.  This  summary  does not
purport to be complete  and is qualified  by  reference  to the  Memorandum  and
Articles of  Association,  which are  incorporated  by  reference in this annual
report.

     The  authorised  share  capital  of MERANT is GBP  4,240,000  divided  into
212,000,000  ordinary  shares of 2p each, of which  143,672,697  ordinary shares
were  outstanding on April 30, 1999. Each of the issued shares is fully paid and
not subject to any further calls or assessments. There are no conversion rights,
redemption  provisions  or sinking fund  provisions  related to the shares.  The
shares are issued in registered form.

     In the following  description,  a shareholder  is the person  registered in
MERANT's register of members as the holder of the relevant share. The depositary
for MERANT's  ADSs is the  shareholder  for shares  represented  by ADSs against
which ADRs have been issued.

     Dividends

     All dividends  will be declared and paid according to the amount paid up on
the shares, but no dividend will be declared in excess of the amount recommended
by the directors.  The directors may from time to time pay interim  dividends to
shareholders  if it appears to the  directors  to be  justified  by the  profits
available for distribution. Final dividends may be declared by resolution of the
members on the  recommendation  of the Board.  There are no fixed dates on which
entitlement to dividends arises on the shares.

     Any  dividend  unclaimed  12 years  after the date  when it became  due for
payment  will,  if the  directors so resolve,  be forfeited  and cease to remain
owing by MERANT.

     Rights in a Winding Up

     In the event of a winding-up  or reduction  of MERANT's  capital  involving
repayment,  the assets  available  for  distribution  among the members  will be
divided between the  shareholders  according to the respective  number of shares
held by them and in accordance  with the provisions of The Companies Act 1985 of
Great  Britain.  The  liquidator  may,  with the  sanction  of an  extraordinary
resolution and subject to the Companies Act,  divide among the members in specie
the whole or any part of MERANT's assets.

     Voting

     Voting at any general  meeting of shareholders is by a show of hands unless
a poll is duly demanded by:

     *    the chairman of the meeting,

     *    at least two shareholders entitled to vote at the meeting,

     *    any shareholder or shareholders representing at least one-tenth of the
          total  voting  rights  of all  shareholders  entitled  to  vote at the
          meeting, or

     *    any shareholder or shareholders  holding shares  conferring a right to
          vote at the  meeting on which the paid up sums are at least  one-tenth
          of the total sum paid up on all the shares conferring that right.

                                      24

<PAGE> 27

On a show of hands,  every  shareholder  who is  present  in person at a general
meeting will have one vote, and on a poll,  every  shareholder who is present in
person or by proxy  will have one vote per  share.  The  necessary  quorum for a
shareholder  meeting  is two  persons  entitled  to vote on the  business  to be
transacted. A resolution proposed at a meeting may be either:

     *    an ordinary  resolution  (e.g.,  for the  election of  directors,  the
          approval of financial statements,  the declaration of final dividends,
          the appointment of auditors,  the increase of authorized share capital
          or the grant of authority  to allot  shares).  An ordinary  resolution
          requires  the  affirmative  vote of a majority  of the votes cast at a
          meeting at which there is a quorum.

     *    a special resolution (e.g.,  relating to certain matters concerning an
          alteration  of  the   Memorandum  or  Articles  of  Association  or  a
          winding-up).

     *    an extraordinary  resolution (e.g.,  modifying the rights of any class
          of shares at a meeting of the  holders of the class),  which  requires
          the affirmative vote of not less than three-fourths of the votes cast.
          Unless specified by law or MERANT's Articles of Association, voting in
          a general  meeting is by ordinary  resolution.  Meetings are generally
          convened upon advance notice of 21 or 14 clear days,  depending on the
          nature of the business to be transacted.

     Pre-Emptive Rights

     Under  Part  III of the  Companies  Act,  a  company  cannot  allot  equity
securities  which are to be paid for wholly in cash (except shares held under an
employees' share scheme) unless it has made an offer to existing shareholders to
allot the equity  securities to them on the same or more favorable  terms and in
proportion to their shareholdings.  In this context, equity securities generally
means,  in  relation  to  MERANT,  ordinary  shares,  that  is  shares  with  no
restrictions on the amounts receivable in a distribution of dividends or capital
and all rights to subscribe for or convert into shares.

     This statutory  pre-emption right does not, however,  apply where the right
has been  disapplied  by a special  resolution  of the  shareholders.  A special
resolution was passed at MERANT's  annual general meeting on September 16, 1999,
disapplying  the  statutory  pre-emption  right in respect of the  allotment  of
equity securities for cash in connection with:

     *    a rights  issue in favor of  ordinary  shareholders  where the  equity
          securities respectively  attributable to the interests of all ordinary
          shareholders are proportionate (as nearly as may be) to the respective
          numbers of shares held by them but subject to any exclusions which the
          directors   may   consider   appropriate   to  deal  with   fractional
          entitlements or holders of shares outside the U.K., or

     *    the allotment of equity securities up to an aggregate nominal value of
          GBP 144,087.98.

     This disapplication will, unless extended or renewed, expire on the date of
MERANT's annual general meeting in 2000, or, if earlier, on December 16, 2000.

     Variation of Rights and Share Capital

     MERANT may, by passing an ordinary resolution:

     *    increase its share capital

     *    consolidate  and divide all or any of its shares into shares of larger
          amounts

                                       25

<PAGE> 28

     *    subdivide  its shares into shares of smaller  amount or cancel  shares
          which have not been taken or agreed to be taken by any person (subject
          to the provisions of the Companies Act).

     MERANT may, by passing a special  resolution (and subject to the provisions
of the Companies Act):

     *    reduce its share  capital,  capital  redemption  reserve and any share
          premium account , or

     *    purchase its own shares

Subject to the provisions of the Companies Act, the rights attached to any class
of shares may be varied either:

     *    with the consent in writing of the holders of three-fourths in nominal
          value of the issued shares of that class, or

     *    with the sanction of an extraordinary  resolution passed at a separate
          meeting of the holders of the shares of that class.

     At any  separate  general  meeting,  the  necessary  quorum  is one or more
persons  holding or  representing  by proxy not less than  one-third  in nominal
amount  of the  issued  shares of the class in  question  (but at any  adjourned
meeting, any person holding shares of the class or his proxy will be a quorum).

     Disclosure of Interests

     The Companies  Act gives MERANT power to require  persons who it knows are,
or has  reasonable  cause to believe to be, or to have been within the  previous
three  years,  interested  in its issued  share  capital to disclose  prescribed
particulars of those  interests.  Sanctions may be imposed against the holder of
the relevant shares for failure to provide the information requested in a timely
manner.  MERANT's Articles of Association impose the withdrawal of voting rights
of these shares and  restrictions  on the rights to receive  dividends on and to
transfer these shares. In this context,  shares includes ADSs. The Companies Act
also  requires  any person who acquires  (alone or, in specified  circumstances,
with  others)  a direct  or  indirect  interest  in  excess  of the  "notifiable
percentage"  (currently  3% of the issued share  capital of a company or 10% for
certain types of interest) to disclose prescribed  information to the company in
respect of those shares  within a period of two business  days. An obligation of
disclosure also arises where the person's interest  subsequently falls below the
notifiable  percentage or where, above that level, that person's interest in the
issued share capital (expressed in whole percentages) increases or decreases.

     Miscellaneous

     There are  currently no U.K.  foreign  exchange  controls on the payment of
dividends or the conduct of MERANT's operations. There are no restrictions under
the  Articles  of  Association  or under  English  law that  limit  the right of
non-resident or foreign owners to hold or vote MERANT's shares.

Description of American Depositary Receipts
-------------------------------------------

     American  depositary  receipts,  or ADRs,  are  issued by a  depositary  as
evidence of the  ownership  of American  depositary  shares,  or ADSs.  Each ADS
represents five of MERANT's ordinary shares.  The rules and regulations by which
ADRs are issued,  held and withdrawn are governed by a deposit agreement between
MERANT, the ADR holders, and the Bank of New York, which acts as the depositary.

     The following is a summary of the principal terms of the deposit agreement.
These  statements  are  subject  to the  terms  and  conditions  of the  deposit
agreement.  Copies of the deposit agreement and MERANT's Memorandum and Articles
of Association are available for inspection at:

                                       26

<PAGE> 29

     *    The depositary's  Corporate Trust Office,  at 101 Barclay Street,  New
          York, NY 10286, and

     *    The depositary's London office, at 46 Berkeley Street, London W1X 6AA,
          England,  which  acts as  custodian  under  the  terms of the  deposit
          agreement.

     The depositary's principal executive office is at 48 Wall Street, New York,
NY 10286.

     The  depositary and MERANT will only treat as owners those persons in whose
names ADRs are registered on the depositary's books.

     Deposit, Transfer and Withdrawal

     The  depositary  has agreed  that on  delivery  of  ordinary  shares to the
custodian (or evidence of rights to receive  ordinary  shares),  the  depositary
will execute and deliver at its Corporate Trust Office an ADR or ADRs.

     Delivery of the  ordinary  shares must be  accompanied  by any  appropriate
instruments of transfer or endorsement in a form  satisfactory to the custodian,
and  any  other  documents  required  by  the  depositary  or the  custodian  in
accordance with the deposit agreement.  Execution and delivery of an ADR or ADRs
will depend on payment of the depositary's fee and of all taxes and governmental
charges and fees. The delivery at its Corporate Trust Office will be to, or upon
the order  of,  the  person  or  persons  named in the  notice of the  custodian
delivered to the  depositary or requested by the person  depositing the ordinary
shares with the  depositary.  The ADR or ADRs will be  registered in the name or
names of the person (or persons),  and will represent any  authorized  number of
ADSs requested by that person (or persons).

     The depositary has no obligation to accept ordinary shares for deposit from
any  person or entity  identified  by MERANT as holding  restricted  securities,
except upon compliance with the provisions of the deposit agreement.

     The  term  "Restricted   Securities"   means  ordinary   shares,   or  ADRs
representing  ordinary  shares,  which are acquired  directly or indirectly from
MERANT or its affiliates, as defined in Rule 144 to the Securities Act of 1933,

     *    that  are  issued  in a  transaction  or  chain  of  transactions  not
          involving  any  public  offering,  or  which  are  subject  to  resale
          limitations under Regulation D under the Securities Act or both,

     *    that are held by an officer, director or other affiliate of MERANT, or

     *    that are subject to other  restrictions  on sale or deposit  under the
          laws of the United States or England, or under a shareholder agreement
          or MERANT's Memorandum and Articles of Association.

     To withdraw the deposited securities represented by an ADR, the owner must:

     *    surrender the ADR at the depositary's Corporate Trust Office

     *    pay the  depositary's  fee for the surrender of ADRs and all taxes and
          governmental charges and fees, and

     *    bear the risk and expense for the forwarding of share certificates and
          other proper documents of title.

     The owner of the ADR will then be entitled to delivery,  to him or upon his
order, of the amount of deposited securities at the time represented by the ADR.

                                       27

<PAGE> 30

     The  depositary  may deliver,  or  pre-release,  ADRs before the receipt of
ordinary  shares.  The  depositary  may also  deliver  ordinary  shares upon the
receipt and  cancellation of ADRs which have been  pre-released,  whether or not
cancellation  is before the  termination  of the  pre-release  or the depositary
knows that the ADR has been pre-released.

The depositary may receive ADRs instead of ordinary  shares in satisfaction of a
pre-release. Each pre-release must be

     *    preceded or accompanied by a written representation from the person to
          whom the ADRs are to be delivered  that that person,  or its customer,
          owns the ordinary shares or ADRs to be remitted, as the case may be,

     *    at all times fully collateralized with cash or other collateral as the
          depositary deems appropriate,

     *    terminable  by the  depositary  on not more than five  business  days'
          notice, and

     *    subject  to  further   indemnities  and  credit   regulations  as  the
          depositary deems appropriate.

     Dividends, Other Distributions and Rights

     When the depositary  receives cash  dividends and other cash  distributions
denominated in a currency other than U.S.  dollars,  in respect of the deposited
ordinary shares,  it is required to arrange for the conversion of the funds into
U.S. dollars, subject to:

     *    any  restrictions  imposed by English law,  regulations  or applicable
          permits,

     *    its judgment that it can do so on a reasonable basis, and

     *    its judgment that it can transfer the resulting  dollars to the United
          States.

     On conversion,  it must then distribute the resulting dollar amount (net of
reasonable and customary  expenses  incurred in converting the foreign currency)
to the  owners  entitled  to the  cash,  in  proportion  to the  number  of ADSs
representing  the deposited  securities held by them. The amount  distributed to
the  owners  will be  reduced  by any  taxes to be  withheld  by  MERANT  or the
depositary.   See  "Liability  of  owner  for  taxes."  If  this  conversion  or
distribution can be effected only with the approval or license of any government
or government agency, the depositary will apply for approval or license, if any,
as it deems desirable.

     The depositary  may  distribute the foreign  currency it receives to, or in
its discretion may hold it for the respective  accounts of, the owners  entitled
to receive it, if:

     *    in its judgment it cannot convert any received  foreign  currency on a
          reasonable basis into dollars transferable to the United States,

     *    any approval or license of any government or government agency that is
          required  for the  conversion  is  denied,  or in the  opinion  of the
          depositary is not obtainable, or

     *    any approval or license is not obtained within a reasonable  period as
          determined by the depositary.

     If the  conversion  of  foreign  currency,  in whole or in part,  cannot be
effected  for  distribution  to some of the  owners  entitled  to the cash,  the
depositary may convert and  distribute  the funds in U.S.  dollars to the extent
permissible  to the owners  entitled to the cash,  and distribute the balance of
the foreign  currency  received to, or hold the balance for, the accounts of the
owners entitled to the cash.

                                       28

<PAGE> 31

     If MERANT declares a dividend in, or free distribution of, ordinary shares,
the  depositary  may,  and will if MERANT  requests,  distribute  to the  owners
additional ADRs for a total number of ADSs  representing  the amount of ordinary
shares received as the dividend or free distribution. This distribution would be
in proportion to the number of ADSs held by them. Instead of delivering ADRs for
fractional  ADSs in the event of dividend or free  distribution,  the depositary
will  sell  the  amount  of  ordinary  shares  represented  by the  total of the
fractions  and  distribute  the net  proceeds  in  accordance  with the  deposit
agreement.  If  additional  ADRs are not  distributed,  each ADS will  then also
represent  the  additional   ordinary  shares  distributed  upon  the  deposited
securities represented by the ADRs.

     If MERANT  offers or causes to be offered to the  holders of any  deposited
securities any rights to subscribe for additional  ordinary  shares or any other
rights, the depositary will have discretion as to the procedure for making those
rights available to any owners, or in disposing of these rights on behalf of any
owners and making the net proceeds  available in U.S. dollars to the owners. If,
for any reason,  the depositary may not either make the rights  available to any
owners or  dispose  of the rights  and make the net  proceeds  available  to the
owners, then the depositary will allow the rights to lapse.

     The depositary  may reasonably  determine that it is lawful and feasible to
make  rights  available  to all  owners,  or to certain  owners but not to other
owners.  In this event,  the depositary  must distribute to any owner to whom it
determines  the  distribution  to be lawful and  feasible,  in proportion to the
number of ADSs held by that owner, warrants or other instruments for the rights.
If:

     *    the  depositary  reasonably  determines  that  it is  not  lawful  and
          feasible to make the rights available to certain owners, or

     *    the rights  represented by the warrants or other  instruments  are not
          exercised and appear about to lapse,

the depositary may sell the rights,  warrants or other instruments in proportion
to the  number of ADSs held by the owners to whom it has  determined  it may not
lawfully or feasibly make the rights available, and allocate the net proceeds of
the sales for the  account of the owners  that would have been  entitled  to the
rights, warrants or other instruments, upon an averaged or other practical basis
without  regard  to any  distinctions  among  the  owners  because  of  exchange
restrictions or the date of delivery of any ADR or ADRs, or otherwise.

     If an owner requests the  distribution of warrants or other  instruments in
order to  exercise  the  rights,  in  circumstances  in which  rights  would not
otherwise be distributed,  the depositary will make the rights  available to the
owner upon written notice from MERANT to the depositary that:

     *    MERANT has elected in its sole  discretion  to permit the rights to be
          exercised, and

     *    the owner has signed any documents that MERANT  determines in its sole
          discretion are reasonably required under applicable law.

     The  depositary  will,  on behalf  of an owner,  exercise  the  rights  and
purchase the ordinary shares:

     *    upon instruction from the owner to exercise the rights,

     *    upon payment by the owner of the purchase price of the ordinary shares
          to be received upon exercise of the rights, and

     *    upon payment of the  depositary's  fees as provided in the warrants or
          other instruments

                                       29

<PAGE> 32

and MERANT will arrange for the ordinary shares purchased to be delivered to the
depositary on behalf of the owner.  As agent for the owner,  the depositary will
arrange for the purchased ordinary shares to be deposited,  and will execute and
deliver restricted ADRs to the owner.

     If  registration  under the  Securities  Act of the securities to which any
rights  relate is required in order for MERANT to offer the rights to owners and
sell the securities  represented by the rights, MERANT or the depositary are not
required to offer the rights to owners -

     *    unless and until a registration statement is in effect, or

     *    unless  the  offering  and sale of the  securities  to the  owners are
          exempt from registration under the Securities Act.

     The deposit  agreement does not create any obligation on the part of MERANT
to file a registration statement covering the rights or underlying securities or
to endeavor to have a registration statement declared effective.

     Whenever  the  depositary  receives  any  distribution  other  than cash or
ordinary shares upon any deposited  securities,  it will cause the securities or
property it receives to be distributed to the owners-

     *    after  deduction or upon payment of any fees of the  depositary or any
          taxes or other governmental charges or fees,

     *    in  proportion  to the  number  of  ADSs  representing  the  deposited
          securities held by them, and

     *    in any manner that the depositary  considers fair and  practicable for
          accomplishing the distribution.

     However,  if the  depositary  decides  that a  distribution  cannot be made
proportionately  among the owners,  or if for any other  reason  (including  any
requirement  that  MERANT or the  depositary  withhold  an amount on  account of
taxes) the depositary  decides that a distribution is not feasible,  then it may
make the distribution in any way it considers fair and  practicable.  This might
include  the  public or  private  sale of all or any part of the  securities  or
property  received,  and  distribution  of the net  proceeds  of the sale to the
owners.

     If the depositary  determines that any distribution in property  (including
ordinary  shares and rights to  subscribe  for them) is subject to any tax which
the  depositary  is  obligated  to withhold,  the  depositary  may, by public or
private  sale,  dispose  of all or a portion  of the  property  as it  considers
necessary and  practicable to pay the taxes.  In this event the depositary  will
distribute  the net  proceeds  of any sale after  deduction  of the taxes to the
owners in proportion to the number of ADSs held by them.

     Upon any change in nominal or par  value,  split-up,  consolidation  or any
other  reclassification of deposited  securities,  or upon any recapitalization,
reorganization, merger or consolidation or sale of assets affecting MERANT or to
which it is a party,  any  securities  that are  received by the  depositary  or
custodian  in  exchange  for,  in  conversion  of, or in  respect  of  deposited
securities  will be  treated  as new  deposited  securities  under  the  deposit
agreement.  From then on, the ADSs will  represent the new deposited  securities
received in exchange or conversion  unless  additional  ADRs are delivered.  The
depositary  may, upon  consultation  with MERANT,  and must if MERANT  requests,
execute  and  deliver  additional  ADRs as in the case of a dividend on ordinary
shares,  or call for the surrender of  outstanding  ADRs to be exchanged for new
ADRs specifically describing the new deposited securities.

                                       30

<PAGE> 33

     Record Dates

     Whenever the depositary  receives  notice of the fixing of a record date by
MERANT, the depositary,  in consultation with MERANT, will fix a record date for
the determination of the owners of ADRs.

     Voting of deposited securities

     When the  depositary  receives  notice of any  meeting or  solicitation  of
consents or proxies of shareholders or holders of other deposited securities, it
will, as soon as practicable, mail to all owners a notice containing:

     *    the information included in the notice of meeting,

     *    a  statement  that each owner at the close of  business on a specified
          record  date  will be  entitled,  subject  to  applicable  law and the
          provisions of MERANT's  Memorandum and Articles of Association and the
          provisions  of or  governing  deposited  securities,  to instruct  the
          depositary in writing as to the exercise of the owner's voting rights,
          if any, and

     *    a statement on how owners must give voting instructions.

When the depositary  receives voting  instructions from an owner who is entitled
to vote within the time established by the depositary,  it will endeavor to vote
the  deposited  securities  or cause  them to be voted  in  accordance  with any
nondiscretionary  proxy. The depositary will not exercise any voting  discretion
over any deposited securities.

     If the depositary  does not receive  instructions  from an owner within the
time  established by the depositary,  it will deliver a discretionary  proxy for
the deposited securities in the form provided by MERANT. However, the depositary
will not give a proxy for any matter as to which MERANT  informs the  depositary
that:

     *    MERANT does not wish a proxy given,

     *    substantial opposition exists, or

     *    the  matter   materially   and   adversely   affects   the  rights  of
          shareholders.

     Owners  generally,  and any owner in  particular,  may not  receive  notice
sufficiently  in  advance  of the date  established  by the  depositary  for the
receipt of  instructions  to ensure that the  depositary  will vote the ordinary
shares or deposited securities.

     Reports and Other Communications

     The  depositary  will  make  available  for  inspection  by  owners  at its
Corporate  Trust  Office any reports  and  communications,  including  any proxy
soliciting material, received from MERANT, which are both:

     *    received by the depositary as the holder of the deposited  securities,
          and

     *    made  generally  available to the holders of deposited  securities  by
          MERANT.

The depositary  will also send copies of reports to the owners when furnished by
MERANT.

     Amendment and Termination of the Deposit Agreement

     MERANT and the  depositary,  may, by written  agreement,  amend the form of
ADRs and any provisions of the deposit  agreement at any time and in any respect
which they  consider  necessary  or  desirable.  Any  amendment  that imposes or
increases any fees or charges,  other than taxes and other governmental charges,

                                       31

<PAGE> 34

registration fees, cable, telex or facsimile  transmission costs, delivery costs
or other similar expenses, or that otherwise prejudices any substantial existing
right of owners of ADRs, will,  however,  not take effect as to outstanding ADRs
until three months after notice of the amendment has been given to the owners of
outstanding  ADRs.  Every  owner  who  continues  to hold  ADRs at the  time any
amendment becomes  effective,  will be treated as having consented and agreed to
the amendment and will be bound by the deposit agreement as amended. In no event
will any amendment impair the right of the owner to surrender an ADR and receive
the deposited securities it represents.  If the depositary resigns or is removed
and a successor  depositary is appointed,  the successor  depositary will notify
owners of outstanding ADRs.

     Upon the  resignation  or removal of the  depositary,  either in accordance
with the  deposit  agreement,  or at any time at the  direction  of MERANT,  the
depositary will terminate the deposit agreement by mailing notice of termination
to the  owners.  The notice  will be sent at least 30 days before the date fixed
for termination. On and after the date of termination, the owner will, upon

     *    surrender of the ADR at the Corporate  Trust Office,

     *    payment of the  depositary's fee for the surrender of ADRs as provided
          in the deposit agreement, and

     *    payment of any applicable taxes or governmental charges,

be entitled to delivery to the owner or upon the owner's  order of the amount of
deposited  securities  represented  by the ADR. If any ADRs  remain  outstanding
after the date of termination of the deposit agreement, the depositary:

     *    will discontinue the registration of transfers of ADRs,

     *    will suspend the distribution of dividends to the owners, and

     *    will not give any further  notices or perform  any further  acts under
          the deposit agreement,

          except for

          *    the collection of dividends and other distributions pertaining to
               the deposited securities, and

          *    the sale of rights  and the  delivery  of  deposited  securities,
               together  with any  dividends or other  distributions  related to
               them  and the net  proceeds  of the sale of any  rights  or other
               property in exchange for surrendered  ADRs (after  deducting,  in
               each case,  its fee for the  surrender of ADRs,  any expenses set
               forth  in the  deposit  agreement  and any  applicable  taxes  or
               governmental charges).

     For a period of up to one year from the date of termination, the depositary
may sell the deposited securities then held under the deposit agreement and hold
the net  proceeds  of the  sale,  uninvested,  together  with  any  other  cash,
unsegregated and without liability for interest, for the pro rata benefit of the
owners that have not surrendered their ADRs. These owners are treated as general
creditors of the depositary with respect to these net proceeds. After making the
sale, the depositary will be discharged  from all obligations  under the deposit
agreement,  except to account for net proceeds and other cash,  after deducting,
in each case,  its fee for the surrender of ADRs,  any expenses set forth in the
deposit agreement and any applicable taxes or governmental charges.

     Charges of depositary

     MERANT  will pay the fees and  reasonable  expenses of the  depositary  and
those of any registrar. MERANT will not pay or be liable for:

     *    the fees of the  depositary  for the  execution  and delivery of ADRs,
          transfers, the surrender of ADRs and the making of any distribution,

                                       32

<PAGE> 35

     *    taxes and other governmental charges,

     *    fees for the registration of transfers of ordinary shares on the share
          register of MERANT or its appointed  agent which apply to transfers of
          ordinary  shares to the  depositary or its nominee or the custodian or
          its nominee on the making of deposits or withdrawals under the deposit
          agreement,

     *    any  cable,  telex  and  facsimile   transmission  expenses  that  are
          expressly  provided in the deposit  agreement  to be at the expense of
          persons depositing ordinary shares or owners, and

     *    expenses  incurred  by the  depositary  in the  conversion  of foreign
          currency.

     The depositary  will charge a fee of $5.00 or less per 100 ADSs (or portion
of 100) to anyone  to whom  ADRs are  issued  or who  surrenders  ADRs.  In this
context, issuance includes,  without limitation, a stock dividend or stock split
declared  by  MERANT,  an  exchange  of stock  regarding  the ADRs or  deposited
securities,  or a distribution of ADRs. In addition,  the depositary will charge
the same fee to owners and  holders  of ADRs for the  distribution  of  proceeds
under the deposit agreement. This fee will be deducted from the proceeds.

     The  depositary  may own and deal in any class of  securities of MERANT and
its affiliates and in ADRs.

     Liability of owner for taxes

     The  owner is  liable  to pay any tax or  other  governmental  charge  that
becomes payable with respect to any ADR, or any deposited securities represented
by any ADR. Until payment is made, the depositary may:

     *    refuse  to  effect  any  transfer  of the  ADR or  any  withdrawal  of
          deposited securities,

     *    withhold any dividends or other distributions,

     *    sell for the  account  of the owner  any part or all of the  deposited
          securities represented by the ADR, and

     *    apply dividends or other  distributions or the proceeds of any sale to
          pay any tax or other governmental charge.

The owner will  remain  liable  for any  deficiency.

     General

     Neither the depositary nor MERANT will be liable to any owner, if either or
both of them is prevented  from,  or subjected to any civil or criminal  penalty
for, doing any action that is provided for in the deposit  agreement  because of
any  present or future  law of any  country or  governmental  authority,  or any
provision,   present  or  future,   of  MERANT's   Memorandum  and  Articles  of
Association, or any act of God or war or other circumstances beyond its control.
Neither  the  depositary  nor  MERANT  will  be  liable  to any  owner  for  any
nonperformance  or delay,  from these same causes,  in the  performance of their
obligations  in the deposit  agreement,  or for any  exercise  of, or failure to
exercise,   any  discretion  provided  for  in  the  deposit  agreement.   If  a
distribution or offering may not be made available to owners, and the depositary

                                       33

<PAGE> 36

may not dispose of the distribution or offering on behalf of the owners and make
the net  proceeds  available  to  them,  then the  depositary  will not make the
distribution or offering, and will allow any rights, if applicable, to lapse.

     MERANT and the depositary  assume no obligation nor will they be subject to
any liability under the deposit  agreement to owners or holders of ADRs,  except
that they agree to perform their  obligations in the deposit  agreement  without
negligence or bad faith.

     The ADRs are  transferable  on the books of the  depositary.  However,  the
depositary  may close the transfer  books at any time in the  performance of its
duties.  Before the depositary  executes and delivers any ADR, registers any ADR
for  transfer,  split-up,  combination  or surrender or withdraws  any deposited
securities,  the  depositary  or the  custodian may require the depositor of the
ordinary shares or the presenter of the ADR to reimburse it for any tax or other
governmental  charge and any stock transfer or  registration  fee (including any
tax or charge and fee due for ordinary  shares being deposited or withdrawn) and
to pay any fees provided for in the deposit  agreement.  The depositary may, and
if requested by MERANT must, refuse to deliver ADRs, to register the transfer of
any ADR,  to make any  distribution  on, or related  to,  ordinary  shares or to
deliver  any   deposited   securities   until  it  has   received   information,
certificates,  representations  and  warranties  such as proof of citizenship or
residence  or  exchange  control  approval  as  it  reasonably  considers  to be
necessary or proper. The delivery,  transfer or registration of transfer of ADRs
may be suspended during any period when the transfer books of the depositary are
closed or at any time as the  depositary  or MERANT may  consider  necessary  or
advisable.  The surrender of  outstanding  ADRs and the  withdrawal of deposited
securities may not be suspended, subject only to:

     *    temporary   delays  caused  by  closing  the  transfer  books  of  the
          depositary  or MERANT or the deposit of ordinary  shares in connection
          with voting at a shareholders' meeting or the payment of dividends,

     *    the payment of fees, taxes and similar charges, and

     *    compliance with any laws or governmental  regulations  relating to the
          ADRs or to the withdrawal of the deposited securities.

     The  depositary  will keep books,  at its Corporate  Trust Office,  for the
registration  and transfer of ADRs,  which at all reasonable  times will be open
for inspection by the owners. However, inspection must not be for the purpose of
communicating with owners in the interest of a business or object other than the
business of MERANT or a matter related to the deposit agreement or the ADRs.

     The  depositary  may appoint one or more  co-transfer  agents at designated
transfer offices. In carrying out its functions, a co-transfer agent may require
holders or owners or persons  entitled to ADRs to provide  evidence of authority
and compliance with applicable laws and other  requirements.  Co-transfer agents
are  also  entitled  to  protection  and  indemnity  to the same  extent  as the
depositary.

     Listing

     The ADSs are quoted on the Nasdaq  National Market under the trading symbol
MRNT.

                                    PART III

ITEM 15.  DEFAULTS UPON SENIOR SECURITIES

     None.

                                       34

<PAGE> 37

ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED SECURITIES
         AND USE OF PROCEEDS

     None.


                                     PART IV

ITEM 17.  FINANCIAL STATEMENTS

     See Item 18.

ITEM 18.  FINANCIAL STATEMENTS

     Reference is made to Item 19 for a list of all financial  statements  filed
as part of this annual report.

ITEM 19.  FINANCIAL STATEMENTS AND EXHIBITS

     (a)  Financial Statements.
          ---------------------

     1. The following audited consolidated  financial statements,  together with
the related reports of Ernst & Young,  are incorporated in this annual report by
reference from the MERANT 1999 Annual Report Detail:

          US Format
          ---------

          Audited Financial Statements

               Consolidated  Statements  of Income for the year ended  April 30,
                    1999, the three-month period ended April 30, 1998, the year
                    ended January 31, 1998 and the year ended January 31, 1997
               Consolidated Balance Sheets at April 30, 1999 and April 30, 1998
               Consolidated  Statements  of Cash Flow for the for the year ended
                    April 30, 1999, the three-month  period ended April 30,
                    1998, the year ended January 31, 1998 and the year ended
                    January 31, 1997
               Consolidated  Statements  of  Shareholders'  Equity  for the year
                    ended April 30,  1999,  the  three-month  period  ended
                    April 30, 1998,  the year ended January 31, 1998 and the
                    year ended January 31, 1997
               Notes to Consolidated Financial Statements

               Report of the Independent Auditors

         UK Format
         ---------

         Audited Financial Statements

               Consolidated  Profit and Loss  Account  for the years ended April
                    30, 1999, January 31, 1998 and January 31, 1997
               Consolidated Balance Sheet at April 30, 1999 and January 31, 1998
               Consolidated  Cash Flow  Statement  for the years ended April 30,
                    1999, January 31, 1998 and January 31, 1997
               Notes to  Consolidated  Cash Flow  Statement  for the years ended
                    April 30, 1999, January 31, 1998 and January 31, 1997
               Company Balance Sheet at April 30, 1999 and January 31, 1998
               Statement  of Total  Recognized  Gains and  Losses  for the years
                    ended April 30, 1999, January 31, 1998 and January 31, 1997

                                       35

<PAGE> 38

               Movement  in  Shareholders'  Funds for the years  ended April 30,
                    1999, January 31, 1998 and January 31, 1997
               Notes to the Financial Statements

     2. The following  financial statement schedules and reports have been filed
as part of this annual report:

               US Format
               ---------

               Schedule  for the year  ended  April 30,  1999,  the  three-month
               period ended April 30, 1998,  the year ended January 31, 1998 and
               the year ended January 31, 1997

               Schedule II - Valuation and Qualifying Accounts

               Report of Ernst & Young, Independent Auditors

               Report of PriceWaterhouseCoopers LLP, Independent Accountants

               UK Format
               ---------

               Schedule for the years ended April 30, 1999, January 31, 1998 and
               January 31, 1997

               Schedule II - Valuation and Qualifying Accounts

     All other schedules have been omitted  because the required  information is
not significant or is not applicable.

(b)     Exhibits.
        ---------

Exhibit 2.01(1)  Memorandum of Association of MERANT dated as of March 28, 1983,
                 as amended and restated to date.

Exhibit 2.02*    Articles of Association of MERANT adopted as of June 19, 1996,
                 as amended and restated to date.

Exhibit 2.03*    Form of Specimen  Certificate for MERANT's  ordinary shares at
                 GBP 0.02 each.

Exhibit 2.04(1)  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.

Exhibit 2.05(2)+ MERANT's 1994 Employee Benefit Trust.

Exhibit 2.06*+   MERANT's 1998 Share Option Plan, as amended.

Exhibit 2.07*+   MERANT's 1998 Inland Revenue Approved Share Option Scheme.

Exhibit 2.08*+   MERANT's 1999 Employee Share Purchase Plan.

Exhibit 2.09(1)  Form of Indemnification Agreement entered into by MERANT with

                                       36

<PAGE> 39

                 each of its directors and certain executive officers.

Exhibit 2.10(1)  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.

Exhibit 2.11(3)  Agreement and Plan of Reorganization among Micro Focus Group
                 plc, Tower Merger Sub, Inc. and INTERSOLV, Inc. dated June 17,
                 1998.

Exhibit 13.01*   The portions of the MERANT 1999 Annual Report Detail
                 incorporated in this Form 20-F by reference.

Exhibit 23.01*   Consent of Ernst & Young, Independent Auditors, dated October
                 29, 1999.

Exhibit 23.02*   Consent of PriceWaterhouseCoopers LLP, Independent Accountants,
                 dated October 29, 1999.
____________________

(1)     Filed on May 29, 1998 as an exhibit to MERANT's Annual Report on Form
        20-F (File No.000-19696), and incorporated in this Form 20-F by
        reference.

(2)     Filed on April 9, 1997 as an exhibit to MERANT's Registration Statement
        on Form S-8 (File No. 333-24867), and incorporated in this Form 20-F by
        reference.

(3)     Filed on August 24, 1998 as an exhibit to MERANT's Registration
        Statement on Form F-4 (File No. 333-62095), and incorporated in this
        Form 20-F by reference.

+    Indicates a management contract or compensatory plan or arrangement.

*    Filed with this Form 20-F.

                                       37

<PAGE> 40

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (U.S. FORMAT)
------------------------------------------------------------

MERANT PLC

<TABLE>
In thousands of U.S. dollars

--------------------------- ----------------- ------------------ ------------------------- ---------------- -----------
                                  Balance at            Charged                   Charged       Deductions     Balance
                                beginning of       to costs and    to/credited from other                    at end of
Description                           period           expenses              accounts (*)                       period
--------------------------- ----------------- ------------------ ------------------------- ---------------- -----------
<S>                 <C>                 <C>                 <C>                 <C>                      <C>       <C>
Provision for bad and doubtful debts

Years ended January 31:

                      1997             4,559              4,587                 (21)                 (3,265)     5,860
                      1998             5,860              3,065                  706               **(4,770)     4,861

Quarter ended April 30:
                      1998             4,861                196                   29                     47      5,133

Year ended April 30:
                      1999             5,133              5,269                 (29)                 (5,588)     4,785
----------------------------------------------------------------------------------------------------------------------

(*)  Includes exchange rate adjustments
(**) Adjusted for INTERSOLV movements previously reported

</TABLE>

                                       38

<PAGE> 41

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (U.K. FORMAT)
------------------------------------------------------------

MERANT PLC


<TABLE>

--------------------------- ----------------- ----------------- ------------------------ ---------------- ---------------
                                  Balance at           Charged                  Charged       Deductions         Balance
                                beginning of      to costs and   to/credited from other         GBP '000       at end of
Description                           period          expenses             accounts (*)                           period
                                    GBP '000          GBP '000                 GBP '000                         GBP '000
--------------------------- ----------------- ----------------- ------------------------ ---------------- ---------------
<S>                 <C>                 <C>                 <C>                 <C>                  <C>             <C>
Provision for bad and doubtful debts

Years ended January 31:

                      1997               942               458               (68)                  (251)           1,081
                      1998             1,081               358                405                  (381)           1,463




Fifteen months ended April 30:
                      1999             1,463              2,839                1,087             (2,416)           2,973
-------------------------------------------------------------------------------------------------------------------------

(*) Includes exchange rate adjustments

</TABLE>

                                       39

<PAGE> 42

                 REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
                                   US FORMAT



To the Board of Directors and Shareholders
of MERANT plc

     We have  audited  the  balance  sheets of MERANT  plc and the  consolidated
balance sheets of MERANT plc and  subsidiaries  as of April 30, 1999 and January
31, 1998, and the related  consolidated profit and loss accounts,  statements of
recognised  gains and losses and cash flow  statements  for the  fifteen  months
ended April 30, 1999 and for each of the two years in the period  ended  January
31, 1998 on pages 72 to 102 of the 1999 Annual Report  Detail.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility is to express an opinion on the financial statements based on our
audits.

     We  conducted  our  audits  in  accordance  with  United  Kingdom  auditing
standards  which do not differ in any  significant  respect  from United  States
generally accepted auditing standards.  Those standards require that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  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  and  the  consolidated   financial   position  of  MERANT  plc  and
subsidiaries  at April 30,  1999 and  January  31,  1998,  and the  consolidated
results of their operations and  consolidated  cash flows for the fifteen months
ended April 30, 1999 and for each of the two years in the period  ended  January
31, 1998, in conformity with  accounting  principles  generally  accepted in the
United Kingdom.



/s/ Ernst & Young

Ernst & Young
Reading, England
August 4, 1999

                                       40

<PAGE> 43


                        REPORT OF INDEPENDENT ACCOUNTANTS



To the Board of Directors and Shareholders of
INTERSOLV, Inc.


     In  our  opinion,   the   consolidated   balance  sheets  and  the  related
consolidated  statements of operations,  cash flows and changes in stockholders'
equity  present  fairly,  in all material  respects,  the financial  position of
INTERSOLV, Inc. and its subsidiaries at April 30, 1998 and 1997, and the results
of their operations and their cash flows for each of the two years in the period
ended  April 30,  1998 and the three  month  period  ended  April 30,  1998,  in
conformity  with  generally  accepted  accounting  principles.  These  financial
statements   are  the   responsibility   of  the   Company's   management;   our
responsibility  is to express an opinion on these financial  statements based on
our audits.  We conducted  our audits of these  statements  in  accordance  with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable  assurance about whether the financial statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and  disclosures  in the financial  statements,
assessing the  accounting  principles  used and  significant  estimates  made by
management,  and evaluating the overall  financial  statement  presentation.  We
believe  that our audits  provide a reasonable  basis for the opinion  expressed
above.

     As  discussed  in  Note 13 to the  INTERSOLV,  Inc.  financial  statements,
INTERSOLV,  Inc.  signed an  agreement  to merge with Micro  Focus  Group,  plc.
subsequent to year end.


/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP



McLean, Virginia

June 17, 1998



                                       41

<PAGE> 44


                                   SIGNATURES

     Pursuant to the  requirements of Section 12 of the Securities  Exchange Act
of 1934, the  Registrant  certifies  that it meets all of the  requirements  for
filing on Form 20-F and has duly caused  this Annual  Report to be signed on its
behalf by the undersigned, thereunto duly authorized.


Date: November 1, 1999                       MERANT plc


                                             By: /s/  Kenneth A. Sexton
                                                 ----------------------
                                                 Kenneth A. Sexton
                                                 Senior Vice President, Chief
                                                 Financial Officer and Secretary

                                       42

<PAGE> 45


                                 EXHIBIT INDEX
                                 -------------

Exhibit No.     Description
-----------     -----------


Exhibit 2.02    Articles of Association of MERANT adopted as of June 19, 1996,
                as amended and restated to date.

Exhibit 2.03    Form of Specimen Certificate for MERANT's Ordinary Shares at GBP
                0.02 each.

Exhibit 2.06    MERANT's 1998 Share Option Plan, as amended.

Exhibit 2.07    MERANT's 1998 Inland Revenue Approved Share Option Scheme.

Exhibit 2.08    MERANT's 1999 Employee Share Purchase Plan.

Exhibit 13.01   The portions of the MERANT 1999 Annual Report Detail
                incorporated in this Form 20-F by reference.

Exhibit 23.01   Consent of Ernst & Young, Independent Auditors, dated October
                29, 1999.

Exhibit 23.02   Consent of PriceWaterhouseCoopers LLP, Independent Accountants,
                dated October 29, 1999.



<PAGE> 46

EXHIBIT 2.02



No: 01709998

                        THE COMPANIES ACTS 1985 TO 1989
                ________________________________________________

                       A PUBLIC COMPANY LIMITED BY SHARES
                ________________________________________________



                   A R T I C L E S  O F  A S S O C I A T I O N

  (adopted by Special Resolution passed on June 19 1996 and amended by Special
                    Resolution passed on September 16 1999)

                                     -of -

                                   MERANT Plc



                                 MEMERY CRYSTAL
                               31 Southampton Row
                                London WC1B 5HT
                               Tel: 0171-242 5905
                               Fax: 0171-242 2058
                                Ref:JPD:60161V1

<PAGE> 47



NO: 01709998

                        THE COMPANIES ACTS 1985 TO 1989
                ________________________________________________

                       A PUBLIC COMPANY LIMITED BY SHARES
                ________________________________________________


                   A R T I C L E S  O F  A S S O C I A T I O N

  (adopted by Special Resolution passed on June 19 1996 and amended by Special
                    Resolution passed on September 16 1999)

                                     - of -

                                  *MERANT Plc


1.   No regulations set out in any schedule to any statute concerning  companies
     shall apply as regulations or articles of the Company.

2.   2.1 In these articles if not inconsistent with the subject or context,  the
     following words shall bear the following  meanings:-

"the Acts"
               means  every  statute  from  time  to time  in  force  concerning
               companies insofar as the same applies to the Company;



----------
*The name of the Company was changed  from Micro Focus Group Plc on February 15,
1999.

<PAGE> 48

"the Uncertificated  Securities Regulations"

               means the Uncertificated Securities Regulations 1995 in so far as
               the same applies to the Company and includes:

                    (i)  any enactment or subordinate  legislation  which amends
                         or   supersedes   those    Uncertificated    Securities
                         Regulations;

                    (ii) any  applicable  rules made under those  Uncertificated
                         Securities   Regulations   or  any  such  enactment  or
                         subordinate legislation for the time being in force;

"CREST"

               means the relevant  system operated by Crest Co. Limited in terms
               of the Uncertificated Securities Regulations, which enables title
               to shares or other  securities  to be evidenced  and  transferred
               without a written instrument.

"these articles"

               means these  articles of association of the Company as originally
               adopted or from time to time altered;

"executed"

               includes any mode of execution whether under seal or under hand;

"office"

               means the registered office of the Company;

"the  holder"

               in relation to shares  means the member  whose name is entered in
               the register of members as the holder of the shares;

"the seal"

               means the common seal of the Company  (if any) and  includes  the
               official seal (if any) kept by the Company by virtue of the Acts;

"secretary"

               means any person appointed to perform the duties of the secretary
               of the Company; and

"the  Group"

               means the Company and any subsidiary or subsidiaries for the time
               being of the Company.

"the London Stock Exchange"

               means The London Stock Exchange Limited.

2.1  included for numbering purposes only

2.2  References  to writing shall include  typewriting,  printing,  lithography,
     photography and any other modes of  representing or reproducing  words in a
     legible and non-transitory form.

<PAGE> 49

2.3  Where for any purpose an ordinary  resolution  of the Company is required a
     special or  extraordinary  resolution shall also be effective and where for
     any  purpose an  extraordinary  resolution  of the  Company  is  required a
     special resolution shall be effective.

2.4  Unless the context otherwise  requires,  words or expressions  contained in
     these  articles bear the same meaning as in the Acts or the  Uncertificated
     Securities  Regulations (as the case may be) or any statutory  modification
     or  re-enactment  of it or them in  force  when  these  regulations  become
     binding on the Company.

2.5  A reference to shares in  "uncertificated  form" means shares, the title to
     which is recorded in the register of members as being held in such form and
     which  by  virtue  of  the  Uncertificated  Securities  Regulations  may be
     transferred  by means of a  relevant  system  and  reference  to  shares in
     "certificated  form" means shares, the title to which is not and may not be
     transferred. SHARE CAPITAL

3.   included for numbering purposes only

3.1  *The share  capital of the Company is  2,250,000  divided into  22,500,000
     Ordinary Shares of 10 pence each ("Ordinary Shares").

3.2  The  Ordinary  Shares shall rank pari passu in all respects and the holders
     of the Ordinary  Shares shall be entitled to attend and vote at any general
     meeting of the Company.

4.   Subject to the provisions of the Acts and in particular to those conferring
     rights of pre-emption  and without  prejudice to any rights attached to any
     shares  for the time being in issue,  any share may be issued  with or have
     attached thereto such rights or restrictions as the Company may by ordinary
     resolution  determine or have attached thereto or if there has not been any
     such determination or so far as the same shall not make specific provision,
     as the directors may determine.

5.   Subject to the provisions of the Acts and to any special  rights  conferred
     on the  holders of any  shares or class of shares,  any shares may with the
     sanction of a special  resolution be issued which are to be redeemed or are
     to be liable to be redeemed at the option of the Company or the holder.

*    By Ordinary  Resolution  passed on March 12 1998 each Ordinary Share of 10p
     was sub-divided  into 5 Ordinary  Shares of 2p each. By Special  Resolution
     passed on September 23 1998 the share  capital of the Company was increased
     to 4,240,000 divided into 212,000,000 Ordinary Shares of 2p each.

<PAGE> 50

6.   Subject to the provisions of the Acts, the Company is hereby  authorised to
     enter into any contract for the purchase of all or any of its shares of any
     class  (including  any  redeemable  shares) and any contract under which it
     may, subject to any conditions,  become entitled or obliged to purchase all
     or any of such  shares.  Every  contract  entered into in pursuance of this
     article  shall be  authorised  by such  resolution of the Company as may be
     required by the Acts,  but subject  thereto the  directors  shall have full
     power to determine or approve the terms of any such contract.  Any contract
     which the Company is hereby  authorised to enter into may be or provide for
     the purchase of shares by private treaty,  on a stock exchange or otherwise
     and neither the Company nor the  directors  shall be required to select the
     shares in question  rateably or in any other  particular  manner as between
     the holders of shares of the same class or as between  them and the holders
     of  shares  of any  other  class or in  accordance  with the  rights  as to
     dividends  or  capital  conferred  by any class of  shares.  Subject to the
     provisions  of the Acts the  Company  may  agree  to the  variation  of any
     contract  entered  into in  pursuance of this article and to release any of
     its rights or obligations under any such contract. Notwithstanding anything
     to the contrary  contained  in these  articles,  the rights and  privileges
     attached  to any class of  shares  shall be deemed  not to be  modified  or
     abrogated by anything done by the Company in pursuance of this article.

7.   The Company may exercise the powers of paying commissions  conferred by the
     Acts.  Subject  to  the  provisions  of the  Acts,  the  commission  may be
     satisfied  by the  payment of cash or by the  allotment  of fully or partly
     paid  shares or partly in one way and partly in the other.  The Company may
     also on any issue of share capital pay such brokerage as may be lawful.

8.   Except as required by law, no person shall be  recognised by the Company as
     holding any share upon any trust and (except as by these articles or by law
     otherwise provided) the Company shall not be bound by or to recognise (even
     when having  notice  thereof)  any interest in any share except an absolute
     right to the entirety thereof in the holder.

<PAGE> 51

                              VARIATION OF RIGHTS
                              -------------------

9.   Subject to the Acts,  all or any of the  special  rights for the time being
     attached to any class of shares for the time being  issued may from time to
     time (whether or not the Company is being wound-up) be altered or abrogated
     with the consent in writing of the  holders of not less than  three-fourths
     of the issued shares of that class or with the sanction of an extraordinary
     resolution  passed at a separate  general  meeting  of the  holders of such
     shares.  To any such separate  general  meeting all the provisions of these
     articles  as to general  meetings  of the Company  shall  mutatis  mutandis
     apply,  but so that  the  necessary  quorum  shall  be one or more  persons
     holding  or  representing  by proxy not less than  one-third  of the issued
     shares of the  class,  that  every  holder of shares of the class  shall be
     entitled  on a poll to one vote for every such share held by him,  that any
     holder of shares of the class  present  in person or by proxy may  demand a
     poll and that at any adjourned  meeting of such holders one holder  present
     in person or by proxy  (whatever the number of shares held by him) shall be
     a quorum.

10.  The  special  rights  conferred  upon the holders of any shares or class of
     shares  shall  not,  unless  otherwise  expressly  provided  in the  rights
     attaching to or the terms of issue of such shares,  be deemed to be altered
     by the creation or issue of further  shares  ranking pari passu  therewith.

                               SHARE CERTIFICATES
                               ------------------

11.  Every  person  (except a stock  exchange  nominee  in  respect  of whom the
     Company is not by law  required to complete  and have ready for  delivery a
     certificate)  whose  name is  entered  as a  holder  of any  shares  in the
     register of members of the Company shall be entitled,  without payment,  to
     receive within two months after  allotment or lodgment of a transfer to him
     of the shares in respect of which he is so registered (or within such other
     period as the terms of issue shall  provide) one  certificate  for all such
     shares of any one  class or  several  certificates  each for one or more of
     such  shares of such class upon  payment  for every  certificate  after the
     first of such reasonable  out-of-pocket  expenses as the directors may from
     time to time  determine.  In the case of a share  held  jointly  by several
     persons, delivery of a certificate to one or several joint holders shall be
     sufficient  delivery to all. A member  (except such a nominee as aforesaid)
     who has transferred part of the shares comprised in his registered  holding
     shall be entitled to a certificate for the balance without charge.

<PAGE> 52

12.  All forms of certificate for shares/or loan capital or other  securities of
     the Company (other than letters of allotment,  scrip certificates and other
     like documents)  shall,  except to the extent that the terms and conditions
     for the time being relating thereto otherwise provide, be issued under seal
     affixed only with the authority of the Board or in such other manner as the
     Board having regard to the terms of issue,  the Acts and the regulations of
     the London Stock  Exchange may  authorise.  The directors may by resolution
     determine,  either  generally or in any particular case or cases,  that any
     signatures  on any such  certificates  need not be  autographic  but may be
     affixed to such  certificates  by some  mechanical  means or may be printed
     thereon or that such certificates need not be signed by any person.

13.  included for numbering purposes only

13.1 If a share certificate is defaced,  worn-out,  lost or destroyed, it may be
     replaced  without  fee but on  such  terms  (if  any)  as to  evidence  and
     indemnity and payment of the exceptional out of pocket expenses incurred by
     the Company in investigating  such evidence and preparing such indemnity as
     the  directors  may  determine  and where it is defaced or worn out,  after
     delivery  up of the old  certificate  to the  Company  and in any  event no
     replacement  of a lost  certificate  will be issued  unless the  Company is
     satisfied beyond reasonable doubt that the original has been destroyed.

13.2 Notwithstanding  the terms of  articles  11, 12 and 13.1 above,  where,  in
     accordance  with the terms of  Article  13.3  hereof,  any  shares or other
     securities of the Company are issued, transferred,  registered or otherwise
     dealt  with in  uncertificated  form,  any  references  in  these  articles
     requiring  title  to  shares  or other  securities  to be  evidenced  by or
     transferred by reference to share certificates or any other form of written
     instrument shall not apply and the holding, transfer, recording of title to
     and, registration of, uncertificated  securities issued by the Company will
     be governed by reference to the provisions of Article 13.3 hereof.

     (a)  Nothing in these  articles  shall preclude any share or other security
          of  the  Company  from  being  issued,  held,  registered,  converted,
          transferred  or  otherwise  dealt  with in an  uncertificated  form in
          accordance  with the  Uncertificated  Securities  Regulations  and any
          rules or  requirements  laid  down  from  time to time by CREST or any
          other  relevant  system  operated   pursuant  to  the   Uncertificated
          Securities Regulations.

<PAGE> 53

     (b)  In relation to any share or other security which is in  uncertificated
          form,  the articles of  association  shall have effect  subject to the
          provisions of the Uncertificated Securities Regulations and (so far as
          consistent with them) to the following provisions:

          (i)  the  Company   shall  not  be  obliged  to  issue  a  certificate
               evidencing title to shares and all references to a certificate in
               respect of any shares or securities held in  uncertificated  form
               in these articles shall be deemed  inapplicable to such shares or
               securities which are in uncertificated form and furthermore shall
               be  interpreted  as a reference to such form of evidence of title
               to  uncertificated  shares or  securities  as the  Uncertificated
               Securities Regulations prescribe or permit;

          (ii) the  registration  of  title to and  transfer  of any  shares  or
               securities  in  an  uncertificated  form  shall  be  effected  in
               accordance  with the  Uncertificated  Securities  Regulations and
               there  shall  be no  requirement  for  a  written  instrument  of
               transfer;

          (iii)a  properly  authenticated  dematerialised  instruction  given in
               accordance with the Uncertificated  Securities  Regulations shall
               be given effect in accordance with the Uncertificated  Securities
               Regulations;

          (iv) any  communication  required or permitted by these articles to be
               given by a person to the Company may be given in accordance  with
               and in any  manner  (whether  or not in  writing)  prescribed  or
               permitted by the Uncertificated Securities Regulations;

          (v)  if a situation  arises where any  provision of these  articles is
               inconsistent in any respect with the terms of the  Uncertificated
               Securities Regulations in relation to shares or securities of the
               Company which are in an uncertificated form then:-

               (i)  the  Uncertificated  Securities  Regulations  will be  given
                    effect thereto in accordance with their terms; and

               (ii) the directors  shall have power to implement any  procedures
                    they may think fit and as may accord with the Uncertificated
                    Securities Regulations for the recording and transferring of
                    title to shares and  securities in  uncertificated  form and
                    for the  regulation  of those  proceedings  and the  persons
                    responsible for or involved in their operation;

<PAGE> 54

               (iii)the  directors  shall  have the  specific  powers  to elect,
                    without further  consultation with the holders of any shares
                    or  securities  of the Company  (except where such shares or
                    securities  are  constituted  by virtue of some other  deed,
                    document or other source), that any single or all classes of
                    shares and securities of the Company become capable of being
                    traded  in  uncertificated   form  in  accordance  with  the
                    Uncertificated  Securities Regulations on CREST or any other
                    Operator of a relevant system.

                            DESTRUCTION OF DOCUMENTS
                            ------------------------

14.  The Company may destroy:-

14.1 any share certificate which has been cancelled at any time after the expiry
     of one year from the date of such cancellation;

14.2 any  dividend  mandate  or any  variation  or  cancellation  thereof or any
     notification  of change of name or  address at any time after the expiry of
     two years from the date such mandate variation cancellation or notification
     is recorded by the Company;

14.3 any instrument of transfer of shares which has been  registered at any time
     after the expiry of six years from the date of registration; and

14.4 any other  documents  on the basis of which  any entry in the  register  of
     members is made at any time after the expiry of twelve  years from the date
     an entry in the register of members was first made in respect of it;

and it shall  conclusively be presumed in favour of the Company that every share
certificate so destroyed was a valid certificate duly and properly cancelled and
that  every  instrument  of  transfer  so  destroyed  was a valid and  effective
instrument duly and properly  registered and that every other document destroyed
hereunder  was a valid and effective  document in  accordance  with the recorded
particulars  thereof  in the books or records of the  Company:  PROVIDED  ALWAYS
that:

<PAGE> 55

     (a)  the  foregoing  provisions  of this  article  shall  apply only to the
          destruction of a document in good faith and without  express notice to
          the Company that the  preservation  of such document was relevant to a
          claim,

     (b)  nothing  contained in this article shall be construed as imposing upon
          the Company any  liability in respect of the  destruction  of any such
          document earlier than as aforesaid or in any case where the conditions
          of proviso (i) above are not fulfilled, and

     (c)  references in this article to the destruction of any document  include
          references to its disposal in any manner.

                             UNTRACED SHAREHOLDERS
                             ---------------------

15.  The Company  shall be entitled to sell the shares of a member or the shares
     to which a person is entitled by death,  bankruptcy  or operation of law by
     instructing  a member of the London Stock  Exchange to sell them at best if
     and PROVIDED THAT:-

15.1 during a period of 12 years all warrants and cheques in respect of at least
     3 dividends  declared by the Company in respect of the member's shares sent
     by the Company through the post in a prepaid letter addressed to the member
     at his registered address or to the person so entitled at the address shown
     in the  register  of members as his  address  and have  become  payable and
     remain unclaimed and uncashed or have been returned undelivered; and

15.2 the Company shall insert advertisements in a national daily newspaper and a
     newspaper  circulated  in the area in which the last  known  address of the
     member or the address at which service of notices in the manner  authorised
     by these  articles may be effected,  giving notice of its intention to sell
     the said shares; and

15.3 during the said period of 12 years and the period of 3 months following the
     said  advertisements  the Company has had no indication that such member or
     person can be traced; and

15.4 where any shares in the  capital of the  Company  are listed or dealt in on
     the  London  Stock  Exchange  notice  is first  given to the  London  Stock
     Exchange of its intention so to do.

<PAGE> 56

     (a)  To give  effect to such sale the  Company  may  appoint  any person to
          execute  an  instrument  of  transfer  of the  share or in the case of
          shares  for the time being in  uncertificated  form to take such other
          steps in the name of the holder as may be  necessary  to transfer  the
          shares sold,  then the  instrument or steps (as the case may be) shall
          be as effective  as if it had been  executed or they had been taken by
          the registered  holder of, or person entitled by transmission  to, the
          share.  The  Company  shall  account  to the  member  or other  person
          entitled to such shares for the net proceeds of such sale and shall be
          deemed to be his  debtor  and not a trustee  for him in respect of the
          same and no interest  shall be payable by the Company to the member or
          other person entitled to such shares.

     (b)  Any moneys not accounted for to the member or other person entitled to
          such  shares  shall be carried to a  separate  account  and shall be a
          permanent  debt  of the  Company.  Moneys  carried  to  such  separate
          accounts  may either be  employed  in the  business  of the Company or
          invested in such investments  (other than shares of the Company or its
          holding  Company if any) as the  directors may from time to time think
          fit.

15.5 If on two consecutive  occasions dividend warrants and/or Notices have been
     sent  through  the post to any  member  at his  registered  address  or his
     address  for the  service of  Notices  but have been left  uncashed  and/or
     returned  undelivered or if, after one such occasion  reasonable  enquiries
     have failed to establish  any new address of the  registered  member,  such
     member shall not thereafter be entitled to receive dividend warrants and/or
     Notices by post from the Company until he shall have  communicated with the
     Company and supplied in writing to the office a new  registered  address or
     address within the United Kingdom for service of the Notices.

                                      LIEN
                                      ----

16.  The Company shall have a first and paramount lien on every share (not being
     a fully  paid  share)  for all moneys  (whether  presently  payable or not)
     payable at a fixed time or called in respect of that share.  The  directors
     may at any time  declare  any share to be wholly or in part exempt from the
     provisions of this  regulation.  The Company's lien on a share shall extend
     to all moneys payable in respect of it.

<PAGE> 57

17.  The Company may sell in such manner as the  directors  determine any shares
     on which  the  Company  has a lien if a sum in  respect  of which  the lien
     exists is  presently  payable  and is not paid within  fourteen  days after
     notice has been given to the holder of the share or the person  entitled to
     it by reason of the death or bankruptcy of the holder demanding  payment of
     the sum  presently  payable and stating  that if the notice is not complied
     with the shares may be sold.

18.  To give effect to a sale the directors may authorise some person to execute
     an  instrument of transfer of the shares sold, or in the case of shares for
     the time being in uncertificated  form to take such other steps in the name
     of the holder as may be  necessary  to  transfer  the shares sold to, or in
     accordance  with the directions of, the purchaser.  The purchaser  shall be
     registered  as the holder of the share and he shall not be bound to see the
     application  of the  purchase  money.  The title of the  transferee  to the
     shares shall not be affected by any  irregularity  in or  invalidity of the
     proceedings in reference to the sale.

19.  The net proceeds of the sale, after payment of the costs,  shall be applied
     in payment of so much of the sum for which the lien exists as is  presently
     payable,  and any residue shall, in the case of shares in certificated form
     (upon surrender to the Company for  cancellation of the certificate for the
     shares sold and subject to a like lien for any moneys not presently payable
     as existed upon the shares before the sale) be paid to the person  entitled
     to the shares immediately before the date of the sale.

                         CALLS ON SHARES AND FORFEITURE
                         ------------------------------

20.  Subject to the provisions of these articles and to the terms of issue,  the
     directors  may make calls upon the members in respect of any moneys  unpaid
     on their  shares and not by the terms of issue  thereof  made  payable at a
     date fixed by or in accordance with such terms of issue (whether in respect
     of nominal value or premium) and each member shall (subject to receiving at
     least fourteen clear days' notice  specifying  when and where payment is to
     be made) pay to the Company as required by the notice the amount  called on
     his shares.  A call may be required to be paid by instalments.  A call may,
     before receipt by the Company of a sum due thereunder,  be revoked in whole
     or in part and  payment  of a call  may be  postponed  in whole or part.  A
     member  shall  remain  liable for calls made upon him  notwithstanding  the
     subsequent transfer of the shares in respect whereof the call was made.

<PAGE> 58

21.  A call shall be deemed to have been made at the time when the resolution of
     the directors authorising the call was passed.

22.  The joint holders of a share shall be jointly and  severally  liable to pay
     all calls in respect thereof.

23.  If a call  remains  unpaid  after it has become due and  payable the person
     from whom the sum is due shall pay  interest on the unpaid sum from the day
     it became due until it is paid at the rate fixed by the terms of  allotment
     of the share or in the notice of the call or, if no rate is fixed,  at such
     rate not  exceeding 15 per cent.  per annum as the  directors may determine
     but the directors may waive payment of the interest  wholly or in part. The
     Company may also recover any costs, charges and expenses incurred by reason
     of the non-payment of any call.

24.  A sum  payable  in respect of a share on  allotment  or at any fixed  date,
     whether in respect of  nominal  value or premium or as an  instalment  of a
     call,  shall be deemed to be a call and if it is not paid the provisions of
     these  articles  shall  apply as if that sum had become due and  payable by
     virtue of a call.

25.  Subject to the terms of allotment  the directors may on the issue of shares
     differentiate between the allottees or holders as to the amount of calls to
     be paid and the times of payment.

26.  The directors  may receive from any member  willing to advance the same all
     or any part of the money unpaid upon the shares held by him beyond the sums
     actually  called up thereon  as a payment  in  advance  of calls,  and such
     payment  in  advance of calls  shall  extinguish,  so far as the same shall
     extend,  the liability  upon the shares in respect of which it is advanced,
     and the Company may pay  interest  upon the money so  received,  or so much
     thereof as from time to time exceeds the amount of the calls then made upon
     the shares in respect  of which it has been  received,  at such rate as the
     member paying such sum and the directors  agree; but provided that any such
     payment in advance of calls  shall not  entitle the holder of the shares to
     participate  in  respect  thereof in a dividend  subsequently  declared  by
     reference  to a record  date  earlier  than the due date for the call.  The
     directors  may repay any amount  paid in advance of call,  upon  giving the
     member concerned at least three months' notice in writing.

<PAGE> 59

27.  If a call or  instalment  of a call remains  unpaid after it has become due
     and  payable the  directors  may give to the person from whom it is due not
     less than  fourteen  clear  days'  notice  requiring  payment of the amount
     unpaid together with any interest which may have accrued.  The notice shall
     name the place  where  payment  is to be made and shall  state  that if the
     notice is not  complied  with the  shares in  respect of which the call was
     made or instalment is payable will be liable to be forfeited.

28.  If the  notice is not  complied  with any share in  respect of which it was
     given may,  before the  payment  required  by the notice has been made,  be
     forfeited by a resolution of the directors and the forfeiture shall include
     all dividends or other moneys  payable in respect of the  forfeited  shares
     and not paid before the  forfeiture.  Where any share has been forfeited in
     accordance  with the  articles of  association,  the  Company  will serve a
     notice of  forfeiture  on the person who was the holder of the share before
     forfeiture.  The accidental  omission to give notice or the  non-receipt of
     notice will not invalidate the forfeiture.

29.  Subject  to the  provisions  of the Acts,  a  forfeited  share may be sold,
     re-allotted  or  otherwise  disposed of on such terms and in such manner as
     the directors  determine either to the person who was before the forfeiture
     the holder or to any other person upon such terms and in such manner as the
     directors  think fit and at any time before a sale,  re-allotment  or other
     disposition  the  forfeiture may be annulled by the directors on such terms
     as they think fit. Where for the purposes of its disposal a forfeited share
     is to be  transferred to any person the directors may authorise some person
     to execute an  instrument  of  transfer  of the share,  or in the case of a
     share for the time being in  uncertificated  form to take such steps in the
     name of the  holder  as may be  necessary  to  transfer  the  share to that
     person.

30.  A person any of whose shares have been forfeited shall cease to be a member
     in respect of them and,  in the case of shares in  certificated  form shall
     surrender to the Company for  cancellation  the  certificate for the shares
     forfeited  but shall  remain  liable to the Company for all moneys which at
     the date of  forfeiture  were  presently  payable by him to the  Company in
     respect of those  shares with  interest at such rate as may be fixed by the
     terms of allotment of the share or in the notice of the call or, if no rate
     is fixed, at the appropriate rate (as defined in the Acts) from the date of
     forfeiture  until payment but the directors may waive payment  wholly or in
     part or enforce payment  without any allowance for the  value of the shares

<PAGE> 60

     at the  time of  forfeiture  or for any  consideration  received  on  their
     disposal.  Forfeiture  of a share shall  extinguish  all  interest  and all
     claims and demands against the Company in respect of that share.

31.  A statutory  declaration  by a director or the  secretary  that a share has
     been  forfeited  on a specified  date shall be  conclusive  evidence of the
     facts  stated in it as against all  persons  claiming to be entitled to the
     share and the declaration  shall (subject to the execution of an instrument
     of  transfer  if  necessary)  constitute  a good title to the share and the
     person  to whom the share is  disposed  of shall not be bound to see to the
     application of the consideration,  if any, nor shall his title to the share
     be affected by any  irregularity  in the  proceedings  in  reference to the
     forfeiture or disposal of the share.

                             DISCLOSURE OF INTEREST
                             ----------------------

32.  included for numbering purposes only

32.1 No member shall, unless the Directors otherwise  determine,  be entitled in
     respect  of  any  share  held  by him  to  vote  (either  in  person  or by
     representative  or proxy) at any general meeting or at any separate meeting
     of the  holders  of any class of shares,  or to  exercise  any other  right
     conferred by  membership in relation to any such meeting if he or any other
     person  appearing to be  interested in the share(s) has been given a notice
     under  Section 212 of the  Companies  Act 1985 ("a Section 212 notice") and
     has failed to give the Company the information  thereby  required within 14
     days from the date of the notice.

32.2 Without  prejudice to the  provisions of  sub-clause 1 of this article,  no
     member holding shares  representing  0.25 per cent or more in nominal value
     of the issued shares of any class of capital in the Company  shall,  unless
     the Directors otherwise determine, be entitled:

     (a)  in  respect  of any such  shares,  to vote  (either  in  person  or by
          representative  or proxy) at any  general  meeting or at any  separate
          meeting  of the  holders of any class of shares,  or to  exercise  any
          other right  conferred by  membership in relation to any such meeting;
          or

     (b)  to  receive  payment  of any  dividend  (including  shares  in lieu of
          dividend) or other distribution payable in respect of any such shares;
          or

     (c)  to transfer any such shares otherwise than:

<PAGE> 61

          (i)  pursuant to acceptance of a take-over offer;

          (ii) through a  recognised  investment  exchange  or other  recognised
               market; or

          (iii)in any other manner  which the  Directors  are  satisfied is bona
               fide and at arm's length;  (in each case hereinafter  referred to
               as an "arm's  length  sale") if he or any person  appearing to be
               interested in such shares has been given a Section 212 notice and
               has failed to give the Company the information  thereby  required
               within 14 days  from the date of the  notice  provided  that upon
               receipt  by the  Company  of  notice  that the  shares  have been
               transferred  pursuant  to any  arm's  length  sale  or  upon  all
               information  required by the Section 212 notice being given, such
               restrictions  shall  cease to apply in respect of such shares and
               any dividend withheld shall be paid.

32.3 For the purposes of this article:

     (a)  a person  other  than the member  holding a share  shall be treated as
          appearing  to be  interested  in that share if the member has informed
          the Company  that the person is, or may be, so  interested,  or if the
          Company  (after taking  account of any  information  obtained from the
          member or,  pursuant to a Section 212 notice,  from anyone else) knows
          or has  reasonable  cause to believe that the person is, or may be, so
          interested;

     (b)  "interested"  shall be  construed  as it is for the purpose of Section
          212 of the Companies Act 1985;

     (c)  "take-over offer" shall have the meaning ascribed to it in Part XIII A
          of the Companies Act 1985;

     (d)  "recognised investment exchange" shall have the meaning ascribed to it
          in Section 207(1) of the Financial Services Act 1986; and

     (e)  "at arm's length" means a transfer to a person who is unconnected with
          the members and with any other person  appearing to be  interested  in
          the shares; and

<PAGE> 62

     (f)  reference  to  a  person   having  failed  to  give  the  Company  the
          information required by a Section 212 notice includes (i) reference to
          his  having  failed or  refused to give all or any part of it and (ii)
          reference to his having given  information  which he knows to be false
          in a material  particular or having recklessly given information which
          is false in a material particular.

32.4 Where on the basis of information  obtained from a member in respect of any
     share  held by him,  the  Company  gives a Section  212 notice to any other
     person,  it shall at the same time send a copy of the notice to the member,
     but the accidental  omission to do so, or the  non-receipt by the member of
     the copy,  shall not  invalidate  or otherwise  affect the  application  of
     sub-clauses 1 and 2 of this article.

32.5 Any  sanctions  imposed upon a  shareholding  in respect of a person having
     failed to give the Company the information required by a section 212 notice
     will cease to apply 7 days after the earlier of:-

     (a)  receipt by the Company of notice that the  shareholding  has been sold
          to a third party in the manner described above; and

     (b)  due  compliance to the  satisfaction  of the Company,  with the notice
          under section 212.

32.6 Nothing  in these  articles  shall  limit the powers of the  Company  under
     Section 216 of the Companies Act 1985 or any other powers whatsoever.

                               TRANSFER OF SHARES
                               ------------------

33.  included for numbering purposes only

33.1 Subject to such of the restrictions of these articles as may be applicable,
     any  member  may  transfer  all or any of his  shares.  The  instrument  of
     transfer of a share in certificated form may be in any usual form or in any
     other form which the  directors  may approve and shall be executed by or on
     behalf of the  transferor  and,  unless the share is fully  paid,  by or on
     behalf of the transferee.

33.2 Nothing in these  articles  shall  require  title to any  securities of the
     Company  to be  evidenced  or  transferred  by a  written  instrument,  the
     regulations from time to time made under the Acts so permitting.  The Board
     shall have power to implement  any  arrangements  it may think fit for such
     evidencing and transfer which accord with those regulations.

<PAGE> 63

34.  *The  directors  may, in their  absolute  discretion and without giving any
     reason,  refuse to register  the transfer of a share in  certificated  form
     which  is not  fully  paid or of a share on which  the  Company  has a lien
     provided that any such refusal does not prevent dealings in the shares from
     taking place on an open and proper basis.

35.  included for numbering purposes only

35.1 The  directors  may also decline to recognise an  instrument of transfer in
     respect of shares in certificated form unless:-

     (a)  it is lodged duly  stamped at the office or at such other place as the
          directors may appoint and is  accompanied by the  certificate  for the
          shares to which it relates and such other  evidence  as the  directors
          may reasonably require to show the right of the transferor to make the
          transfer;

     (b)  it is in respect of only one class of share; and

     (c)  it is in favour of not more than four transferees.

35.2 In the case of shares for the time being in  uncertificated  form transfers
     shall be registered only in accordance with the terms of the Uncertificated
     Securities  Regulations  but so that the directors may refuse to register a
     transfer  which would  require  shares to be held jointly by more than four
     persons.

36.  If the  directors  decline to  register a  transfer  they shall  within two
     months  after the date on which the transfer was lodged with the Company or
     in the case of uncertificated shares the  Operator-instruction was received
     by the Company send to the transferee notice of the refusal.

37.  The  registration  of transfers of shares or  debentures or of any class of
     shares or  debentures  may be  suspended at such times and for such periods
     (not exceeding  thirty days in any year) as the directors may determine but
     so that such a suspension  shall only apply to  uncertificated  shares with
     the prior consent of the Operator.

38.  No fee shall be charged for the  registration of any instrument of transfer
     or other document or instructions relating to or affecting the title to any


----------
*    Amended by Special Resolution passed September 16 1999.

<PAGE> 64

     share or for otherwise making any entry in the register of members relating
     to any share.

39.  Subject to article 14, all  instruments  of transfer  which are  registered
     shall be retained by the Company,  but any instrument of transfer which the
     directors refuse to register shall be returned to the person depositing it.

40.  Nothing in these articles  shall preclude the directors from  recognising a
     renunciation  of the  allotment  of any share by the  allottee in favour of
     some other person.

                             TRANSMISSION OF SHARES
                             ----------------------

41.  If a member dies the survivor or survivors where he was a joint holder, and
     his  personal  representatives  where  he was a  sole  holder  or the  only
     survivor of joint  holders,  shall be the only  persons  recognised  by the
     Company as having any title to his interest;  but nothing herein  contained
     shall release the estate of a deceased member from any liability in respect
     of any share held by him solely or which had been jointly held by him.

42.  A person  becoming  entitled  to a share  in  consequence  of the  death or
     bankruptcy  of a member or otherwise  by  operation  of law may,  upon such
     evidence  being  produced as the directors may properly  require,  elect to
     become  the  holder  of the  share  or in the case of  certificated  shares
     alternatively  elect to have some person nominated by him registered as the
     transferee.  If he elects to become the holder he shall give  notice to the
     Company to that effect.  If he elects to have another person  registered he
     shall execute an  instrument  of transfer of the share to that person.  All
     the provisions of these  articles  relating to the transfer of shares shall
     apply to the notice or  instrument  of transfer as if it were an instrument
     of transfer  signed by the member and the death or bankruptcy of the member
     had not occurred.  Nothing in these articles shall preclude the transfer of
     shares  or  other  securities  of the  Company  in  uncertificated  form in
     accordance  with the  terms of  Article  13.3  hereof,  and any  references
     contained in these  Articles in relation to the execution of any instrument
     of  transfer  or the  registration  of any  transfer  of  shares  or  other
     securities  of  the  Company  in  uncertificated  form  shall  be  read  in
     accordance with the terms of Article 13.3 hereof.

43.  A person becoming  entitled to a share by reason of the death or bankruptcy


<PAGE> 65

     of a member or  otherwise  by  operation  of law shall (upon such  evidence
     being  produced as may from time to time be required by the directors as to
     his  entitlement)  have the rights to which he would be entitled if he were
     the holder of the share,  except that he shall not, before being registered
     as the holder of the share,  be entitled in respect of it to attend or vote
     at any meeting of the Company or at any separate  meeting of the holders of
     any class of shares in the  Company.  The Board may at any time give notice
     requiring  the  person  to elect  either  to be  registered  himself  or to
     transfer  the share and if the Notice is not  complied  with within 60 days
     the Board may withhold payment of all dividends and other monies payable in
     respect  of the  share  until  the  requirements  of the  Notice  have been
     complied with.

                                     STOCK
                                     -----

44.  The  Company  may by  ordinary  resolution  convert any paid up shares into
     stock,  and re-convert  any stock into paid up shares of any  denomination.
     After the passing of any resolution converting all the fully paid up shares
     of any class in the capital of the Company  into stock,  any shares of that
     class which  subsequently  become  fully paid up and rank pari passu in all
     other  respects  with such shares  shall by virtue of this article and such
     resolution be converted  into stock  transferable  in the same units as the
     shares already converted.

45.  The holders of stock may  transfer the same or any part thereof in the same
     manner,  and subject to the same regulations,  as would have applied to the
     shares  from which the stock  arose if they had not been  converted,  or as
     near thereto as  circumstances  admit,  but the  directors may from time to
     time, if they think fit, fix the minimum amount of stock transferable,  but
     so that such  minimum  shall not exceed the  nominal  amount of each of the
     shares from which the stock arose.

46.  The holders of stock  shall,  according  to the amount of the stock held by
     them, have the same rights, privileges and advantages in all respects as if
     they held the  shares  from  which the stock  arose  provided  that no such
     privilege or advantage  (except  participation  in dividends and profits of
     the  Company and in the assets on a winding  up) shall be  conferred  by an
     amount of stock which would not, if existing in shares, have conferred such
     privilege or advantage.

47.  All the  provisions  of these  articles  applicable to paid up shares shall
     apply to stock and in all such  provisions  the words  "share" and "member"


<PAGE> 66

     shall include "stock" and "stockholder" respectively.

                             ALTERATION OF CAPITAL
                             ---------------------

48.  The Company may from time to time by ordinary resolution:-

     (a)  increase  the  share  capital  by new  shares  of such  amount  as the
          resolution prescribes;

     (b)  consolidate  and  divide  all or any of its  shares  into  shares of a
          larger amount than its existing shares;

     (c)  subject to the provisions of the Acts,  sub-divide its shares,  or any
          of them, into shares of smaller amount than is fixed by the Memorandum
          of Association  (subject  nevertheless to the Acts) and the resolution
          may  determine  that,  as between the holders of the shares  resulting
          from the  sub-division,  one or more of the  shares  may have any such
          preferred  or other  special  rights over,  or may have such  deferred
          qualified  rights or be subject to any such  restrictions  as compared
          with, the others as the Company has power to attach to unissued or new
          shares; and

     (d)  cancel  shares  which,  at the date of the passing of the  resolution,
          have not been taken or agreed to be taken by any person,  and diminish
          the  amount  of its  share  capital  by the  amount  of the  shares so
          cancelled.

49.  Whenever as a result of a consolidation  of shares any members would become
     entitled to fractions  of a share,  the  directors  may, on behalf of those
     members,  sell the shares  representing  the  fractions  for the best price
     reasonably  obtainable to any person (including the Company) and distribute
     the  proceeds  of sale  in due  proportion  among  those  members,  and the
     directors may authorise some person to execute an instrument of transfer of
     the shares,  or in the case of shares for the time being in  uncertificated
     form to take such other steps in the name of the holder as may be necessary
     to transfer  shares sold to, or in accordance  with the  directions of, the
     purchaser.  The transferee  shall not be bound to see to the application of
     the  purchase  money nor shall his title to the shares be  affected  by any
     irregularity in or invalidity of the proceedings in reference to the sale.

50.  Subject  to the  provisions  of  the  Acts,  the  Company  may  by  special
     resolution  reduce its  authorised  or issued  share  capital,  any capital


<PAGE> 67

     redemption reserve, and any share premium account in any way.

                                GENERAL MEETINGS
                                ----------------

51.  All general  meetings  other than annual  general  meetings shall be called
     extraordinary general meetings.

52.  The  directors  may call  general  meetings.  If at any time  there are not
     within the United Kingdom sufficient  Directors capable of acting to form a
     quorum,  any  Director  or any two  members of the  Company  may convene an
     extraordinary  general  meeting in the same manner as nearly as possible as
     that in which meetings may be convened by the Directors.

                           NOTICE OF GENERAL MEETINGS
                           --------------------------

53.  Subject to the  provisions  of the Acts, an annual  general  meeting and an
     extraordinary  general meeting for the passing of a special resolution or a
     resolution  appointing a person as a director shall be called by twenty-one
     days' notice at the least,  and all other  extraordinary  general  meetings
     shall be called by fourteen days' notice at the least.  The notice shall be
     exclusive of the day on which it is served, or deemed to be served,  and of
     the day for which it is given.  Every  notice shall be in writing and shall
     specify  the place,  the day and the time of  meeting,  and (in the case of
     special  business) the general nature of such business,  and in the case of
     an annual general  meeting shall specify the meeting as such and the notice
     convening  a meeting to pass a special or  extraordinary  resolution  shall
     specify  the   intention  to  propose  the   resolution  as  a  special  or
     extraordinary  resolution  as the  case may be.  Notices  shall be given in
     manner hereinafter mentioned to all the members, other than those who under
     the provisions of these articles or under the rights attached to the shares
     held by them are not  entitled to receive the notice,  and to the  auditors
     for the time being of the  Company.  Notwithstanding  that a meeting of the
     Company is called by shorter notice than that specified in this article, it
     shall be deemed to have been duly called if it is so agreed:-

     (a)  in the case of a meeting called as an annual general  meeting,  by all
          the members entitled to attend and vote thereat; and

     (b)  in the case of any  other  meeting,  by a  majority  in  number of the
          members  having a right to  attend  and vote at the  meeting,  being a
          majority  together holding not less than 95 per cent. in nominal value

<PAGE> 68

          of the shares giving that right.

54.  The Board may convene an  Extraordinary  General Meeting whenever it thinks
     fit  and,  upon  receipt  of a  requisition  of  members  pursuant  to  the
     provisions of the Acts,  shall forthwith  convene such a meeting for a date
     not later than 28 days after the date of the Notice convening the meeting.

55.  included for numbering purposes only

55.1 The  accidental  omission  to give  notice of a meeting or (in cases  where
     instruments of proxy are sent out with the notice) the accidental  omission
     to send such  instrument  of proxy to,  or the  non-receipt  of notice of a
     meeting or such  instrument  of proxy by, any  person  entitled  to receive
     notice shall not invalidate the proceedings at that meeting.

55.2 The  directors may determine  that persons  entitled to receive  notices of
     meetings are those persons  entered on the register of members at the close
     of business on a day  determined  by the  directors  being not more than 21
     days before the day that the notices are sent and may specify in the notice
     of the meeting a time, not more than 48 hours before the time fixed for the
     meeting,  by which a person  must be entered on the  register of members in
     order to have the  right  to  attend  or vote at the  meeting.  Changes  to
     entries on the  register of members  after the time so  specified  shall be
     disregarded  in  determining  the rights of any person to attend or vote at
     the meeting.

                        PROCEEDINGS AT GENERAL MEETINGS
                        -------------------------------

56.  All business shall be deemed special that is transacted at an extraordinary
     general  meeting.  All business  that is  transacted  at an annual  general
     meeting  shall also be deemed  special,  with the  exception  of  declaring
     dividends,  the  consideration  of the accounts  and balance  sheet and the
     reports of the  directors and auditors and other  documents  required to be
     annexed to the balance sheet,  the appointment of directors in the place of
     those  retiring by  rotation  or  otherwise  and the  reappointment  of the
     retiring  auditors (other than retiring auditors who have been appointed by
     the  directors  to  fill  a  casual  vacancy)  and  the  fixing  of or  the
     determining  of the method of fixing the  remuneration  of the auditors and
     the directors.

57.  No business  shall be transacted at any meeting  unless a quorum is present
     but the absence of a quorum shall not preclude the  appointment,  choice or
     election of a chairman  which shall not be treated as part of the  business


<PAGE> 69

     of the  meeting.  Two  persons  entitled  to vote upon the  business  to be
     transacted,  each  being  a  member  or a  proxy  for a  member  or a  duly
     authorised representative of a corporation, shall be a quorum.

58.  If a quorum is not  present  within  five  minutes (or such longer time not
     exceeding  one hour as the  chairman of the meeting may  determine to wait)
     from the time  appointed  for the meeting,  or if during a meeting a quorum
     ceases to be present,  the meeting if convened on the requisition of, or by
     members, shall be dissolved.  In any other case it shall stand adjourned to
     such other day not being less than fourteen nor more than twenty-eight days
     thereafter and at such other time and place as the directors may determine.
     At such adjourned  meeting one member present in person or proxy  (whatever
     the number of shares held by him) shall be a quorum. The Company shall give
     not less than  seven  days'  notice in  writing  of any  meeting  adjourned
     through  want of a quorum  and such  notice  shall  state  that one  member
     present in person or by proxy  (whatever  the number of shares held by him)
     shall be a quorum.

59.  The  directors  may  make  arrangements  for  simultaneous  attendance  and
     participation in general meetings by members and proxies entitled to attend
     such  meetings  at places  other  than the place  specified  in the  notice
     convening  the  meeting  ("the  specified  place").  Any  arrangements  for
     simultaneous  attendance  at other places shall operate so that any members
     and proxies  excluded from  attendance  at the specified  place are able to
     attend at one or more of the other  places.  For the  purpose  of all other
     provisions  of these  articles any such  meeting  shall be treated as being
     held and taking place at the  specified  place.  The right of any member or
     proxy otherwise entitled to attend a general meeting at the specified place
     shall  be  subject  to any  arrangements  that the  directors  may at their
     discretion  make from time to time (whether before or after the date of the
     notice  convening  the  meeting)  for  facilitating  the  organisation  and
     administration  of  any  general  meeting  by  requiring  any  such  person
     (selected on such basis as the directors may at their discretion decide) to
     attend the meeting at one or more of the other places.

60.  included for numbering purposes only

60.1 The  chairman,  if any,  of the board of  directors  or in his  absence the
     deputy-chairman,   or  in  the  absence  of  both  the   chairman  and  the
     deputy-chairman  some  other  director  nominated  by the  directors  shall
     preside as chairman of the  meeting,  but if neither the  chairman  nor the
     deputy-chairman  nor such other  director  (if any) be present  within five


<PAGE> 70

     minutes after the time appointed for holding the meeting,  or if present is
     unwilling to act, the directors  present shall elect one of their number to
     be chairman.

60.2 If no director is willing to act as chairman,  or if no director is present
     within five minutes after the time  appointed for holding the meeting,  the
     members present and entitled to vote shall choose one of their number to be
     chairman,  and  will  remain  chairman  for the  duration  of the  relevant
     meeting.

61.  included for numbering purposes only

61.1 A director shall,  notwithstanding  that he is not a member, be entitled to
     attend and speak at any general meeting and at any separate  meeting of the
     holders of any class of shares in the Company.

61.2 Where  shares  are held by  nominee  shareholders  the  directors  may make
     arrangements for the holders of the beneficial interest in shares to attend
     and speak (but not vote) at general meetings notwithstanding that the names
     do not  appear on the  Register  of  Members.  Any  person  invited  by the
     Chairman to do so may attend and speak at any general meeting.

62.  The  chairman  may,  with the  consent  of a  meeting  at which a quorum is
     present (and shall if so directed by the meeting), adjourn the meeting from
     time to time and from place to place.

In  addition,  the  Chairman may at any time without the consent of the meeting,
adjourn  any  meeting  to another  time or place if it  appears to the  Chairman
that:-

     (a)  The  number  of  persons  wishing  to attend  cannot  be  conveniently
          accommodated in the place(s) appointed for the meeting, or

     (b)  The unruly  conduct of persons  attending  the meeting  prevents or is
          likely to prevent  the  orderly  continuation  of the  business of the
          meeting, or

     (c)  An  adjournment  is  otherwise  necessary  so that the business of the
          meeting may be properly conducted.

No business  shall be  transacted  at an adjourned  meeting  other than business
which  might  lawfully  have  been  transacted  at the  meeting  from  which the
adjournment took place.

<PAGE> 71

63.  included for numbering purposes only

63.1 included for numbering purposes only

     (a)  In  the  case  of  a  Resolution   duly   proposed  as  a  Special  or
          Extraordinary   Resolution,   no  amendment  thereto  (other  than  an
          amendment to correct a patent  error) may be  considered or voted upon
          and  in  the  case  of a  Resolution  duly  proposed  as  an  Ordinary
          Resolution, no amendment thereto (other than an amendment to correct a
          patent error) may be considered or voted upon unless at least 48 hours
          prior to the time  appointed  for  holding  the  meeting or  adjourned
          meeting at which such  Resolution is to be proposed  notice in writing
          of the terms of the  amendment  and intention to vote to move the same
          have been lodged at the office.

     (b)  If  an   amendment   shall  be  proposed  to  any   resolution   under
          consideration  but  shall in good  faith be ruled  out of order by the
          Chairman of the meeting, the proceedings on the substantive resolution
          shall not be invalidated by any error in such ruling.

63.2 A  resolution  put to the vote of a meeting  shall be  decided on a show of
     hands  unless  (before or on the  declaration  of the result of the show of
     hands or on the  withdrawal  of any other demand for a poll) a poll is duly
     demanded. Subject to the provisions of the Acts, a poll may be demanded:-

     (a)  by the chairman of the meeting; or

     (b)  by at least two members having the right to vote at the meeting; or

     (c)  by a member or members  representing  not less than  one-tenth  of the
          total voting rights of all the members having the right to vote at the
          meeting; or

     (d)  by a member or members  holding  shares  conferring a right to vote at
          the meeting  being shares on which an  aggregate  sum has been paid up
          equal to not less than  one-tenth  of the total sum paid up on all the
          shares  conferring  that  right;

and a demand by a proxy for a member shall be the same as a demand by a member.

64.  Unless  a  poll  is  duly  demanded  and  the  demand  is not  withdrawn  a
     declaration by the chairman that a resolution has, on a show of hands, been
     carried or carried unanimously,  or by a particular  majority,  or lost, or
     not carried by a  particular  majority  shall be final and an entry to that


<PAGE> 72

     effect in the minutes of the meeting  shall be  conclusive  evidence of the
     fact without  proof of the number or  proportion  of the votes  recorded in
     favour of or against the resolution.

65.  The demand for a poll may,  before the poll is taken, be withdrawn with the
     consent of the  chairman  and a demand so  withdrawn  shall not be taken to
     have  invalidated  the result of a show of hands declared before the demand
     was made.

66.  A poll on any question  other than the  election of the  Chairman  shall be
     taken as the chairman directs, including the use of ballot or voting papers
     or tickets,  and he may appoint  scrutineers  (who need not be members) and
     fix a time and place for  declaring  the result of the poll.  The result of
     the poll shall be deemed to be the  resolution  of the meeting at which the
     poll was demanded.

67.  In the case of an  equality  of votes,  whether  on a show of hands or on a
     poll,  the  chairman  shall be  entitled  to a second  or  casting  vote in
     addition to any other vote he may have.

68.  A  poll  demanded  on  the  election  of a  chairman  or on a  question  of
     adjournment shall be taken forthwith. A poll demanded on any other question
     shall be taken  either  forthwith or at such time and place as the chairman
     directs not being more than thirty days from the conclusion of the meeting.
     The demand for a poll shall not  prevent the  continuance  of a meeting for
     the  transaction  of any business other than the question on which the poll
     was demanded,  and it may be withdrawn  with the consent of the chairman at
     any time  before  the  close of the  meeting  or the  taking  of the  poll,
     whichever is the earlier.  If a poll is demanded  before the declaration of
     the result of a show of hands and the demand is duly withdrawn, the meeting
     shall  continue  as if the demand had not been made.  69. No notice need be
     given of a poll not taken forthwith if the time and place at which it is to
     be taken are  announced  at the meeting in respect of which it is demanded.
     In any  other  case at  least  seven  clear  days'  notice  shall  be given
     specifying the time and place at which the poll is to be taken.

                                VOTES OF MEMBERS
                                ----------------

70.  Subject to any rights or restrictions  attached to any shares, on a show of
     hands every member who (being an individual) is present in person or (being


<PAGE> 73

     a corporation)  is present by a duly authorised  representative,  not being
     himself a member entitled to vote, shall have one vote, and on a poll every
     member  present in person or by proxy shall have one vote for each share of
     which he is the holder.

71.  In the case of joint  holders  the vote of the senior  who  tenders a vote,
     whether in person or by proxy,  shall be accepted to the  exclusion  of the
     votes of the other joint holders;  and seniority shall be determined by the
     order in which the names of the holders stand in the register of members.

72.  A member in respect of whom an order has been made by any  competent  court
     or  official  on the  ground  that he is or may be  suffering  from  mental
     disorder  or is  otherwise  incapable  of  managing  his  affairs may vote,
     whether on a show of hands or on a poll,  by his  receiver or other  person
     authorised  in that  behalf  and such  person  may vote on a poll by proxy.
     Evidence to the  satisfaction  of the  directors  of the  authority  of the
     person  claiming to exercise  the right to vote shall be  deposited  at the
     office  or at such  other  place as is  specified  in  accordance  with the
     articles for the deposit of  instruments  of proxy,  not less than 48 hours
     before the time  appointed for holding the meeting or adjourned  meeting at
     which the right to vote is to be exercised and in default the right to vote
     shall not be exercisable.

73.  Unless the directors  otherwise  determine,  no member shall be entitled to
     receive notice of or to vote at any general meeting, either in person or by
     proxy,  in respect  of any share  held by him  unless all moneys  presently
     payable by him in respect of that share have been paid.

74.  No objection  shall be raised to the  qualification  of any voter except at
     the meeting or adjourned meeting at which the vote objected to is tendered,
     and every vote not disallowed at the meeting shall be valid.  Any objection
     made in due time shall be referred to the chairman  whose decision shall be
     final and conclusive.

75.  On a poll  votes  may be given  either  personally  or by  proxy.  A member
     entitled to more than one vote need not, if he votes,  use all his votes or
     cast all the votes he uses the same way.

76.  The instrument  appointing a proxy shall be in writing in any usual form or
     in any other form which the  directors may approve and for the avoidance of


<PAGE> 74

     doubt may be in the form of a two way proxy form and shall be  executed  by
     or on behalf of the  appointor.  A corporation  may execute a form of proxy
     under the hand of a duly authorised officer. A member may appoint more than
     one  proxy  (who need not be a  member)  to  attend  on the same  occasion.
     Deposit  of an  instrument  of proxy  shall  not  preclude  a  member  from
     attending and voting at the meeting or at any adjournment thereof.

77.  The  instrument  appointing  a proxy and any  authority  under  which it is
     executed or a copy  certified  notarially  or in some other way approved by
     the directors shall be deposited by physical  delivery either by post or by
     hand at the office (or at such other place within the United  Kingdom as is
     specified  in the  notice  convening  the  meeting  or on any notice or any
     adjustment  or, in either case,  in any document sent  therewith)  not less
     than 48 hours before the time for holding the meeting or adjourned  meeting
     at which the person  named in the  instrument  proposes  to vote or, in the
     case of a poll taken  subsequently to the date of a meeting,  not less than
     24 hours  before  the time  appointed  for the  taking of the poll,  and in
     default the  instrument  of proxy shall be invalid.  When two or more valid
     but  differing  instruments  of proxy are  delivered in respect of the same
     share  for use at the  same  meeting,  the  one  which  is  last  delivered
     (regardless of its date or of the date of its  execution)  shall be treated
     as replacing and revoking the others as regards that share:  If the Company
     is unable to  determine  which was last  delivered,  none of them  shall be
     treated as valid in respect of that share.

78.  A  vote  given  or  poll  demanded  by  proxy  or by  the  duly  authorised
     representative of a corporation shall be valid notwithstanding the previous
     determination  of the  authority  of the person  voting or demanding a poll
     unless  notice of the  determination  was  received  by the  Company at the
     office or at such other place in the United Kingdom as may be specified for
     the delivery of instruments of proxy in the notice convening the meeting or
     other document sent therewith one hour at least before the  commencement of
     the  meeting  or  adjourned  meeting at which the vote is given or the poll
     demanded or (in the case of a poll taken  otherwise than on the same day as
     the meeting or adjourned meeting) the time appointed for taking the poll.

79.  included for numbering purposes only

79.1 The instrument appointing a proxy to vote at a meeting shall be deemed also
     to confer  authority (a) to demand or join in demanding a poll (and for the
     purposes of article 62 a demand by a person as proxy for a member  shall be


<PAGE> 75

     the  same  as a  demand  by the  member);  and (b) to vote on a poll on the
     election of a chairman and on a motion to adjourn a meeting.

79.2 No  instrument  appointing a proxy shall be valid after the  expiration  of
     twelve  months  from  the date  named  in it as the date of its  execution,
     except at an  adjourned  meeting or on a poll  demanded  at a meeting or an
     adjourned  meeting in cases where the meeting  was  originally  held within
     twelve months from such date.

80.  If any votes are  counted  which ought not to have been  counted,  or might
     have been  rejected,  the error  shall not vitiate the result of the voting
     unless  it is  pointed  out  at the  same  meeting,  or at any  adjournment
     thereof,  and it is in  the  opinion  of the  chairman  of the  meeting  of
     sufficient magnitude to vitiate the result of the voting.

                         REPRESENTATION OF CORPORATIONS
                         ------------------------------

81.  Any Corporation being a member may, by resolution of its directors or other
     governing  body,  authorise  such  person  as it  thinks  fit to act as its
     representative  (or,  as the case may be,  representatives)  at any general
     meeting of the Company or any class  meeting of the members of the Company.
     A person so  authorised  shall be entitled  to exercise  the same powers on
     behalf  of  the  grantor  as the  Grantor  could  exercise  if it  were  an
     individual  member of the Company and each person so authorised  shall,  if
     present at any such meeting, for the purpose of these Articles be deemed to
     be a member present in person at such meeting.

                     NUMBER AND QUALIFICATION OF DIRECTORS
                     -------------------------------------

82.  Unless otherwise  determined by ordinary resolution the number of directors
     (other than alternate  directors) shall be not less than two in number. The
     Company may from time to time by ordinary  resolution  fix a maximum number
     of  directors  and  from  time  to  time  vary  that  maximum  number.   No
     shareholding qualification for directors shall be required.

                              ALTERNATE DIRECTORS
                              -------------------

83.  Any  director  (other  than an  alternate  director)  may appoint any other
     director, or any other person approved by the directors, to be an alternate
     director and may remove from office an  alternate  director so appointed by
     him. An  alternate

<PAGE> 76

     him. An  alternate  director  shall be  entitled to receive  notices of all
     meetings of directors,  to attend and vote at any such meeting at which the
     director appointing him is not personally present, and generally to perform
     all the  functions  of his  appointor  as a  director  in his  absence.  An
     alternate director shall cease to be an alternate director if his appointor
     ceases  to be a  director;  but,  if a  director  retires  by  rotation  or
     otherwise but is  reappointed  or deemed to have been  re-appointed  at the
     meeting at which he retires,  any appointment of an alternate director made
     by him  which  was in  force  immediately  prior  to his  retirement  shall
     continue  after his  reappointment.  Every  appointment  and  removal of an
     alternate  director shall be in writing  executed by the director making or
     revoking the  appointment and (in the case of an appointment) by the person
     appointed  and shall be deposited at the office or tendered at a meeting of
     the directors or in any other manner approved by the directors.

84.  Every  person  acting as an alternate  director  shall (save as regards the
     power to appoint an alternate  director and remuneration) be subject in all
     respects to the  provisions  of these  articles  relating to directors  and
     shall alone be  responsible  for his own acts and defaults and he shall not
     be deemed to be the agent of the director  appointing him. The remuneration
     of any alternate director shall be payable out of the remuneration  payable
     to the director  appointing him, and shall consist of such part (if any) of
     the  last-mentioned  remuneration  as shall be agreed between the alternate
     director and the director appointing him.

                              POWERS OF DIRECTORS
                              -------------------

85.  Subject  to the  provisions  of the  Acts  and  these  articles  and to any
     directions given by special resolution,  the directors may exercise all the
     powers of the Company.  No alteration of the articles and no such direction
     shall invalidate any prior act of the directors which would have been valid
     if that alteration had not been made and that direction had not been given.
     The powers given by this article  shall not be limited by any special power
     given to the  directors by the articles and a meeting of directors at which
     a quorum is present may exercise all powers exercisable by the directors.

86.  included for numbering purposes only

86.1 The  directors  may  exercise all the powers of the Company to borrow money
     and to mortgage or charge its undertaking, property and assets (present and
     future) and uncalled capital, or any part thereof,  and subject to the Acts
     to issue debentures and other securities  whether outright or as collateral


<PAGE> 77

     security  for any debt  liability  or  obligation  of the Company or of any
     third party. The directors shall restrict the borrowings of the Company and
     exercise  all voting and other rights or powers of control  exercisable  by
     the Company in relation  to its  subsidiaries  (if any) so as to secure (as
     regards subsidiaries so far as by such exercise they can secure) that, save
     with the  previous  sanction of an ordinary  resolution,  no money shall be
     borrowed if the aggregate  principal amount  (including any premium payable
     on  final  repayment)  outstanding  of all  moneys  borrowed  by the  Group
     (excluding  amounts  borrowed  by any  member of the  Group  from any other
     member of the Group)  then  exceeds or would as a result of such  borrowing
     exceed an amount equal to four times the aggregate of:-

     (a)  the amount paid up or credited as paid up on the share  capital of the
          Company; and

     (b)  the total of the capital and revenue  reserves of the Group (including
          any share  premium  account,  capital  redemption  reserve  and credit
          balance on the combined  profit and loss account) but  excluding  sums
          set  aside  for   taxation   and  amounts   attributable   to  outside
          shareholders  in  subsidiaries  of the Company and deducting any debit
          balance on the combined  profit and loss account  except to the extent
          that such  deductions  have already been made

all as shown in the then latest audited balance sheet of the Group, but adjusted
as may be necessary in respect of any  variation in the paid up share capital or
share  premium  account or capital  redemption  reserve of the Company since the
date of its latest audited balance sheet.

86.2 For the purposes of this article:-

     (a)  the amount  outstanding in respect of acceptances by any member of the
          Group or by any bank or accepting  house under any  acceptance  credit
          opened on behalf of any member of the Group (not being  acceptances in
          relation to the purchase of goods in the ordinary  course of business)
          shall be taken into account as moneys borrowed;

     (b)  moneys  borrowed  for the purpose of repaying the whole or any part of
          any moneys  previously  borrowed and then  outstanding  (including any
          premium  payable on final  repayment  thereof)  and  applied  for that
          purpose within four months of such borrowing  shall not,  pending such

<PAGE> 78

          application, be taken into account as moneys borrowed; and

     (c)  the  principal   amount   (including  any  premium  payable  on  final
          repayment)  of  any  debentures  issued  in  whole  or in  part  for a
          consideration  other than cash  shall be taken into  account as moneys
          borrowed by the member of the Group issuing the same.

86.3 Where the aggregate  principal  amount of  borrowings  required to be taken
     into  account for the purposes of this  article on any  particular  date is
     being ascertained any of such moneys denominated or repayable in a currency
     other than sterling shall be converted for the purpose of  calculating  the
     sterling  equivalent  at the rate of  exchange  prevailing  on such date in
     London  provided  that any of such moneys shall be converted at the rate of
     exchange  prevailing  in London six months before such date if thereby such
     aggregate  amount  would be less (and so that for this  purpose the rate of
     exchange  shall be  taken  as the  middle  market  rate as at the  close of
     business).

86.4 A  certificate  or report by the Auditors for the time being of the Company
     as to the amount of the adjusted  capital and reserves or the amount of any
     borrowings  or to the effect that the limit imposed by this article has not
     been or will not be  exceeded  at any  particular  time or  times  shall be
     conclusive  evidence  of such  amount  or fact  for  the  purposes  of this
     article.

86.5 No debt incurred or security  given in respect of moneys  borrowed or to be
     taken into  account as moneys  borrowed  in excess of the  aforesaid  limit
     shall be invalid or ineffectual except in the case of express notice to the
     lender  or the  recipient  of the  security  at the time  when the debt was
     incurred or security  given that the limit  hereby  imposed had been or was
     thereby  exceeded,  but no lender or other person  dealing with the Company
     shall be concerned to see or enquire whether such limit is observed.

87.  If any  uncalled  capital of the  Company is  included in or charged by any
     mortgage or other  security,  the  directors  may delegate to the person in
     whose favour such mortgage or security is executed,  or to any other person
     in trust for him, the power to make calls on the members in respect of such
     uncalled  capital,  and to sue in the name of the Company or otherwise  for
     the recovery of moneys becoming due in respect of calls so made and to give
     valid  receipts for such moneys,  and the power so delegated  shall subsist
     during the  continuance  of the mortgage or security,  notwithstanding  any


<PAGE> 79

     change of directors, and shall be assignable if expressed so to be.

88.  All  cheques,  promissory  notes,  drafts,  bills of  exchange,  and  other
     instruments whether negotiable or transferable or not, and all receipts for
     moneys paid to the Company shall be signed,  drawn,  accepted,  endorsed or
     otherwise executed, as the case may be, in such manner as the directors may
     from time to time by resolution determine.

                        DELEGATION OF DIRECTORS' POWERS
                        -------------------------------

89.  The directors may delegate any of their powers:-

     (a)  to any Managing  Director or any director  holding any other executive
          office; and

     (b)  to  any  committee  consisting  of  one or  more  directors  or to any
          committee  consisting  of  directors  and  co-opted  persons not being
          directors.

Subject to the above the  delegation  may be made subject to any  conditions the
directors may impose, and either  collaterally with or to the exclusion of their
own powers and may be varied or revoked.  Subject to any such conditions and the
above, the proceedings of a committee with two or more members shall be governed
by the articles regulating the proceedings of directors so far as they apply.

90.  The  directors  may  from  time  to  time,  and at any  time,  appoint  any
     corporation,  firm or person,  or any fluctuating body of persons,  whether
     nominated  directly or indirectly by the directors,  to be the agent of the
     Company for such purposes and with such powers, authorities and discretions
     (not exceeding  those vested in or exercisable by the directors under these
     articles)  and for such period and subject to such  conditions  as they may
     think fit, and any such  appointment  may contain such  provisions  for the
     protection and  convenience  of persons  dealing with any such agent as the
     directors  may  think  fit,  and may  also  authorise  any  such  agent  to
     sub-delegate all or any of the powers,  authorities and discretions  vested
     in him.

91.  The directors  may cause to be kept in any part of Her Majesty's  Dominions
     outside the United Kingdom, the Channel Islands or the Isle of Man in which
     the Company  transacts  business a branch  register or registers of members
     resident in such part of the said Dominions, and the directors may (subject


<PAGE> 80

     to the  provisions of the Acts) make and vary such  regulations as they may
     think fit respecting the keeping of any such register.

                    APPOINTMENT AND RETIREMENT OF DIRECTORS
                    ---------------------------------------

92. *(a)  At the annual general meeting in every year, any director who is still
          in office at the  start of the  annual  general  meeting  which  falls
          nearest  to the third  anniversary  of the annual  general  meeting at
          which  he was  appointed  or was last  re-appointed  shall  retire  by
          rotation.

     (b)  Subject to paragraph (a) above, at the annual general meeting in every
          year,  one third of all the directors  shall retire by rotation but if
          that  number is not a  multiple  of three,  then the  number  shall be
          rounded down to the nearest whole number.

     (c)  Subject to  article  98, a director  retiring  at a meeting  aforesaid
          shall retain office until the dissolution of that meeting.

93.  Subject to the  provisions of the Acts, the directors to retire by rotation
     shall be those who have been longest in office since their last appointment
     or  reappointment,   but  as  between  persons  who  became  or  were  last
     reappointed  directors on the same day those to retire  shall  (unless they
     otherwise agree among themselves) be determined by lot.

94.  If the  Company,  at the meeting at which a director  retires by  rotation,
     does not fill the vacancy the retiring  director  shall, if willing to act,
     be deemed to have been reappointed unless at the meeting it is resolved not
     to fill the vacancy or unless a  resolution  for the  reappointment  of the
     director is put to the meeting and lost.

95.  No  person  other  than a  director  retiring  at a meeting  shall,  unless
     recommended by the directors, be appointed or reappointed a director at any
     general  meeting  unless,  not less than  seven nor more than a maximum  of
     forty-two days before the date appointed for the meeting,  notice  executed
     by a member  qualified  to vote at the meeting  (not being the person to be
     proposed)  has been given to the Company of the  intention  to propose that


----------
*    Amended by Special Resolution passed September 16 1999.

<PAGE> 81

     person for  appointment  or  reappointment  stating the  particulars  which
     would, if he were so appointed or  reappointed,  be required to be included
     in the Company's register of directors together with notice executed by the
     person being proposed of his willingness to be appointed.

96.  Subject to article 95 the  Company  may by  ordinary  resolution  appoint a
     person  to be a  director  either  to fill a  vacancy  or as an  additional
     director  and may also  determine  the  rotation  in which  any  additional
     directors are to retire.

97.  The  directors  may  appoint  a person to be a  director,  either to fill a
     vacancy or as an additional  director,  provided that the appointment  does
     not cause the  number of  directors  to exceed  any  number  fixed by or in
     accordance with the articles as the maximum number of directors. A director
     so appointed shall hold office only until the next following annual general
     meeting and, if not then reappointed,  shall vacate office and shall not be
     taken into account in determining  the directors or the number of directors
     who are to retire by rotation at the meeting.

98.  Subject to the provisions of these articles,  the Company at the meeting at
     which a director retires in manner aforesaid may fill the vacated office by
     electing a person thereto and in default the retiring  director  shall,  if
     willing to continue to act,  be deemed to have been  re-elected,  unless at
     such  meeting it is expressly  resolved not to fill such vacated  office or
     unless a resolution  for the  re-election  of such director shall have been
     put to the meeting and lost.

99.  included for numbering purposes only

99.1 Any  contract of  employment  entered  into by a director  with the Company
     shall not include a term that it is to be for a period exceeding five years
     unless such term is first approved by ordinary resolution.

99.2 *Any  provisions  of the Acts  which but for this  Article,  would have the
     effect of rendering any person  ineligible for appointment as a Director or
     liable to vacate office as a Director on account of his having  reached any
     specified  age,  or of  requiring  special  notice  or  any  other  special
     formality  in  connection  with  the  appointment  of any  Director  over a
     specified  age,  shall not apply to the Company  save that any Director who
     has  attained  the  age  of 70  shall  be  required  to  offer  himself  or
     re-election at each annual general meeting.

----------
*    Amended by Special Resolution passed September 16 1999.

<PAGE> 82

                   DISQUALIFICATION AND REMOVAL OF DIRECTORS
                   -----------------------------------------

100. Without  prejudice  to the  provisions  of the Acts,  the  Company  may, by
     special  resolution or by ordinary  resolution of which special  notice has
     been  given in  accordance  with the Acts,  remove a  director  before  the
     expiration  of his  period of office  (but such  removal  shall be  without
     prejudice to any claim such director may have for breach of any contract of
     service  between him and the  Company)  and may,  by  ordinary  resolution,
     appoint  another  person in his  stead.  The person so  appointed  shall be
     subject to  retirement  at the same time as if he had become a director  on
     the day on which  the  director  in whose  place he is  appointed  was last
     appointed or reappointed a director.

101. Without  prejudice to the provisions  for retirement by rotation  contained
     herein the office of a director shall be vacated if:-

     (a)  he ceases to be a director by virtue of any  provision  of the Acts or
          is removed from office pursuant to these articles; or

     (b)  he becomes prohibited by law from being a director; or

     (c)  he becomes  bankrupt or makes any arrangement or composition  with his
          creditors generally; or

     (d)  an order is made by a court of competent jurisdiction by reason of his
          mental disorder for his detention or for the appointment of any person
          to exercise powers with respect to his property or affairs; or

     (e)  not  being  a  director   whose   contract  of  employment   precludes
          resignation, he resigns his office by notice to the Company; or

     (f)  he shall for more than six months have been absent without  permission
          of the directors  from  meetings of directors  held during that period
          and his alternate  director (if any) shall not during that period have
          attended any such meeting in his stead and the directors  resolve that
          his office be vacated; or

     *(g) if he shall be removed  from  office by notice in writing  served upon

----------
*    Amended by Special Resolution passed September 16 1999.

<PAGE> 83

          him signed by  three-quarters  his  co-directors  and all of the other
          directors  are not less than three in number,  but so that if he holds
          an  appointment  to an executive  office which  thereby  automatically
          determines  such  removal  shall be deemed to be an act of the Company
          and shall have effect  without  prejudice to any claim for damages for
          breach of any contract of service between him and the Company.

                           REMUNERATION OF DIRECTORS
                           -------------------------

102. +The  directors  shall be  entitled to  directors'  fees in  aggregate  not
     exceeding GBP 250,000 per annum, or such other higher amount as the Company
     by ordinary resolution may from time to time determine, which shall (unless
     otherwise  determined  by the  resolution  by which it is voted) be divided
     between the directors as they may agree or, failing agreement, equally. The
     directors'  remuneration  shall be deemed to  accrue  from day to day.  The
     directors shall also be entitled to be paid all travelling, hotel and other
     expenses  properly  incurred by them in connection with the business of the
     Company, or in attending and returning from meetings of the directors or of
     committees of the directors or general meetings.

103. Any director who serves on any committee or who devotes  special  attention
     to the business of the Company, or who otherwise performs services which in
     the opinion of the directors  are outside the scope of the ordinary  duties
     of a  director,  may be paid  such  extra  remuneration  by way of  salary,
     participation in profits or otherwise as the directors may determine.

                     DIRECTORS' APPOINTMENTS AND INTERESTS
                     -------------------------------------

104. The  directors  may from time to time appoint any one or more of their body
     to be a Managing Director or to be the holder of any other executive office
     on  such  terms  as they  think  fit,  and may  revoke  or  vary  any  such
     appointment. The appointment of a Managing Director or of a director to any
     executive  office as aforesaid  shall  automatically  be  terminated  if in
     either case he ceases for any reason to be a director.  Any  revocation  or
     termination of any such appointment shall be without prejudice to any claim


----------
+    Increased  to GBP250,000  with effect  from  February 1 1998,  by Ordinary
     Resolution passed September 23 1998.

<PAGE> 84

     for breach of any contract between the director and the Company. A Managing
     Director  or a  director  appointed  to  such  other  executive  office  as
     aforesaid  shall  receive  such  remuneration  (whether  by way of  salary,
     commission,  participation  in profits  and partly in one way and partly in
     another or others, or otherwise) as the directors may determine.

105. The directors may entrust to and confer upon any director  appointed to any
     such executive  office any of the powers  exercisable by them as directors,
     other than the power to make calls or forfeit  shares,  upon such terms and
     conditions  and with  such  restrictions  as they  think  fit,  and  either
     collaterally with or to the exclusion of their own power, and may from time
     to time revoke, withdraw, alter or vary all or any of such powers.

106. A director,  including an alternate director,  may hold any other office or
     place of profit under the Company  (other than the office of auditor of the
     Company or any subsidiary of the Company) in conjunction with his office of
     director  for  such  period  and  upon  such  terms  as the  directors  may
     determine,  and may act in a professional  capacity to the Company, on such
     terms as to tenure of office,  remuneration  and otherwise as the directors
     may determine.

107. Subject to the Acts and to the provisions of these articles, no director or
     intending director,  including an alternate director, shall be disqualified
     by his office from  contracting  with the Company either with regard to his
     tenure of any other office or place of profit,  or as vendor,  purchaser or
     otherwise,  nor shall any such  contract,  or any  contract or  arrangement
     entered into by or on behalf of the Company in which any director is in any
     way, whether directly or indirectly,  interested,  be liable to be avoided,
     nor shall any director so  contracting  or being so interested be liable to
     account  to the  Company  for any  remuneration,  profit  or other  benefit
     realised by any such  contract or  arrangement,  by reason of such director
     holding that office or of the fiduciary relation thereby established.

108. Any director, including an alternate director, may continue to be or become
     a director or other  officer or member of or  otherwise  interested  in any
     other  company  promoted  by the  Company  or in which the  Company  may be
     interested,  as a member or otherwise, or which is a holding company of the
     Company or a subsidiary of any such holding  company,  and no such director
     shall be accountable for any remuneration or other benefits received by him


<PAGE> 85

     as a director or other  officer or member of, or from his  interest in, any
     such other company.  The directors may exercise the voting power  conferred
     by the  shares  of any  other  company  held or  owned  by the  Company  or
     exercisable by them as directors of any such holding  company or subsidiary
     in such manner in all  respects as they think fit  (including  the exercise
     thereof in favour of any  resolution  appointing  themselves or any of them
     directors or other officers of such company, or voting or providing for the
     payment  of  remuneration  to the  directors  or  other  officers  of  such
     company).

109. A director, including an alternate director, who is to his knowledge in any
     way,  whether   directly  or  indirectly,   interested  in  a  contract  or
     arrangement  or proposed  contract or  arrangement  with the Company  shall
     declare the nature of his interest at a meeting of  directors.  In the case
     of a proposed  contract or arrangement the declaration shall be made at the
     meeting  of the  directors  at which  the  question  of  entering  into the
     contract is first taken into  consideration  if he knows his interest  then
     exists,  or, if the director was not at the date of that meeting interested
     in the proposed  contract or arrangement,  at the next meeting of directors
     held after he became so interested if he knows his interest then exists. In
     a case where the director  becomes  interested in a contract or arrangement
     after it is made or becomes aware of his interest the declaration  shall be
     made at the first meeting of the directors held after the director  becomes
     so  interested or knows that he is or has become so  interested.  In a case
     where the director is  interested  in a contract or  arrangement  which has
     been made before he was appointed a director the declaration  shall be made
     at the first meeting of the directors held after he is so appointed.

110. For the purposes of the last  preceding  article a general  notice given to
     the directors by any director to the effect that:-

110.1he is a member of any  specified  company or firm and is to be  regarded as
     interested in any contract or arrangement  which may, after the date of the
     notice, be made with the Company or firm; or

110.2he is to be regarded as  interested  in any contract or  arrangement  which
     may after the date of the  notice be made with a  specified  person  who is
     connected  with him

(if such  director  shall give the same at a meeting of the  directors  or shall
take reasonable steps to secure that it is brought up and read at the


<PAGE> 86

     next  meeting  of the  directors  after  it is  given)  shall  be  deemed a
     sufficient declaration of interest in relation to any contract so made.

                       DIRECTORS' GRATUITIES AND PENSIONS
                       ----------------------------------

111. The directors may establish and maintain,  or procure the establishment and
     maintenance of, any pension or superannuation  funds (whether  contributory
     or  otherwise)  for the  benefit  of,  and give or  procure  the  giving of
     donations,  gratuities, pensions, allowances and emoluments to, any persons
     who are or were at any time in the employment or service of the Company, or
     of any  company  which is a  subsidiary  of the  Company or is allied to or
     associated  with  the  Company  or  any  such  subsidiary  or of any of the
     predecessors  in  business  of the  Company  or any such  other  company as
     aforesaid,  or who may be or have been directors or officers of the Company
     or of any  such  other  company  as  aforesaid  and who  hold or have  held
     executive  positions or agreements for service with the Company or any such
     other company as aforesaid,and the wives, widows, families, connections and
     dependants of any such persons, and also establish, subsidise and subscribe
     to any institutions,  associations, societies, clubs or funds calculated to
     be for the benefit of, or to advance the  interests  and  well-being of the
     Company or of any such other company as aforesaid, or of any such person as
     aforesaid,  and make  payments  for or towards  the  insurance  of any such
     person as aforesaid  and  subscribe or guarantee  money for  charitable  or
     benevolent  objects,  or for any  exhibition or for any public,  general or
     useful  object,  and do any of the  matters  aforesaid  either  alone or in
     conjunction   with  any  such  other  company  as  aforesaid.   Subject  to
     particulars  with respect to the proposed  payment  being  disclosed to the
     members of the Company and to the proposal being approved by the Company by
     ordinary  resolution,  if the Acts shall so require, any director who holds
     or has held any such executive  position or agreement for services shall be
     entitled  to  participate  in and  retain  for his  own  benefit  any  such
     donation, gratuity, pension, allowance or emolument.

                            PROCEEDINGS OF DIRECTORS
                            ------------------------

112. The directors may regulate their  proceedings as they think fit. A director
     may, and the secretary at the request of a director  shall,  call a meeting
     of the directors.  It shall not be necessary to give notice of a meeting to
     a director  who is absent from the United  Kingdom.  Any director may waive


<PAGE> 87

     notice of any  meeting  and such  waiver  may be  retrospective.  Questions
     arising at a meeting shall be decided by a majority of votes. In case of an
     equality  of votes,  the  chairman  of the  meeting  shall have a second or
     casting vote.  Every person acting as an alternate  director shall have one
     vote for each  director for whom he acts as  alternate  (in addition to his
     own vote if he is also a director).  The signature of an alternate director
     to any  resolution  in  writing  of the  directors  or a  committee  of the
     directors  shall,  unless the  notice of his  appointment  provides  to the
     contrary, be as effective as the signature of his appointor.

113. The quorum for the  transaction  of the  business of the  directors  may be
     fixed by the  directors  and unless so fixed at any other  number  shall be
     two. An alternate  director who is not himself a director  shall be counted
     in the quorum.  Any director or member of a committee of the  directors may
     participate  in a meeting of the  directors  or such  committee by means of
     conference  telephone  or  similar  communications  equipment  whereby  all
     persons  participating in the meeting can hear each other and participation
     in the meeting in such  manner  shall be deemed to  constitute  presence in
     person at such  meeting  and that  person  shall be  entitled to vote or be
     counted in a quorum accordingly. Such meeting shall be deemed to take place
     where the largest group of those  participating is assembled,  or, if there
     is no such group, where the Chairman of the meeting then is.

114. The   continuing   directors  or  a  sole   continuing   director  may  act
     notwithstanding  any  vacancies  in their  number,  but,  if the  number of
     directors  is less than the  number  fixed by or in  accordance  with these
     articles,  the continuing  directors or director,  notwithstanding that the
     number of  directors  is below the number  fixed by or in  accordance  with
     these articles as the quorum or that there is only one continuing director,
     may act only for the purpose of filling  vacancies  or of calling a general
     meeting of the Company but not for any other purpose.

115. The directors may appoint one or more of their number to be the chairman or
     the deputy  chairman of the board of  directors  and may at any time remove
     any director so appointed from office and appoint  another  director in his
     place. The director  appointed as chairman,  or, in his absence,  as deputy
     chairman  shall  preside  at  every  meeting  of  directors  at which he is
     present,  but if there is no director holding either such office,  or if no
     director  holding  either such office is present  within five minutes after
     the time appointed for the meeting the directors present may appoint one of


<PAGE> 88

     their number to be chairman of the meeting.

116. All acts done by a meeting of directors, or of a committee of directors, or
     by a person  acting as a director  or member of a  committee  of  directors
     shall,  notwithstanding that it be after- wards discovered that there was a
     defect  in the  appointment  of any  director  or  that  any of  them  were
     disqualified  from  holding  office,  or had  vacated  office,  or were not
     entitled  to  vote,  be as  valid as if every  such  person  had been  duly
     appointed and was qualified and had continued to be a director or member of
     a committee of directors and had been entitled to vote.

117. included for numbering purposes only

117.1A resolution  in writing  executed by all the  directors for the time being
     entitled to receive  notice of a meeting of directors or by all the members
     for the time being of a committee of directors  (not being less,  in either
     case,  than a  quorum)  shall be as valid and  effectual  as if it had been
     passed at a meeting of  directors  or (as the case may be) a  committee  of
     directors duly convened and  constituted.  Such resolution may be contained
     in one document or in several documents in the like form each signed by one
     or more directors or members of the committee concerned.

117.2All or any of the  members of the Board or any  committee  of the Board may
     participate  in a  meeting  of the  Board or that  committee  by means of a
     conference  telephone  or any  communication  equipment  which  allows  all
     persons  participating  in the  meeting  to hear  each  other.  A person so
     participating  shall be deemed to be present in person at the  meeting  and
     shall be  entitled  to vote or be counted in a quorum  accordingly.  Such a
     meeting  shall be deemed to take  place  where the  largest  group of those
     participating  has  assembled,  or,  if there is no such  group,  where the
     Chairman of the meeting then is.

118. included for numbering purposes only

118.1Save as otherwise  provided by these  articles,  a director  shall not vote
     (nor be counted in the  quorum) on any  resolution  of the  directors  or a
     committee of the  directors in respect of any  contract or  arrangement  in
     which he (together with any persons connected with him) is to his knowledge
     materially interested, and if he shall do so his vote shall not be counted,
     but this  prohibition  shall  not  apply to any of the  following  matters,
     namely:-

     (a)  any contract or arrangement  for giving to such director any security,
          guarantee or indemnity in respect of money lent by him or  obligations

<PAGE> 89

          undertaken  by him at the request of or for the benefit of the Company
          or any of its subsidiary undertakings;

     (b)  any  contract  or  arrangement  for the  giving by the  Company of any
          security  to a third party in respect of a debt or  obligation  of the
          Company or any of its subsidiary  undertakings  which the director has
          himself guaranteed or secured in whole or in part;

     (c)  any contract or  arrangement  by a director to  subscribe  for shares,
          debentures or other  securities of the Company  issued or to be issued
          pursuant to any offer or invitation to members or debenture holders of
          the  Company  or any class  thereof  or to the  public or any  section
          thereof,  or to underwrite any shares,  debentures or other securities
          of the Company;

     (d)  any contract or arrangement in which he is interested by virtue of his
          interest in shares or debentures or other securities of the Company or
          by reason of any other interest in or through the Company;

     (e)  any contract or arrangement  concerning any other company (not being a
          company in which the  director and any persons  connected  with him do
          not to his knowledge hold an interest in shares,  as that term is used
          in sections 198 to 211 Companies Act 1985 representing one per cent or
          more of any class of the equity share capital of, or the voting rights
          in, such  company) in which he is  interested  directly or  indirectly
          whether as an officer, share- holder, creditor or otherwise howsoever;

     (f)  any proposal  concerning the adoption,  modification or operation of a
          pension fund or retirement  death or disability  benefits scheme which
          relates  both to directors  and  employees of the Company or of any of
          its  subsidiaries  and does not provide in respect of any  director as
          such any privilege or advantage not accorded to the employees to which
          such scheme or fund relates;

     (g)  any  arrangement for the benefit of employees of the Company or of any
          of its  subsidiaries  under which the  director  benefits in a similar
          manner as the  employees  and which does not accord to any director as
          such any  privilege or advantage not accorded to the employees to whom
          such arrangement relates;

<PAGE> 90

     (h)  any proposal,  contract,  transaction  or  arrangement  concerning the
          purchase or  maintenance of insurance for the benefit of the directors
          or for the benefit of persons who include directors.

118.2A company  shall be deemed to be a company in which a director owns one per
     cent.  or more if and so long as (but only if and so long as) he is (either
     directly or indirectly) the holder of or beneficially interested in one per
     cent.  or more of any class of the equity share  capital of such company or
     of the voting rights available to members of such company.  For the purpose
     of this paragraph  there shall be disregarded any shares held by a director
     as bare or custodian  trustee and in which he has no  beneficial  interest,
     any shares  comprised  in a trust in which the  director's  interest  is in
     reversion  or  remainder if and so long as some other person is entitled to
     receive the income thereof,  and any shares comprised in an authorised unit
     trust scheme in which the director is interested only as a unit holder.

118.3Where a  company  in  which a  director  holds  one  per  cent.  or more is
     materially  interested in a  transaction,  then that director shall also be
     deemed materially interested in such transaction.

119. A  director  shall not be  counted  in the  quorum  present at a meeting in
     relation to a resolution on which he is not entitled to vote.

120. *The Company may by ordinary  resolution  ratify any  transactions not duly
     authorised by reason of a contravention of these articles.

121. Where  proposals  are  under   consideration   concerning  the  appointment
     including  the  arrangement  or  variation  of  the  terms  thereof  or the
     termination thereof of two or more directors to offices or employments with
     the Company or any body  corporate in which the Company is  interested  the
     proposals  may be divided  and  considered  in  relation  to each  director
     separately  and  (provided  he is not for  another  reason  precluded  from
     voting) each of the  directors  concerned  shall be entitled to vote and be
     counted in the quorum in respect of each resolution  except that concerning
     his own appointment or the arrangement or variation of the terms thereof or
     the termination thereof.

----------
*    Amended by Special Resolution passed September 16 1999.

<PAGE> 91

122. If a  question  arises at a  meeting  of  directors  or of a  committee  of
     directors  as to the right of a  director  other than the  chairman  of the
     meeting to vote or be counted in a quorum,  the  question  may,  before the
     conclusion  of the meeting,  be referred to the chairman of the meeting and
     his ruling in relation to any director  other than  himself  shall be final
     and conclusive  except in a case where the nature or extent of the interest
     of the  director  concerned  as known to such  director has not been fairly
     disclosed to the  directors.  If any  question as aforesaid  shall arise in
     respect of the chairman of the meeting such question  shall be decided by a
     resolution  of the  directors  (for which  purpose such  chairman  shall be
     counted in the quorum but shall not vote thereon) and such resolution shall
     be final and conclusive  except in a case where the nature or extent of the
     interest  of such  chairman as known to such  chairman  has not been fairly
     disclosed to the directors.

                                    MINUTES
                                    -------

123. The  directors  shall  cause  minutes  to be made  in  books  kept  for the
     purpose:-

     (a)  of all appointments of officers made by the directors;

     (b)  of the names of the directors present at each meeting of directors and
          of any committee of directors;

     (c)  of all  resolutions  and proceedings at meetings of the Company and of
          the holders of any class of shares in the Company and of the directors
          and of committees of directors.

                                   SECRETARY
                                   ---------

124. The  secretary  shall be appointed by the  directors for such term, at such
     remuneration  and upon such  conditions as they think fit and any secretary
     so appointed may be removed by the directors.

125. Anything  by the  Acts  required  or  authorised  to be  done  by or to the
     secretary  may, if the office is vacant or there is for any other reason no
     secretary  capable  of  acting,  be done by or to any  assistant  or deputy
     secretary  or, if there is no  assistant  or deputy  secretary  capable  of
     acting,  by or to  any  officer  of the  Company  authorised  generally  or
     specially in that behalf by the  directors:  provided that any provision of
     the Acts or of these  articles  requiring or authorising a thing to be done


<PAGE> 92

     by or to a director and secretary  shall not be satisfied by its being done
     by or to the same person  acting  both as director  and as, or in the place
     of, the secretary.

                                    THE SEAL
                                    --------

126. The Company may have a seal if it so resolves.  In such case the  directors
     shall provide for the custody of every seal. The seal shall only be used by
     the authority of the directors or of a committee of directors authorised by
     the  directors in that behalf.  The  directors may determine who shall sign
     any  instrument  to which  the seal is  affixed  and  unless  otherwise  so
     determined  it shall be signed by a director  and by the  secretary or by a
     second  director.  Any instrument to which an official seal is affixed need
     not, unless the directors for the time being otherwise determine or the law
     otherwise requires be signed by any person.

                                   DIVIDENDS
                                   ---------

127. Subject  to the  provisions  of  the  Acts  the  Company  may  by  ordinary
     resolution  declare  dividends to be paid to members in accordance with the
     respective  rights  and  their  interests  in  the  profits  available  for
     distribution,  but no dividend  shall exceed the amount  recommended by the
     directors.

128. Subject to the provisions of the Acts and of these articles,  the directors
     may pay interim  dividends if it appears to them that they are justified by
     the profits of the Company available for distribution. If the share capital
     is divided into different classes,  the directors may pay interim dividends
     on shares  which  confer  deferred or  non-preferred  rights with regard to
     dividend as well as on shares which confer  preferential rights with regard
     to  dividend,  but no  interim  dividend  shall be paid on shares  carrying
     deferred  or  non-preferred   rights  if,  at  the  time  of  payment,  any
     preferential dividend is in arrear. The directors may also pay at intervals
     settled by them any dividend  payable at a fixed rate if it appears to them
     that the profits available for distribution  justify the payment.  Provided
     the  directors  act in good faith they shall not incur any liability to the
     holders of shares conferring  preferred rights for any loss they may suffer
     by the lawful payment of an interim  dividend on any shares having deferred
     or non-preferred rights.

129. Except as  otherwise  provided  by the rights  attached  to or the terms of
     issue of shares,  all dividends  shall be declared and paid on the Ordinary


<PAGE> 93

     Share  capital  according to the amounts  paid up on such shares  otherwise
     than in  advance  of calls on  which  the  dividend  is  paid.  Subject  as
     aforesaid,  all dividends shall be apportioned and paid  proportionately to
     the amounts paid up on the shares otherwise than in advance of calls during
     any portion or  portions of the period in respect of which the  dividend is
     paid.

130. The directors  may deduct from any dividend or other moneys  payable to any
     member on or in respect of any share any moneys presently payable by him to
     the  Company on account of calls or  otherwise  in respect of shares of the
     Company.

131. included for numbering purposes only

131.1A general meeting declaring a dividend may, upon the  recommendation of the
     directors,  direct  that it shall be  satisfied  wholly  or  partly  by the
     distribution  of specific  assets and in  particular  of paid-up  shares or
     debentures of any other company and, where any difficulty  arises in regard
     to the  distribution,  the  directors may settle the same and in particular
     may issue  fractional  certificates  or  authorise  any  person to sell and
     transfer any fractions or may ignore  fractions  altogether and may fix the
     value  for  distribution  purposes  of any  such  specific  assets  and may
     determine  that cash  shall be paid to any member  upon the  footing of the
     value so fixed in order to secure equality of distribution and may vest any
     such specific assets in trustees.

     (a)  The Directors may, with the sanction of an Ordinary  Resolution of the
          Company,  offer  holders  of  Ordinary  Shares  the  right to elect to
          receive in respect of all or part of their holdings of Ordinary Shares
          additional  Ordinary  Shares in the  Company,  credited as fully paid,
          instead  of  cash in  respect  of all or  part  of  such  dividend  or
          dividends  whether  interim  or final and  (subject  to the  following
          provisions of this article) upon such terms and conditions and in such
          manner as may be specified in such Ordinary  Resolution  and otherwise
          as the  Directors may  determine.  Any such  resolution  may specify a
          particular  dividend  and/or  all of any  dividends  (or  part of such
          dividends)  declared or paid within a  specified  period,  but no such
          period may end later than the beginning of the Annual General  Meeting
          in the calendar  year next  following  the date on which such Ordinary
          Resolution is passed.

     (b)  When any such right of  election is offered to the holders of Ordinary
          Shares  pursuant to this Article,  the Directors shall make such offer


<PAGE> 94

          to such holders in writing  (conditionally  if the necessary  Ordinary
          Resolution has yet to be passed,  upon such  resolution  being passed)
          and shall make  available  to or provide  such  holders  with forms of
          election  (in such form as the  Directors  may  approve)  whereby such
          holders may  exercise  such right and shall notify such holders of the
          procedure to be followed and of the place at which and the latest date
          and time by which,  duly completed forms of election must be lodged in
          order to be effective.

     (c)  Each  holder of  Ordinary  Shares  who  elects to  receive  additional
          Ordinary  Shares in the Company  under a right offered to him pursuant
          to this  Article  shall be  entitled to receive  such whole  number of
          additional  Ordinary Shares as is as nearly as possible equal in value
          (calculated on the basis of the Market Value of an additional Ordinary
          Share in the  Company)  to (but not in excess of) the cash amount that
          such holder would otherwise have received by way of dividend.  For the
          purposes of this Article, the "Market Value" of an additional Ordinary
          Share in the  Company  shall be the  average  of the  prices  at which
          business  is done in the  Ordinary  Shares  (derived  from  the  Daily
          Official List of the London Stock  Exchange) on such five  consecutive
          dealing days as the Directors  shall determine (save that the first of
          such  dealing  days  shall  be on or after  the day  when  the  issued
          Ordinary  Shares in the  Company are first  quoted  "ex" the  relevant
          dividend, unless no business is done during such dealing days, when in
          that  case  the  first  of such  dealing  days  should  be the  latest
          practicable  date at least five days prior to the date when the issued
          Ordinary  Shares in the  Company are first  quoted  "ex" the  relevant
          dividend when business is done in the Ordinary  Shares) or the nominal
          value of an Ordinary Share in the Company (whichever is the higher).

     (d)  Following an election by holders of Ordinary Shares in accordance with
          this  article,  the  relevant  dividend (or that part of a dividend in
          respect of which a right of election  has been  offered)  shall not be
          payable on the Ordinary  Shares issued pursuant to the election but in
          lieu thereof,  the Directors shall capitalise out of any undistributed
          profits of the  Company  not  required  for  paying  any  preferential
          dividend  (whether or not they are available for  distribution) or out
          of any sum  standing  to the  credit of the  Company's  share  premium


<PAGE> 95

          account  or  capital  reserves   (including  any  capital   redemption
          reserve),  as the Directors may determine a sum equal to the aggregate
          nominal value of the number of additional  Ordinary Shares required to
          be  allotted  to the  holders  of  Ordinary  Shares who have made such
          election  and shall apply such sum in paying up in full such number of
          additional  Ordinary Shares and shall allot and distribute the same to
          and amongst such holders on the basis set out in  sub-clause 3 of this
          article save that the foregoing  provisions of this paragraph shall be
          subject to any right of the Directors  under these  articles to retain
          any dividend or other monies  payable on or in respect of the Ordinary
          Shares of a particular member.

     (e)  The additional  new Ordinary  Shares so allotted shall rank pari passu
          with the fully paid Ordinary  Shares in the Company then in issue save
          that they shall not be  entitled  to  participate  in the  dividend in
          relation to which the relevant election was made.

     (f)  A resolution of the Directors capitalising any part of the reserves or
          profits  hereinbefore  mentioned shall have the same effect as if such
          capitalisation had been declared by Ordinary Resolution of the Company
          in  accordance  with  these  Articles  and in  relation  to  any  such
          capitalisation  the Directors may exercise all the powers,  other than
          the powers to allot  fractional  shares,  conferred on them by Article
          136 without the need for any such Ordinary Resolution.

     (g)  The  Directors  may at their  discretion  make any rights of  election
          offered  pursuant  to  this  Article  subject  to such  exclusions  or
          arrangements as they may consider  necessary or expedient to deal with
          any legal or other  difficulties  which would or may  otherwise  arise
          under laws of, or the  requirements of any recognised  regulatory body
          or any stock exchange in, any territory.

     (h)  Every duly effected  election  shall be binding on every  successor in
          title to the Ordinary  Shares or any of the members who have  effected
          the same.

132. Any dividend or other  monies  payable in cash or in respect of a share may
     be paid by  cheque,  or  other  instrument  sent  through  the  post to the
     registered  address of the person  entitled  or, if two or more persons are
     the  holders of the share or are  jointly  entitled  to it by reason of the


<PAGE> 96

     death or bankruptcy of the holder, to the registered address of that one of
     those  persons  who is first  named in the  register  of members or to such
     person and to such address as the person or persons entitled may in writing
     direct.  Every  such  cheque,  warrant  or other  instrument  shall be made
     payable  to or to the order of the person or  persons  entitled  or to such
     other person as the person or persons  entitled may in writing direct.  Any
     such cheque,  warrant or other  instrument  may be crossed  "account  payee
     only" although the Company shall not be obliged to do so. Any such dividend
     or other monies may also be paid by any bank or other funds transfer system
     as the directors may consider  appropriate and to or through such person as
     the person or persons  entitled  thereto  may in writing  director  and the
     Company shall have no responsibility  for any such dividend or other monies
     lost or  delayed in the  course of such  transfer  or when it is acted upon
     such direction.  Payment of the cheque,  warrant or other instrument by the
     bank upon whom it is drawn or transfer of the funds by the bank  instructed
     to make the same  shall be a good  discharge  to the  Company.  Every  such
     cheque,  warrant or other  instrument shall be sent and every such transfer
     of funds shall be made at the risk of the person or persons entitled to the
     money represented thereby. If any such cheque,  warrant or other instrument
     has or shall be  alleged  to have  been  lost,  stolen  or  destroyed,  the
     directors  may at the  request  of the  person  entitled  thereto  issue  a
     replacement cheque,  warrant or other instrument subject to compliance with
     such conditions as to evidence and indemnity and the payment of such out of
     pocket  expenses  incurred by the Company in connection with the request as
     the directors may think fit.


133. All unclaimed dividends or other moneys payable on or in respect of a share
     may be invested or otherwise  made use of by the  directors for the benefit
     of the  Company  until  claimed.  No dividend  or other  moneys  payable in
     respect of a share shall bear interest against the Company unless otherwise
     provided by the rights attached.

134. Any dividend which has remained unclaimed for twelve years from the date of
     declaration  of such dividend or (if later) the date such  dividend  became
     due for payment shall, if the directors so resolve,  be forfeited and shall
     revert to the  Company and the payment by the  directors  of any  unclaimed
     dividend,  interest or other sum payable on or in respect of a share into a
     separate  account  shall not  constitute  the  Company a trustee in respect
     thereof.

<PAGE> 97

                                    RESERVES
                                    --------

135. The directors may before recommending any dividend, whether preferential or
     otherwise,  carry to reserve out of the  profits of the Company  (including
     any premiums  received upon the issue of debentures or other  securities of
     the Company) such sums as they think proper as a reserve or reserves, which
     shall, at the discretion of the directors, be applicable for any purpose to
     which the profits of the Company may properly be applied and,  pending such
     application,  may at the like discretion either be employed in the business
     of  the  Company  or be  invested  in  such  investments  (subject  to  the
     provisions  of the Acts) as the  directors may from time to time think fit.
     The directors may also, without placing the same to reserve,  carry forward
     any profits which they may think prudent not to distribute.

                           CAPITALISATION OF PROFITS
                           -------------------------

136. The  directors  may with the  authority  of an ordinary  resolution  of the
     Company:-

     (a)  subject  as   hereinafter   provided,   resolve  to   capitalise   any
          undistributed  profits  of the  Company  not  required  for paying any
          preferential   dividend   (whether  or  not  they  are  available  for
          distribution) or any sum standing to the credit of the Company's share
          premium account or capital redemption reserve;

     (b)  appropriate  the sum  resolved  to be  capitalised  to the  members in
          proportion to the nominal  amounts of the shares (whether or not fully
          paid)  held  by  them   respectively   which  would  entitle  them  to
          participate   in  a   distribution   of  that  sum  if  it  were  then
          distributable  and it were  distributed  by way of dividend  and apply
          such sum on their behalf  either in or towards  paying up the amounts,
          if  any,  for  the  time  being  unpaid  on any  shares  held  by them
          respectively, or in paying up in full unissued shares or debentures of
          the  Company  of a nominal  amount  equal to that  sum,  and allot the
          shares or debentures  credited as fully paid to those  members,  or as
          they may direct, in those proportions, or partly in one way and partly
          in the other but the share  premium  account,  the capital  redemption
          reserve,  and any profits which are not available for distribution may
          for the  purposes of  this  regulation,  only be  applied in paying up

<PAGE> 98

          unissued shares to be issued to members credited as fully paid;

     (c)  resolve  that any  shares so  allotted  to any  member in respect of a
          holding by him of any partly paid shares  shall so long as such shares
          remain  partly  paid rank for  dividend  only to the  extent  that the
          latter shares rank for dividend;

     (d)  where any difficulty  arises in regard to any distribution  under this
          article the directors may settle the same as they think  expedient and
          in  particular  may issue  fractional  certificates  or authorise  any
          person to sell and  transfer  any  fractions  or may resolve  that the
          distribution  should be as nearly as may be practicable in the correct
          proportion but not exactly so or may ignore fractions altogether,  and
          may determine that cash payments shall be made to any members in order
          to adjust  the rights of all  parties,  as may seem  expedient  to the
          directors.

     (e)  authorise  any person to enter on behalf of all the members  concerned
          into an agreement with the Company providing for the allotment to them
          respectively,  credited  as  fully  paid,  of any  further  shares  or
          debentures  to which they are entitled upon such  capitalisation,  any
          agreement made under such authority being binding on all such members;
          and

     (f)  generally  do all acts and  things  required  to give  effect  to such
          resolution as aforesaid.

                                    NOTICES
                                    -------

137. Any notice to be given pursuant to the articles shall be in writing and the
     Company  may give any such  notice  to a  member  either  personally  or by
     sending  it by post in a prepaid  envelope  addressed  to the member at his
     registered  address or by leaving it at that address.  In the case of joint
     holders of a share,  all notices  shall be given to the joint  holder whose
     name  stands  first in the  register  of  members  in  respect of the joint
     holding  and notice so given  shall be  sufficient  notice to all the joint
     holders.

138. A member whose registered  address is not within the United Kingdom and who
     gives to the Company an address  within the United Kingdom at which notices
     may be given to him shall be entitled to have notices  given to him at that

<PAGE> 99

     address,  but  otherwise  no such  member  shall be entitled to receive any
     notice from the Company.

139. A member  present,  either in person or by  proxy,  at any  meeting  of the
     Company or of the  holders of any class of shares in the  Company  shall be
     deemed to have received notice of the meeting and, where requisite,  of the
     purposes for which it was called.

140. Every  person who becomes  entitled to a share shall be bound by any notice
     which,  before his name is entered in the  register  of  members,  has been
     given to the person from whom he derives his title.

141. If at any  time by  reason  of the  suspension  or  curtailment  of  postal
     services  within the  United  Kingdom or any part  thereof  the  Company is
     unable effectively to convene a general meeting by notices sent through the
     post, a general meeting may be convened by a notice  advertised on the same
     date in at least one leading  national daily  newspapers  with  appropriate
     circulation and such notice shall be deemed to have been duly served on all
     members  entitled  thereto and persons  entitled  by  transmission  who are
     entitled to have notice of the meeting  served upon them at noon on the day
     when the  advertisement  appears.  In any such case the Company  shall send
     confirmatory  copies of the notice by post if at least  seven days prior to
     the  meeting  the  posting of notices to  addresses  throughout  the United
     Kingdom or such part thereof again becomes practicable.

142. A notice  sent by the Company by  first-class  post shall be deemed to have
     been given at the  expiration of 24 hours after the envelope  containing it
     was  posted  and if sent by second  class post shall be deemed to have been
     given at the  expiration  of 72 hours after the envelope  containing it was
     posted  and proof that the  envelope  containing  the  notice was  properly
     addressed,  prepaid and posted shall be conclusive evidence that the notice
     was given.  A notice  given by  advertisement  shall be deemed to have been
     served on the day on which the advertisement  appears. Any notice delivered
     or left at a registered  address  otherwise than by post shall be deemed to
     have been given on the day it was so delivered or left.

143. A notice  or other  document  delivered  or sent by post to the  registered
     address of a member  pursuant to the articles shall,  notwithstanding  that
     the member be then dead,  bankrupt,  mentally  disordered or that any other

<PAGE> 100

     event has  occurred and whether or not the Company has notice of the death,
     bankruptcy  mental  disorder or other event be deemed to have been given in
     respect of any share registered in the name of such member as sole or joint
     holder  unless  before  the day of  posting  (or if it is not  sent by post
     before the day of service or delivery) of the notice or document,  his name
     has been  removed  from the  Register as the holder of the share,  and such
     service or delivery of such notice or document.  A notice so given shall be
     deemed a sufficient notice to all persons interested  (whether jointly with
     or as claiming through or under the member) in the share.

                                  RECORD DATES
                                  ------------

144. Notwithstanding any other provision of these articles but subject always to
     the Act, the Company or the directors  may by  resolution  specify any date
     ("the  Record  Date") as the date at the close of  business  (or such other
     time as the  Directors may  determine)  on which persons  registered as the
     holders of shares or other  securities  shall be entitled to receipt of any
     dividend,  distribution,  interest,  allotment, issue notice,  information,
     document or  circular  and such Record Date may be on or at any time before
     the date on which the same is paid or made or (in the case of any dividend,
     distribution,  interest,  allotment or issue) at any time after the same is
     recommended,  resolved, declared or announced, but without prejudice to the
     rights inter se in respect of the same of  transferors  and  transferees of
     any such shares or other securities.

                                    ACCOUNTS
                                    --------

145. The  accounting  records  shall be kept at the  office,  or (subject to the
     provisions of the Acts) at such other place as the directors think fit, and
     shall  always be open to  inspection  by the  officers of the  Company.  No
     member  (other than a director)  shall have any right of  inspection of any
     account or book or document of the Company  except as  conferred by statute
     or authorised by the directors or by the Company in general meeting.

146. A printed copy of the  directors'  and  auditors'  reports  accompanied  by
     printed  copies of the  balance  sheet,  profit and loss  account and other
     documents  required by the Acts to be annexed to the balance  sheet  shall,
     not less than  twenty-one days before the general meeting before which they
     are to be laid, be delivered or sent by post to the  registered  address of
     every member and holder of debentures  of the Company,  and to the auditors
     for the time being of the  Company,  and, if all or any of the shares in or
     debentures  of the  Company  are for the time  being  listed  on any  stock
     exchange,  there shall at the same time be  forwarded  to the  secretary of
     such stock exchange such number of copies of each of these documents as may
     be required by the  regulations  for the time being of such stock exchange.

<PAGE> 101

     Provided that the Company need not,  subject to the  provisions of the Acts
     and the  regulations  of the London Stock Exchange so permitting and if the
     Board so decides, send the copies of such documents to members, but instead
     send them a summary  financial  statement derived from the Company's annual
     accounts  and the  directors'  report,  in such  form and  containing  such
     information as may be required by the Acts and provided further that copies
     of the Company's annual accounts  (together with the directors'  report for
     the financial  year and the auditor's  report on those  accounts)  shall be
     sent to any Member who wishes to receive them and the Company  shall comply
     with  any  provisions  of the  Acts  as to the  manner  in  which  it is to
     ascertain whether a Member wishes to receive them.

                                   WINDING UP
                                   ----------

147. If the Company is wound up, the  liquidator  may,  with the  sanction of an
     extraordinary  resolution of the Company and any other sanction required by
     the Acts,  divide  among the members in specie the whole or any part of the
     assets of the Company and whether or not the assets  consist of property of
     one kind or of  properties  of different  kinds may, for that purpose value
     any assets and determine  how the division  shall be carried out as between
     the members or different  classes of members.  The liquidator may, with the
     like  sanction,  vest the whole or any part of the assets in trustees  upon
     such  trusts for the  benefit of the  members as he with the like  sanction
     determines,  but no member  shall be  compelled  to accept any assets  upon
     which there is a liability.

                                   INDEMNITY
                                   ---------

148. *Subject to the provisions of the Acts,  every director or other officer of
     the Company shall be indemnified  out of the assets of the Company  against
     all costs, charges,  expenses,  losses and liabilities which he may sustain
     or incur in or about the  execution  of his office or otherwise in relation
     thereto.  Pursuant to the provisions of Section 310(3) of the Companies Act
     1985 (as  amended  by the  Companies  Act  1989)  the  Company  may for the
     purposes of this Article  purchase and maintain  insurance to indemnify any
     past or  present  director,  officer,  or manager  of the  Company,  or any
     company which is a member of the Group.

----------
*    Amended by Special Resolution passed September 16 1999.

<PAGE> 102

EXHIBIT 2.03

                                 Ordinary Shares


Certificate  No.    Account No.        Transfer No.      Date   Number of Shares
--------------------------------------------------------------------------------


--------------------------------------------------------------------------------
                                                                      of 2p Each

                                  [MERANT logo]

                                    MERANT (TM)

          ____________________________plc ____________________________
   (Incorporated in England under the companies acts 1948 to 1981 No. 1709998)

                           This is to certify that the
                 undermentioned is/are the registered holder(s)
                   of Ordinary Shares of 2p each fully paid in
             the Capital of this Company as shown herein, subject to
                   the Memorandum and Articles of Association.


Name(s) of Holder(s)                    Number of Ordinary Shares of 2p Each
--------------------                    ------------------------------------




                                                                Given  under the
                                                                official seal of
                                                                     The Company

This certificate should be kept in a safe place. It will be needed when you sell
or transfer the shares.

                                     [SEAL]

The registrar's address is: Lloyds TSB Registrars, The Causeway,  Worthing, West
Sussex BN99 6DA and the relevant reference for correspondence in No. 260.


<PAGE> 103

EXHIBIT 2.06

            Rules of the 1998 Merant Share Option Plan ("the Plan")

1.   Definitions

     In this Plan:

     (a)  "Board" means the board of directors of the Company;

     (b)  "Code"  means the  United  States  Internal  Revenue  Code of 1986 (as
          amended);

     (c)  "The Company"  means Merant Public  Limited  Company  incorporated  in
          England with number 1709998;

     (d)  "Control" means the definition thereof contained in section 840 of the
          UK Income and Corporation Taxes Act 1988;

     (e)  "Date of Grant"  means in relation  to any  Option,  the date on which
          such option is granted in accordance with Rule 9;

     (f)  "Employer Corporation" means any company within the Group for which an
          Eligible  Person  who has been  granted  an  Option  under  this  Plan
          performs services;

     (g)  "Eligible  Person"  means a person to whom an Option may be granted as
          defined in Rule 2 below;

     (h)  "Effective Date" means the completion date of the Merger;

     (i)  "Group" means the Company and every other company of which the Company
          has direct or indirect Control;

     (j)  "Incentive  Stock  Option"  means  an  Option  which  qualifies  as an
          incentive stock option within the meaning of Section 422 of the Code;

     (k)  "ISO Group" means the Company and any other  Company which is a Parent
          Corporation or Subsidiary Corporation of the Company;

<PAGE> 104

     (l)  "Merger"  means the  merger of  Intersolv,  Inc.  with and into  Tower
          Merger Sub Inc., a Subsidiary Corporation of the Company.1

     (m)  "Non-Executive  Director"  means a director of any member of the Group
          who has been appointed as a non-executive director;

     (n)  "Option" means a right granted by the Company in accordance  with this
          Plan to subscribe for Shares;

     (o)  "Parent Corporation" means any corporation (other than the Company) in
          an unbroken chain of  corporations  ending with the Company if, at the
          time in question, each of the corporations other than the Company owns
          stock (or shares)  possessing 50% or more of the total combined voting
          power  of all  classes  of  stock  (or  shares)  in  one of the  other
          corporations in such chain;

     (p)  "Shares"  means  fully  paid  ordinary  shares in the  capital  of the
          Company;

     (q)  "Subsidiary   Corporation"  means  any  corporation  (other  than  the
          Company)  in an  unbroken  chain of  corporations  beginning  with the
          Company if, at the time in question,  each of the  corporations  other
          than the last corporation in the unbroken chain owns stock (or shares)
          possessing  50% or more of the  total  combined  voting  power  of all
          classes of stock (or shares) in one of the other  corporations in such
          chain;

     (r)  "10%  Shareholder"  means a person who owns shares  representing  more
          than 10% of the total  combined  voting power of all classes of shares
          in any company which is a member of the ISO Group at the Date of Grant
          of an Option;

     (s)  "fair market value" means the average of the middle market  quotations
          of a share as derived from the Daily Official List of The London Stock
          Exchange on the three business days immediately  preceding the Date of
          Grant.
----------
1 The completion date of the Merger was September 24, 1998.

<PAGE> 105

2.   Persons to whom Options may be granted

          (a)  Options  may only be granted to current or former  employees  and
               directors of a Member of the Group  ("Eligible  Persons") and for
               the avoidance of doubt, subject to Rule 5(b) below, shall include
               Non-Executive Directors.

          (b)  Subject to Rule 6 below Incentive Stock Options may be granted to
               such  Eligible  Persons as the Board from time to time and in its
               absolute discretion may determine.

3.   Non-transferability of Options

Options shall be personal to the person to whom they are granted and shall lapse
forthwith  if they  are  purportedly  transferred  (otherwise  than to  personal
representatives upon death) assigned,  mortgaged, charged or otherwise alienated
or if that  person is  adjudicated  bankrupt or does or suffers any other act or
thing  whereby he or she would or might be deprived  of the legal or  beneficial
ownership of the Options.

4.   Number of Shares available to be put under option

     (a)  Subject to Rule 13 below (relating to variation in share capital), the
          aggregate  of (1) the  total  number of  Shares  in  respect  of which
          Options may be granted in accordance  with this Plan during the period
          from the Effective Date to August 18, 2008 and (2) the total number of
          Shares  which may be issued  under all other  options  granted  by the
          Company and which  immediately  prior to the  completion of the Merger
          remain  capable of  exercise  may not  exceed 15% of the issued  share
          capital of the Company, as enlarged,  immediately following completion
          of the Merger (or an aggregate of 25,000,000 Shares, if less).

     (b)  For the avoidance of doubt, where Options under this Plan or any other
          share option plan or scheme  established by the Company lapse or cease
          to be exercisable  the Shares under such options may be the subject of
          new grants of Options  under this Plan without  being  included in the
          limit  in  paragraph  (a)  above.  To this  end,  in  addition  to the
          aforementioned  limit,  the total number of Shares in respect of which
          Options may be granted  under this Plan shall be  increased to include
          the  number of all or any  Shares  which  were the  subject of options

<PAGE> 106

          which have  lapsed or ceased to be  exercisable  under  other plans or
          schemes or former plans or schemes established by the Company.

     (c)  The number of shares subject to an option  granted in accordance  with
          the Merant Inland Revenue  Approved Share Option Scheme,  which option
          certificate  provides that the source of shares subject thereto is the
          pool of shares available for grant in accordance with this Plan, shall
          reduce by the same  amount,  the  number of Shares in respect of which
          Options may be granted in  accordance  with this Plan.  In  accordance
          with paragraph 4(b),  where such Merant Inland Revenue  Approved Share
          Option  Scheme  options lapse or cease to be  exercisable,  the shares
          under such  options may be the subject of new grants of Options  under
          this Plan.

5.   Maximum  or annual  number of Shares in  respect  of which  Options  may be
     granted to any person

     (a)  Subject to Rule 13 below,  the maximum  number of Shares in respect of
          which Options may be granted to any person (other than a Non-Executive
          Director) in accordance with this Plan in the period of this authority
          shall  be  375,000  Shares.   Save  that  any  person  (other  than  a
          Non-Executive  Director) who commences  employment  for the first time
          (whether  before or after the  adoption of this Plan) with the Company
          or a member of the Group shall be  eligible  to be granted  Options in
          respect of up to 1,500,000 Shares in the period of 12 months after the
          commencement of his employment.

     (b)  In each 12 month period during his or her  directorship  Options shall
          be granted to any person who is a Non-Executive Director in respect of
          10,000 Shares or, in the case of a  Non-Executive  Director who is the
          Chairman,  20,000 Shares.  Save that any person who is a Non-Executive
          Director who  commences his  directorship  for the first time with the
          Company  shall be eligible to be granted  Options in respect of 10,000
          Shares  or,  in  the  case  of a  Non-Executive  Director  who  is the
          Chairman,  20,000  Shares  in  the  period  of  12  months  after  the
          commencement   of  his   directorship   in   addition  to  the  annual
          entitlement.

6.   Further restrictions on the grant of Incentive Stock Options

<PAGE> 107

     (a)  Incentive Stock Options may only be granted to employees (as that term
          is used in Section 422 of the Code) of any  company  which is a member
          of the ISO Group at the Date of Grant;

     (b)  The aggregate  fair market value  (determined as of the Date of Grant)
          of Shares in respect of which  Incentive Stock Options are exercisable
          for the first time by an employee during any calendar year pursuant to
          this  Plan (and  under  any other  plan  permitting  the  granting  of
          Incentive  Stock Options which might be  established by any company in
          the ISO Group) may not exceed US$100,000.  If the fair market value of
          shares  on the Date of  Grant in  respect  of  which  Incentive  Stock
          Options are  exercisable  for the first time by an employee during any
          calendar  year  exceeds  US$100,000,  then the  Options  for the first
          US$100,000 worth of Shares to become exercisable in such calendar year
          will be  Incentive  Stock  Options  and the  Options for the amount in
          excess of  US$100,000  that become  exercisable  in that calendar year
          will not be Incentive Stock Options.

7.   Payment for grant of Options

The amount,  if any,  payable in consideration of the grant of any Options shall
be as the Board may decide but in any event  shall not be more than GBP1,  which
shall not be returnable.

8.   Exercise Price

The exercise price payable for any Share to be acquired upon the exercise of any
Option  shall be not less than the fair  market  value of a Share on the Date of
Grant:

     (a)  In the case of an Incentive Stock Option granted to a 10% Shareholder,
          the  exercise  price  shall be not less than  110% of the fair  market
          value of a Share on the Date of Grant; and

     (b)  in any event,  the  exercise  price shall be not less than the nominal
          value of a Share.

<PAGE> 108

9.   Times at which Options may be granted

     (a)  Options  may  only be  granted  on or  after  the  Effective  Date and
          thereafter during any of the following periods:

          (i)  within the period of 30 days  immediately  following  the date of
               shareholder  approval  of this  Plan  (but no  earlier  than  the
               Effective Date); or

          (ii) within the period of 42 days  immediately  following  the date on
               which the Company  announces  its interim or  preliminary  annual
               trading  results for any period to the press and The London Stock
               Exchange  (provided  that in respect of  directors of the Company
               that such  date does not fall  during  the  period of two  months
               prior  to the  announcement  of  interim  or  preliminary  annual
               trading  results  or, if shorter,  the period  from the  relevant
               financial  period  end  up to  and  including  the  time  of  the
               announcement); or

          (iii)to any  person  who  commences  employment  with a member  of the
               Group  for  the  first  time,   within  the  period  of  45  days
               immediately  thereafter (provided that in respect of directors of
               the  Company  such date does not fall  during  the  period of two
               months prior to the announcement of interim or preliminary annual
               trading  results  or, if shorter,  the period  from the  relevant
               financial  period  end  up to  and  including  the  time  of  the
               announcement).

     (b)  The Board may grant Options outside the periods specified in this Plan
          in  circumstances  which the  Board in its  absolute  discretion  deem
          sufficiently exceptional to justify the grant of Options at that time.

     (c)  Options  granted to  Non-Executive  Directors on  commencement  of his
          directorship (under Rule 5(b)) shall be granted as soon as practicable
          during the period in Rule 9(a)(iii) or, if no grant is possible during
          that period then such Options shall be granted as soon as  practicable
          after  the next  announcement  of a period in Rule  9(a)(ii).  Options
          granted  to  Non-Executive  Directors  shall be  granted in respect of
          their annual  entitlement  (under Rule 5(b)) on the business day after

<PAGE> 109

          the Company's  Annual General Meeting but if that day does not fall in
          one of the periods in Rule  9(a)(ii)  above then such Options shall be
          granted as soon as practicable after the next commencement of a period
          in Rule  9(a)(iii)  provided  that where a  Non-Executive  Director is
          appointed  within  90 days  following  the  Company's  Annual  General
          Meeting  such  director  shall be entitled to be granted  their annual
          entitlement  (under  Rule  5(b)) on the  same day as the  grant of the
          Options to which they are  entitled  following  commencement  of their
          directorship.

10.  Performance Targets

     (a)  The  exercise of any Option may by its terms be  conditional  upon the
          attainment of one or more objective  performance targets ("Performance
          Targets").  The terms of each  Performance  Target shall themselves be
          determined by the Executive Remuneration Committee of the Board in its
          discretion and shall be specified to the relevant  Eligible  Person at
          the same time as the Date of Grant to such Eligible Person.

     (b)  Where an issue or  reorganisation  by the Company or any member of the
          Group  (including,   without  limitation,   any  issue  of  shares  or
          securities   or  any   reduction   of  capital  or   sub-division   or
          consolidation of shares) or any other event or circumstance (including
          a change in accounting  policies or practice or a change in the length
          of the Company's accounting period) causes the Executive  Remuneration
          Committee  reasonably to consider that a different  performance target
          (including in the case of Rules 11(b) and 14, an appropriate reduction
          in the period for achieving such a Performance Target) would be a more
          appropriate measure of performance and that the different  Performance
          Target  will be a  fairer  measure  of such  performance  or that  any
          amended  performance target will provide a more effective incentive to
          the holders of Options, the Executive Remuneration Committee after due
          consultation with the auditors of the Company may determine that a new
          Performance  Target shall be substituted for the existing  Performance
          Target applicable to such Option or Options.

     (c)  Where the Executive  Remuneration  Committee has imposed a Performance
          Target  under Rule 10(a) upon the grant of an Option,  that Option may
          not be  exercised  except  in  accordance  with any  such  Performance

<PAGE> 110

          Target, as from time to time varied in accordance with Rule 10(b).

11.  Option Period

     (a)  No Option  shall be  capable  of being  exercised  later than 10 years
          after the Date of Grant,  or in the case of an Incentive  Stock Option
          granted to a 10% Shareholder, 5 years after the Date of Grant.

     (b)  Exercise  of an  Option  shall  always  be  subject  to the  following
          additional  provisions:  (i) if the  option  holder  ceases to provide
          services  to any member of the Group for any reason  except the option
          holder's death or disability  (whether such disability is temporary or
          permanent,  partial or total,  as determined  by the Board),  then the
          option  holder may exercise such option  holder's  Options only to the
          extent  that  such  Options  would  have  been  exercisable  upon  the
          effective  date of such  termination  no later than three months after
          the effective date of such termination (or such longer or shorter time
          period as may be specified in the Option),  but in any event, no later
          than the expiration date of the Options; and (ii) if the option holder
          ceases to provide  services to any member of the Group  because of the
          option  holder's death or disability (or the option holder dies within
          three  months  of  termination  for any  reason  other  than  death or
          disability)  then the option holder's Options may be exercised only to
          the extent that such Options would have been exercisable by the option
          holder on the effective date of such termination and must be exercised
          by the option holder (or the option holder's legal  representative  or
          authorised  assignee) no later than 12 months after the effective date
          of such  termination  (or such longer or shorter time period as may be
          specified  in  the  Option),  but in  any  event  no  later  than  the
          expiration  date  of  the  Options.  The  phrase  "ceases  to  provide
          services" shall include termination of employment.

     (c)  Options shall become  exercisable at such times and in such increments
          as shall be determined by the Board.

12.  Stock Exchange Listing

All Shares allotted upon the exercise of any Option shall rank pari passu in all
respects  with the  Shares  then in issue  and the  Company  shall  apply to the

<PAGE> 111

Council of The London Stock Exchange for Shares allotted  pursuant to any Option
to be admitted to the Official  List.  The Company  shall provide to each person
who shall hold one or more Options a copy of the annual report of the Company as
soon as reasonably practicable after it is released by the Company.

13.  Variation in share capital

     (a)  As  provided  for in the rules of The London  Stock  Exchange,  in the
          event  of any  increase  in the  number  of  Shares  issued  by way of
          capitalisation  or rights  issue or open offer,  or any  sub-division,
          consolidation or reduction of any other variation of share capital the
          Board will make the appropriate adjustment to:-

          (i)  the restrictions imposed by Rules 4 and 5 above; and/or

          (ii) the number of Shares which are subject to any Option; and/or

          (iii)the  exercise  price  payable  for each Share  under any  Option;

               provided that the exercise  price for any Share shall not be less
               than the  nominal  value of such  Share and no  adjustment  shall
               cause an Option to be  capable of being  exercised  later than as
               mentioned in Rule 11 above.

     (b)  As required by the rules of The London Stock  Exchange,  except in the
          case of a  capitalisation  issue  no  such  adjustment  shall  be made
          without the prior written  confirmation of the auditors of the Company
          for the time being that it is in their opinion fair and reasonable.

     (c)  Written notice of any adjustment  shall be given to any person granted
          an Option who is affected thereby.

14.  Winding-up of the Company and change of control

     (a)  Notwithstanding Rule 11 above, it shall be a term and condition of any
          Option that in the event of notice  being given to  shareholders  of a
          resolution  for the  winding-up  of the  Company,  the Option shall be
          capable of exercise within the period of six months  commencing on the
          date of such  notice  and the  Option  shall  lapse at the end of such
          period or on the winding up of the Company, if earlier.

<PAGE> 112

     (b)  If the  Company is  succeeded  by a successor  corporation,  or if any
          person  ("the  Offeror")  obtains  Control  of the  Company,  then the
          successor corporation or Offeror may assume, convert or replace any or
          all  outstanding  Options,  which action will be binding on all option
          holders. In the alternative,  the successor corporation or Offeror may
          substitute   equivalent  options  or  provide   substantially  similar
          consideration to option holders as was provided to shareholders (after
          taking into account the existing  provisions of the Options).  If such
          successor  corporation  or  Offeror  refuses  to assume or  substitute
          Options,  such Options shall accelerate and become exercisable in full
          on  such  conditions  as the  Board  shall  determine  prior  to  such
          succession  or change of  control.  Any  Options  not so  replaced  or
          exercised shall lapse and cease to be exercisable.

15.  Alteration of the Plan

     (a)  Subject to Rule 15(b) below, the Board may at any time alter or add to
          all or any of the provisions of the Plan in any respect;

     (b)  Subject to Rule 15(c) below,  no alterations or addition shall be made
          to  any   provision  of  the  Plan  without  the  prior   approval  of
          shareholders  of the Company in general  meeting except for: (i) minor
          amendments  to  benefit  the  administration  of  the  Plan;  or  (ii)
          alterations  or additions  that are necessary or desirable in order to
          comply  with the laws and  regulations  for the time being in force in
          the United  Kingdom  or the  United  States of America or to obtain or
          maintain  approval of the Plan from any government or other regulatory
          or advisory body whether in the United  Kingdom,  the United States of
          America or elsewhere,  provided  that any such  alteration or addition
          shall  not  affect  the  basic   principles  of  the  Plan;  or  (iii)
          alterations or additions to ensure and maintain treatment as Incentive
          Stock  Options of those  Options  granted  and to be granted  that are
          intended to be treated as such.

     (c)  No alterations or additions shall be made to an outstanding  Option to
          the  disadvantage  of the holder  thereof  without  the prior  written
          consent of such holder.

<PAGE> 113

16.  Administration and Interpretation of the Plan

The Plan  shall be  administered  by the Board or, to the  extent  necessary  to
comply with the laws and regulations of the United Kingdom and the United States
of America, by the Executive Remuneration Committee of the Board. Subject to the
general purposes, terms and conditions of the Plan, the Board or, if applicable,
the  Executive  Remuneration  Committee  of the Board,  shall have full power to
implement and carry out the Plan.  Any  determination  made by the Board,  or if
applicable,  the Executive Remuneration Committee of the Board, shall be made in
its  sole  discretion  on  the  Date  of  Grant  of the  Option  or,  unless  in
contravention of any express term of the Plan or Option,  at any later time, and
such determination shall be final and binding on the members of the Group and on
all persons having an interest in any Option under the Plan.

17.  Duration of the Plan

The  authority to grant  Options  under the Plan will expire on August 18, 2008,
the last day of the ten year period  commencing on the date this Plan is adopted
by the Board.



<PAGE> 114

EXHIBIT 2.07

                                    RULES OF
                                    --------

                    THE MERANT INLAND REVENUE (1998) APPROVED
                    -----------------------------------------

                               SHARE OPTION SCHEME
                               -------------------

These rules set out the terms and  conditions  governing the grant of options to
acquire shares in Merant PLC which, if exercised in accordance with this Scheme,
as it is  approved by the Board of Inland  Revenue,  and within  statutory  time
limits,  will qualify for favourable tax treatment  under section 185 Income and
Corporation Taxes Act 1988.

Definitions

In this Scheme:

(a)    "Auditors"                       means the auditors for the time being of
                                        the Company;

(b)    "Board"                          means the board of directors of the
                                        Company;

(c)    "the Company"                    means Merant PLC (incorporated in
                                        England with number 1709998);

(d)    "Close Company"                  has the same meaning as in Chapter I of
                                        Part XI of the Income and Corporation
                                        Taxes Act 1988 SAVE THAT in determining
                                        whether a company is a Close Company for
                                        the purposes of the Scheme, sections
                                        414(a) and 415  of that Act shall be
                                        disregarded;

(e)    "Control"                        has the same meaning as in section 840
                                        of the Income and Corporation Taxes Act
                                        1988;

(f)    "Date of Grant"                  means, in respect of any Option, the
                                        date upon which that Option is granted;
<PAGE> 115

(g)    "Eligible Person"                means a director or employee of any
                                        Participating Company in the Group who
                                        devotes substantially the whole of his
                                        time to the business of the Group;

(h)    "full-time"                      means required to work in the case of
                                        directors for not less than 25 hours per
                                        week and in the case of an employee
                                        other than a director not less than 20
                                        hours per week (excluding meal breaks);

(i)    "the Group"                      means the Company and every other
                                        company of which the Company has direct
                                        or indirect Control;

(j)    "market value"                   has the same meaning as in Part VIII of
                                        the Taxation of Chargeable Gains Act
                                        1992;

(k)    "material interest"              has the same meaning as in Chapter IV,
                                        Part V Income and Corporation Taxes Act
                                        1988 SAVE THAT in determining for the
                                        purposes of this Scheme whether a person
                                        has or has had a material interest in a
                                        company, section 187(3) and paragraph ii
                                        of the proviso to section 417(3) of that
                                        Act shall have effect with the
                                        substitution for the reference in those
                                        provisions to 5 per cent of references
                                        to 10 per cent;

(l)    "Nominees"                       means Micro Focus Nominees Limited
                                        (incorporated in England with number
                                        1790073);

(m)    "Option"                         means a right to acquire Shares which is
                                        granted in accordance with this Scheme;

(n)    "Option Holder"                  means a person who has subsisting rights
                                        under an Option (including, upon the
                                        death of such person, his personal
                                        representatives);
<PAGE> 116


(o)    "Participating Company"          means the Company and any Subsidiary for
                                        the time being designated by the Board
                                        as a Participating Company for the
                                        purposes of this Scheme;

(p)    "the Plan"                       means the 1998 Merant Share Option Plan
                                        under which the Board is authorised by
                                        shareholders of the Company to grant
                                        rights to subscribe for shares (as
                                        modified, extended or renewed from time
                                        to time);

(q)    "this Scheme"                    means the Merant Inland Revenue Approved
                                        (1998) Share Option Scheme as amended
                                        from time to time in accordance with
                                        Rule 12 below which was formerly known
                                        as the Micro Focus Group Inland Revenue
                                        Approved (1998) Share Option Scheme;

(r)    "Shares"                         means full paid ordinary shares in the
                                        capital of the Company which satisfy the
                                        requirements of paragraphs 10-14 of
                                        Schedule 9 of the Income and Corporation
                                        Taxes Act 1988;

(s)  "Subsidiary"                       means a company which is under the
                                        Control of the Company and which is a
                                        subsidiary of the Company within the
                                        meaning of section 736 of the Companies
                                        Act 1985;

(t)  "Subsisting Option"                means an Option which has neither lapsed
                                        nor been exercised in respect of all the
                                        shares subject thereto;

(u)  "Taxes Act"                        means the Income and Corporation taxes
                                        Act 1988;

(v)  "Trustees"                         means Micro Focus Trustees Limited
                                        (incorporated in Jersey with number
                                        58902).

<PAGE> 117


(w)  Words and expressions not otherwise defined have the same meaning as in
     section 187 of Schedule 9 of the Income and Corporation taxes Act 1988.

(x)  Words denoting the masculine gender shall include the feminine.


1.   Grant of Options

     Options may be granted from time to time in accordance with the provisions
     of this Scheme by:

     (a)  the Company; or

     (b)  Nominees; or

     (c)  Trustees; or

     (d)  any other company which is a member of the Group.

2.   Eligibility

     (a)  Options  shall  only  be  granted  to  Eligible  Persons  who are
          full-time  directors or full-time  employees of any Participating
          Company within the Group.

     (b)  No Option  shall be granted to nor be capable of  exercise by any
          such person at any time when he has, or has within the  preceding
          12  months,  had a material  interest  in a Close  Company  being
          either the Company or a company  which has control of the Company
          or is a member of a consortium which owns such a company.

<PAGE> 118

     (c)  Subject to Rules 2(a) and (b)  above,  Options  may be granted to
          such persons as the board of  directors  of the company  granting
          the Options in its absolute discretion may determine.

3.   Non-transferability of Options

     Options  shall be personal to the person to whom they are granted and shall
     lapse  forthwith if they are  purportedly  transferred  (otherwise  than to
     personal  representatives  upon  death)  assigned,  mortgaged,  charged  or
     otherwise  alienated or if that person is  adjudicated  bankrupt or does or
     suffers any other act or thing whereby he or she would or might be deprived
     of the legal or beneficial ownership of the Options.

4.   Restriction on the Grant of Options

     No Option shall be granted to an Eligible  Person at any time if that would
     cause the  aggregate  market  value of the Shares which he may acquire upon
     the exercise of Options  granted under this Scheme or under any other share
     option scheme approved under Schedule 9 of the Taxes Act and established by
     any  associated  company of the Company  (and not  exercised)  to exceed or
     further exceed GBP30,000.

5.   Payment for the Grant of Options

     The  amount,  if any,  payable in  consideration  of the grant of an Option
     shall be as the board of directors  of the company  granting the Option may
     desire but in any event shall not be more than GBP1.00,  which shall not be
     returnable.

6.   Exercise Price

     Subject to Rule 10 below,  the price  payable  for any Share to be acquired
     upon the exercise of any Option shall not be less than:

<PAGE> 119

     (a)  the average of the middle market quotations of a Share as derived from
          the Daily Official List of The London Stock Exchange on the 3 business
          days immediately preceding the Date of Grant; and

     (b)  the nominal value of a Share.

7.   Performance Targets

     (a)  The  exercise of any Option may by its terms be  conditional  upon the
          attainment of one or more objective  performance targets ("Performance
          Targets").  The terms of each  Performance  Target shall themselves be
          determined by the Executive Remuneration Committee of the Board in its
          discretion  having  first  obtained  the prior  approval of the Inland
          Revenue to such terms and shall be specified to the relevant  Eligible
          Person at the same time as the Date of Grant to such Eligible Person.

     (b)  Where  an  issue  or  reorganisation  by  the  Company  or  any of its
          Subsidiaries  (including,  without limitation,  any issue of shares or
          securities   or  any   reduction   of  capital  or   sub-division   or
          consolidation of shares) or any other event or circumstance (including
          a change in accounting  policies or practice or a change in the length
          of the Company's accounting period) causes the Executive  Remuneration
          Committee  reasonably to consider that a different  Performance Target
          would be a more appropriate measure of performance,that  the different
          Performance  Target  will be a  fairer  measure  of  such  performance
          andthat any amended  Performance  Target will provide a more effective
          incentive  to the Option  Holders  and shall be no more  difficult  to
          satisfy  than  were  the  original  conditions  when  first  set,  the
          Executive  Remuneration  Committee,  after due  consultation  with the
          Auditors  and with the prior  approval  of the  Inland  Revenue to the
          terms  of  such  new  Performance  Target,  may  determine  that a new
          Performance  Target shall be substituted for the existing  Performance
          Target applicable to such Option or Options.

<PAGE> 120

     (c)  Where the Executive  Remuneration Committee have imposed a Performance
          Target  under Rule 7(a) upon the grant of an Option,  that  Option may
          not be  exercised  except  in  accordance  with any  such  Performance
          Target, as from time to time varied in accordance with Rule 7(b).

8.   Exercise of Options

     No Option shall be capable of being  exercised more than 10 years after the
     Date of Grant.

     (a)  Exercise  of an  Option  shall  always  be  subject  to the  following
          additional provisions:

          (i)  if the Option  Holder's  employment is terminated  for any reason
               except the option  holder's  death or  disability  (whether  such
               disability  is  temporary  or  permanent,  partial  or total,  as
               determined  by the Board),  then the Option  Holder may  exercise
               such Options only to the extent that such Options would have been
               exercisable  upon the effective date of such termination no later
               than three months after the  effective  date of such  termination
               (or such  shorter  or longer  period as may be  specified  in the
               Options),  but in any event, no later than the expiration date of
               the Options; and

          (ii) if the  Option  Holder's  employment  is  terminated  because  of
               disability,  then the Option  Holder's  Options may be  exercised
               only to the extent that such Options would have been  exercisable
               by the Option  Holder on the effective  date of such  termination
               and  must be  exercised  by the  Option  Holder  (or  the  Option
               Holder's legal  representative  or authorised  assignee) no later
               than 12 months after the effective date of such  termination  (or
               such  shorter  or  longer  period  as  may  be  specified  in the
               Options),  but in any event, no later than the expiration date of
               the Options; and

<PAGE> 121

          (iii)if the Option Holder's  employment is terminated because of death
               (or if the  Option  Holder  dies  within  three  months  of  such
               termination) then the Option Holder's options may be exercised by
               the personal representatives within 12 months after the effective
               date of such  termination  (or such shorter period or such longer
               period  not  exceeding  12  months  as  may be  specified  in the
               Options),  but in any event, no later than the expiration date of
               the Options.

     (b)  Options shall become  exercisable at such times and in such increments
          as shall be determined by the Board at the relevant Date of Grant.

9.   Stock Exchange Listing

     All Shares to be allotted  upon the  exercise of any Option shall be issued
     within 30 days of the date of  exercise  and shall  rank pari  passu in all
     respects  with the Shares then in issue and the Company  shall apply to the
     Council of The London Stock  Exchange for Shares  allotted  pursuant to any
     Option to be admitted to the Official  List. The Company shall at all times
     keep available  sufficient  authorised  and unissued  Shares to satisfy the
     exercise of all Subsisting  Options where those Options are to be satisfied
     by the issue of Shares and not the  transfer  of  existing  Shares,  taking
     account of any other obligations upon the Company to issue Shares.

10.  Variation in Share Capital

     (a)  In the event of any increase in the number of Shares  issued by way of
          capitalisation  or rights issue, or open offer,  or any  sub-division,
          consolidation, or reduction of share capital or any other variation of
          capital otherwise than for  consideration,  the Board will, subject to
          the  prior  approval  of the  Inland  Revenue,  make  the  appropriate
          adjustment to:

          (i)  the number of Shares which are subject to any Option; and/or

          (ii) the price payable for each Share under any Option;

<PAGE> 121

               provided  that the  exercise  price for a Share shall not be less
               than the  nominal  value of such  Share and no  adjustment  shall
               cause an Option to be  capable of being  exercised  later than as
               mentioned in Rule 8 above.

     (b)  Except in the case of  capitalisation  issue, no such adjustment shall
          be made without the prior written confirmation of the Auditors that it
          is in their opinion fair and reasonable.

     (c)  Written notice of any adjustment  shall be given to any person granted
          an Option who is affected thereby.

11.  Winding-up of the Company and Change of Control

     (a)  If any person (which shall include  persons acting in concert with him
          within the meaning of the City Code on Take-overs and Mergers) obtains
          Control of the Company as a result of making:

          (i)  a general  offer to acquire the whole of the issued share capital
               of the Company  (or the whole  other than any such share  capital
               already  held at the date of the offer  by, or by a nominee  for,
               the offeror or any subsidiary thereof); or

          (ii) a general  offer to  acquire  all shares in the  Company  (or all
               other than any Shares  already  held at the date of the offer by,
               or by a nominee for, the offeror or any subsidiary thereof)

          an Option  Holder  shall be entitled to exercise any Options then held
          by him within six months of the time when the person  making the offer
          has obtained such control of the Company and any condition  subject to
          which the offer is made has been  satisfied  provided that any Options
          not so  exercised  before  the  expiry  of  such  period  cease  to be
          exercisable or available for future exercise and provided further that
          no Option shall be capable of exercise hereunder later than the end of
          the exercise period relating thereto.

<PAGE> 122

     (b)  If the Court sanctions, under Section 425 of the Companies Act 1985, a
          compromise  or  arrangement   proposed  for  the  purposes  of  or  in
          connection with a scheme for the reconstruction of the Company, or its
          amalgamation with any company or companies,  an Option Holder shall be
          entitled to exercise  any Option then held by him within six months of
          the Court so sanctioning  the compromise or arrangement  provided that
          any Options not so  exercised  before the expiry of such period  shall
          upon the expiry of such period  cease to be  exercisable  or available
          for future  exercise  and  provided  further  that no Option  shall be
          capable  of  exercise  hereunder  later  than the end of the  exercise
          period relating thereto.

     (c)  If any  person  becomes  bound or  entitled  to acquire  Shares  under
          Section 428 to 430F of the  Companies Act 1985, an Option Holder shall
          be entitled to exercise  any Option then held by him during any period
          when that person  remains so bound or entitled  provided that any such
          Options not so  exercised  before the expiry of such period shall upon
          expiry of such period cease to be  exercisable or available for future
          exercise  and  provided  that no Option  shall be capable of  exercise
          hereunder later than the end of the exercise period relating thereto.

     (d)  If notice is duly given of a resolution for a voluntary  winding-up of
          the Company, an Option Holder may forthwith and until the commencement
          of the  winding-up  (or if  earlier  the day  before the expiry of the
          period within which the Option is otherwise  exercisable)  exercise an
          Option but such  exercise  (save where the Option  Holder is otherwise
          entitled  under any other  provision  of this Scheme to  exercise  any
          Subsisting  Option of his) shall be  conditional  upon the  resolution
          being duly passed.

     (e)  If as a result of any of the sets of circumstances  specified in Rules
          11(a) or 11(b) a company has obtained Control of the Company,  or if a
          company has become bound or entitled as  mentioned in Rule 11(c),  the
          Company shall seek the agreement of that other company ("the Acquiring
          Company") and if such

<PAGE> 123

          agreement is obtained the Option  Holder may,  within the  appropriate
          period as defined in  sub-paragraph  15(2) of  Schedule 9 to the Taxes
          Act release each Subsisting Option ("the Old Option") in consideration
          for a new  option  ("the  New  Option")  which  (for the  purposes  of
          paragraph 15 of Schedule 9 to the Taxes Act) is  equivalent to the Old
          Option  but  relates to shares in a  different  company  (whether  the
          Acquiring   Company  itself  or  some  other  company  falling  within
          paragraph 10(b) or (c) of Schedule 9).

     (f)  The New Option shall not be regarded for the purposes of Rule 11(e) as
          equivalent  to  the  Old  Option  unless  the  conditions  set  out in
          paragraph  15(3) of Schedule 9 to the Taxes Act are  satisfied  but so
          that the provisions of this Scheme shall for this purpose be construed
          as if :

               (i)  the New Option was an option  granted  under this  Scheme at
                    the same time as the Old Option;

               (ii) except for the purposes of the definitions of "Participating
                    Company" and "Subsidiary",  the reference to "Merant PLC" in
                    the  definition  of the  "Company"  were a reference  to the
                    different company referred to in Rule 11(e);

               (iii) Rule 12 was omitted.

     (g)  Nothing in this Rule 11 shall permit any Option to be exercised  later
          than any time otherwise specified in this Scheme.

12.  Alteration of the Scheme

     (a)  Subject to Rule 12(b)  below the Board may at any time alter or add to
          all or any of the terms of this Scheme in any respect.

     (b)  After the Board of Inland Revenue has approved this Scheme pursuant to
          Schedule 9 of the Taxes Act, no alteration  or addition  shall be made
          to any  provision  of this Scheme  without  the prior  approval of the
          Company in general meeting

<PAGE> 125

          save for minor amendments to benefit the administration of the Scheme,
          to take  account of a change in  legislation  or to obtain or maintain
          favourable  tax,   exchange   control  or  regulatory   treatment  for
          participants in the Scheme or any member of the Group and save further
          to the  extent  that  any  alteration  or  addition  is  necessary  or
          desirable  in order to comply  with the laws and  regulations  for the
          time being in force in England,  or to obtain or maintain  approval of
          this Scheme from the Board of Inland Revenue.

     (c)  No such alteration or addition shall have effect until approved by the
          Board of Inland Revenue.

<PAGE> 126

EXHIBIT 2.08

                                   MERANT plc
                       1999 EMPLOYEE SHARE PURCHASE PLAN
                           Adopted September 16, 1999

1.   ESTABLISHMENT OF PLAN

Merant plc (the  "Company")  proposes to grant  options to acquire the Company's
ordinary  shares  of 2p  each  to  eligible  employees  of the  Company  and its
Subsidiaries (as hereinafter  defined) pursuant to this Merant plc 1999 Employee
Share  Purchase  Plan  (this  "Plan").   For  purposes  of  this  Plan,  "Parent
Corporation" and "Subsidiary" (collectively, "Subsidiaries") shall have the same
meanings as "parent corporation" and "subsidiary corporation" in Sections 424(e)
and 424(f),  respectively,  of the US Internal  Revenue Code of 1986, as amended
(the  "Code").  The Company  intends the Plan to qualify as an  "employee  stock
purchase  plan" under Section 423 of the Code  (including  any  amendments to or
replacements of such section), and the Plan shall be so construed.  Any term not
expressly  defined in the Plan but  defined  for  purposes of Section 423 of the
Code shall have the same definition herein. Shares made available under the Plan
shall  not be  made by way of  subscription.  Upon  the  Plan's  adoption  up to
1,000,000 of the Company's  ordinary shares may be issued to employees under the
Plan.  The  number of  shares  issuable  to  employees  under the Plan  shall be
increased  annually,  beginning January 1, 2001, by an amount equal to 1% of the
outstanding  ordinary  shares of the Company on the last day of the  immediately
preceding calendar year; provided,  however, that the aggregate number of shares
that may be issued  under  this Plan shall not exceed  20,000,000  shares.  Such
numbers shall be subject to adjustments  effected in accordance  with Section 14
of the Plan.

2.   PURPOSES

The  purpose  of  the  Plan  is to  provide  employees  of  the  Company  and of
Subsidiaries  designated  from  time to time by the  Board of  Directors  of the
Company (the "Board") as eligible to  participate  in the Plan with a convenient
means of acquiring an equity interest in the Company through payroll deductions,
to enhance such employees'  sense of participation in the affairs of the Company
and Subsidiaries, and to provide an incentive for continued employment.

3.   ADMINISTRATION

This Plan may be administered by the Board or a committee appointed by the Board
(the  "Committee").  As used in this Plan,  references to the "Committee"  shall
mean either such  committee or the Board if no committee  has been  established.
Subject to the provisions of the Plan and the  limitations of Section 423 of the
Code or any successor  provision in the Code, all questions of interpretation or
application  of the Plan shall be  determined by the Committee and its decisions
shall be final and binding upon all participants. Members of the Committee shall
receive no compensation for their services in connection with the administration
of the Plan,  other than standard fees as  established  from time to time by the
Board for services  rendered by Board members serving on Board  committees.  All
expenses  incurred in connection  with the  administration  of the Plan shall be
paid by the Company.

<PAGE> 127

4.   ELIGIBILITY

Any employee of the Company or the Subsidiaries is eligible to participate in an
Offering Period (as hereinafter defined) under the Plan except the following:

     (a)  employees who are not employed by the Company or  Subsidiaries  on the
          first (1st) day of the month  before the  beginning  of such  Offering
          Period;

     (b)  employees  who are  customarily  employed  for less  than 30 hours per
          week;

     (c)  employees  who are  customarily  employed  for less than 5 months in a
          calendar year;

     (d)  employees  who,  together  with any other person whose shares would be
          attributed  to such employee  pursuant to Section  424(d) of the Code,
          own shares or hold  options to acquire  ordinary  shares or who,  as a
          result of being  granted an option under the Plan with respect to such
          Offering  Period,  would own shares or hold options to acquire  shares
          possessing  5 percent or more of the total  combined  voting  power or
          value of all  classes of stock or shares of the  Company or any of its
          Subsidiaries.

5.   OFFERING PERIODS

The Offering Periods of the Plan (the "Offering  Period") shall be of six months
duration commencing on the dates determined by the Committee. Payroll deductions
of each participant are accumulated  under the Plan during the Offering Periods.
The first  business day of each Offering  Period is referred to as the "Offering
Date".  The last  business  day of each  Offering  Period is  referred to as the
"Purchase  Date".  The Board  shall  have the power to change  the  duration  of
Offering Periods with respect to future offerings without  shareholder  approval
if such  change  is  announced  prior to the  scheduled  beginning  of the first
Offering Period to be affected.

6.   PARTICIPATION IN THE PLAN

Eligible employees may become  participants in an Offering Period under the Plan
on the first Offering Date after  satisfying  the  eligibility  requirements  by
delivering  an  enrollment  form to the  Company's  or  Subsidiary's  (whichever
employs such employee) payroll  department (the "Payroll  Department") not later
than ten (10) days prior to such  Offering  Date  unless a later time for filing
the enrollment form authorizing  payroll  deductions is set by the Board for all
eligible employees with respect to a given Offering Period. An eligible employee
who does not deliver an enrollment  form to the Payroll  Department by such date
after  becoming  eligible  to  participate  in such  Offering  Period  shall not
participate  in that Offering  Period or any subsequent  Offering  Period unless
such employee  enrolls in the Plan by filing an enrollment form with the Payroll
Department not later than ten (10) days prior to such subsequent  Offering Date.
Once an employee becomes a participant in an Offering Period, such employee will
automatically   participate  in  the  Offering  Period  commencing   immediately
following  the  last  day of the  prior  Offering  Period  unless  the  employee

<PAGE> 128

withdraws  from the Plan or  terminates  further  participation  in the Offering
Period as set forth in Section 11 below.  Such  participant  is not  required to
file any additional forms to continue participation in the Plan.

7.   GRANT OF OPTION ON ENROLLMENT

Enrollment  by an  eligible  employee  in the Plan with  respect to an  Offering
Period will  constitute  the grant (as of the  Offering  Date) by the Company to
such  employee of an option to acquire on the Purchase Date up to that number of
ordinary shares of the Company  determined by dividing the amount accumulated in
such employee's  payroll deduction  account during such Offering Period,  and if
applicable, as converted into Pounds Sterling at the Conversion Rate (as defined
in Section 9(g)) on the Purchase Date, by the lower of (i)  eighty-five  percent
(85%) of the  fair  market  value of an  ordinary  share of the  Company  on the
Offering Date or (ii)  eighty-five  percent (85%) of the fair market value of an
ordinary share of the Company on the Purchase Date; provided,  however, that the
number of ordinary shares of the Company subject to any option granted  pursuant
to this Plan  shall  not  exceed  the  lesser  of the  maximum  number of shares
permitted  under  Sections  10(b) or 10(c) below with respect to the  applicable
Offering Period.  Fair market value of an ordinary share of the Company shall be
determined as provided in Section 8 hereof.

8.   PURCHASE PRICE

The purchase price of shares acquired  pursuant to this Plan shall be payable in
Pounds Sterling. The purchase price per share at which a share will be issued in
any Offering Period shall be 85 percent of the lesser of:

     (a)  The fair market value on the Offering Date; or

     (b)  The fair market value on the Purchase Date.

Notwithstanding  the foregoing,  the purchase price per ordinary share shall not
in any circumstances be less than the par value of an ordinary share.

For  purposes of the Plan,  the term "fair  market  value" on a given date shall
mean the fair market value of an ordinary share of the Company determined as the
closing  price of a share on the day prior to the Offering  Date or the Purchase
Date as quoted in Pounds  Sterling  on the  Official  List of The  London  Stock
Exchange Ltd. or if no such reported sale takes place on such date,  the closing
price as quoted in Pounds Sterling on the next preceding trading date on which a
reported sale occurred.

<PAGE> 129

9.   PAYMENT OF PURCHASE PRICE; CHANGES IN PAYROLL DEDUCTIONS; ISSUE OF SHARES

     (a)  The purchase  price of the shares is  accumulated  by regular  payroll
          deductions made during each Offering  Period.  The deductions are made
          as a percentage of the participant's compensation (at the start of the
          Offering Period) in one percent increments not less than 2 percent nor
          greater  than 10  percent,  not to exceed the limits from time to time
          imposed by the Code.  Compensation for U.S.  employees shall mean base
          salary  and  commissions;  provided,  however,  that for  purposes  of
          determining  a  participant's  compensation,   any  election  by  such
          participant  to reduce  his or her  regular  cash  remuneration  under
          Sections  125 or  401(k)  of  the  Code  shall  be  treated  as if the
          participant  did not make such  election.  Compensation  for  non-U.S.
          employees  shall mean  annual  base  salary and  commissions.  Payroll
          deductions  shall commence on the first payday  following the Offering
          Date and  shall  continue  to the end of the  Offering  Period  unless
          sooner altered or terminated as provided in the Plan.

     (b)  A  participant  may  lower  (but not  increase)  the  rate of  payroll
          deductions  during  an  Offering  Period by  filing  with the  Payroll
          Department a new authorization for payroll  deductions,  in which case
          the new  rate  shall  become  effective  for the next  payroll  period
          commencing more than 15 days after the Payroll Department's receipt of
          the authorization and shall continue for the remainder of the Offering
          Period unless changed as described  below.  Such change in the rate of
          payroll  deductions may be made at any time during an Offering Period,
          but not more than one change may be made effective during any Offering
          Period.  A  participant  may  increase or decrease the rate of payroll
          deductions  for any  subsequent  Offering  Period by  filing  with the
          Payroll  Department a new  authorization  for payroll  deductions  not
          later than ten (10) days  prior to the  beginning  of such  subsequent
          Offering Period.

     (c)  All payroll  deductions  made for a participant are credited to his or
          her account under the Plan and are deposited with the general funds of
          the  Company.  No  interest  accrues on the  payroll  deductions.  All
          payroll deductions  received or held by the Company may be used by the
          Company  for any  corporate  purpose,  and the  Company  shall  not be
          obligated to segregate such payroll deductions.

     (d)  On each  Purchase  Date,  so long as the Plan  remains  in effect  and
          provided that the participant has not submitted a signed and completed
          withdrawal  form before  that date,  as set forth in Section 11 below,
          which  notifies  the Company that the  participant  wishes to withdraw
          from  that  Offering  Period  under  the Plan  and  have  all  payroll
          deductions  accumulated  in the  account  maintained  on behalf of the
          participant as of that date returned to the  participant,  the Company
          shall  apply  the  funds  then  in  the   participant's   account  (if
          applicable,  as converted to Pounds Sterling at the Conversion Rate on
          the Purchase  Date) for the  acquisition of a whole number of ordinary
          shares  reserved  under the option  granted to such  participant  with

<PAGE> 130

          respect  to the  Offering  Period to the  extent  that such  option is
          exercisable  on the Purchase  Date. The purchase price per share shall
          be as  specified  in Section 8 of the Plan.  Any cash  remaining  in a
          participant's  account after such purchase of ordinary shares shall be
          refunded to such  participant  in cash,  without  interest;  provided,
          however,  that any amount remaining in such participant's account on a
          Purchase  Date which is less than the amount  necessary  to purchase a
          single ordinary share shall be carried forward, without interest, into
          the  next  Offering  Period.  In the  event  that  the  Plan  has been
          oversubscribed,  all funds not used to purchase ordinary shares on the
          Purchase Date shall be returned to the participant,  without interest.
          No ordinary  shares shall be purchased on a Purchase Date on behalf of
          any employee whose  participation  in the Plan has terminated prior to
          such Purchase Date.

     (e)  As promptly as practicable  after the Purchase Date, the Company shall
          arrange the delivery to each participant of a certificate representing
          the shares issued upon exercise of his option,  subject to the payment
          of any stamp duty in respect of such acquisition.

     (f)  During a participant's  lifetime, such participant's option to acquire
          shares  hereunder is exercisable  only by him or her. The  participant
          will have no interest or voting right in shares  covered by his or her
          option until such option has been exercised.  Shares to be transferred
          and  delivered to a  participant  under the Plan will be registered in
          the name of the  participant or in the name of the participant and his
          or her spouse.

     (g)  "Conversion  Rate" means the U.S. Federal Reserve Noon Buying Rate for
          purposes of converting  listed  currencies  other than Pounds Sterling
          into Pounds Sterling.

10.  LIMITATIONS ON SHARES TO BE PURCHASED

     (a)  In accordance  with the  requirements  set forth in Section 423 of the
          Code, for each calendar year in which the employee participates in the
          Plan no employee shall be entitled to acquire shares under the Plan at
          a rate which, when aggregated with his or her rights to acquire shares
          under all other  employee  stock  purchase plans of the Company or any
          Subsidiary,  exceeds  twenty  five  thousand  U.S.  Dollars  worth  of
          ordinary shares  calculated with reference to the fair market value of
          such shares  determined as of the Offering Date or such other limit as
          may be imposed by the Code. So as to avoid any confusion  with respect
          to such limitation, as the Plan provides for the purchase of shares in
          an amount no greater  than 85% of the fair market value of an ordinary
          share on the Offering  Date, an employee may not elect to have payroll
          deductions  applied to the purchase of shares under the Plan in excess
          of twenty one  thousand  two hundred  fifty U.S.  Dollars per calendar
          year and such  amount  shall be  reduced  in the  event  that the fair

<PAGE> 131

          market value of an ordinary  share on the  Purchase  Date is less than
          the fair market value of an ordinary share on the Offering Date.

     (b)  No employee shall be entitled to acquire,  on any Purchase Date,  more
          than twice the number of shares he or she would have been  eligible to
          purchase if the fair market value of a share on the Purchase  Date was
          the same as the fair market value of a share on the Offering Date.

     (c)  No employee  shall be entitled to acquire more than the Maximum  Share
          Amount (as defined  below) on any single  Purchase Date. Not less than
          thirty days prior to the  commencement  of any  Offering  Period,  the
          Committee may, in its sole discretion,  set a maximum number of shares
          which may be acquired  by any  employee  at any single  Purchase  Date
          (hereinafter  the  "Maximum  Share  Amount").  In no event  shall  the
          Maximum Share Amount exceed the amounts  permitted under Section 10(b)
          above.  If a new Maximum  Share Amount is set,  then all  participants
          must  be  notified  of  such   Maximum   Share  Amount  prior  to  the
          commencement  of the next  Offering  Period.  Once the  Maximum  Share
          Amount  is set,  it  shall  continue  to  apply  with  respect  to all
          succeeding  Purchase Dates and Offering  Periods unless revised by the
          Committee as set forth above.

     (d)  If the  number of  shares to be  acquired  on a  Purchase  Date by all
          employees  participating in the Plan exceeds the number of shares then
          available  for issue under the Plan,  the Company will make a pro rata
          allocation of the remaining  shares in as uniform a manner as shall be
          practicable and as the Committee  shall determine to be equitable.  In
          such event, the Company shall give written notice of such reduction of
          the number of shares to be acquired  under a  participant's  option to
          each participant affected thereby.

     (e)  Any payroll  deductions  accumulated in a participant's  account which
          are not used to acquire ordinary shares due to the limitations in this
          Section 10 shall be returned to the participant as soon as practicable
          after the end of the Offering Period, without interest.

11.  WITHDRAWAL

     (a)  Each  participant  may withdraw from an Offering Period under the Plan
          by signing and delivering to the Payroll Department a notice on a form
          provided for such purpose.  Such withdrawal may be elected at any time
          at least 15 days prior to the end of an Offering Period.

<PAGE> 132

     (b)  Upon  withdrawal  from the Plan, the  accumulated  payroll  deductions
          shall be returned to the withdrawn participant,  without interest, and
          his or her  interest  in the  Plan  shall  terminate.  In the  event a
          participant  voluntarily  elects to withdraw  from the Plan, he or she
          may not resume his or her  participation  in the Plan  during the same
          Offering Period,  but he or she may participate in any Offering Period
          under the Plan which commences on a date subsequent to such withdrawal
          by  filing a new  authorization  for  payroll  deductions  in the same
          manner as set forth in Section 6 above for  initial  participation  in
          the Plan.

12.  TERMINATION OF EMPLOYMENT

Termination of a participant's  employment for any reason, including retirement,
death  or  the  failure  of  a  participant  to  remain  an  eligible  employee,
immediately  terminates his or her participation in the Plan. In such event, the
payroll deductions credited to the participant's account will be returned to him
or her or, in the case of his or her death, to his or her legal  representative,
without  interest.  For  purposes of this  Section  12, an employee  will not be
deemed to have  terminated  employment  or  failed  to remain in the  continuous
employ of the Company in the case of sick leave,  military  leave,  or any other
leave of absence approved by the Board; provided that such leave is for a period
of not more than ninety (90) days or  reemployment  upon the  expiration of such
leave is guaranteed by contract or statute.

13.  RETURN OF PAYROLL DEDUCTIONS

In the event a  participant's  interest in the Plan is terminated by withdrawal,
termination  of employment or otherwise,  or in the event the Plan is terminated
by the Board,  the Company shall promptly deliver to the participant all payroll
deductions  credited to his  account.  No interest  shall  accrue on the payroll
deductions of a participant in the Plan.

14.  CAPITAL CHANGES

Subject to any required action by the shareholders of the Company, the number of
ordinary  shares  covered by each  option  under the Plan which has not yet been
exercised and the number of ordinary shares which have been authorized for issue
under the Plan but have not yet been  placed  under  option  (collectively,  the
"Reserves"),  as well as the price per  ordinary  share  covered by each  option
under  the Plan  which  has not yet  been  exercised,  shall be  proportionately
adjusted  (subject  where shares are being  provided by the  Company's  Employee
Benefit Trust ("the Trust") to the consent of the Trustees of the Trust) for any
increase or decrease in the number of issued ordinary shares  resulting from any
consolidation or subdivision of ordinary shares of the Company,  or any bonus or
other  capitalization issue of ordinary shares or any other increase or decrease
in  the  number  of  issued  ordinary   shares   effected   without  receipt  of
consideration  by  the  Company;  provided,  however,  that  conversion  of  any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of  consideration."  Such adjustment shall be made by the Board,
(subject  where  shares are being  provided  by the Trust to the  consent of the
Trustees  of  the  Trust)  whose  determination  shall  be  final,  binding  and

<PAGE> 133

conclusive.  Except as  expressly  provided  herein,  no issue by the Company of
shares of any class, or securities  convertible into shares of any class,  shall
affect,  and no adjustment by reason  thereof shall be made with respect to, the
number or price of ordinary shares subject to an option.

In the event of the proposed  dissolution  or  liquidation  of the Company,  the
Offering  Period will terminate  immediately  prior to the  consummation of such
proposed action,  unless otherwise  provided by the Board. The Board may, in the
exercise of its sole  discretion  in such  instances,  declare  that the options
under the Plan  shall  terminate  as of a date  fixed by the Board and give each
participant  the right to purchase such number of whole  ordinary  shares of the
Company determined by dividing the amount accumulated in such employee's payroll
deduction  account by the fair market  value of a share on the date fixed by the
Board. In the event of a proposed sale of all or substantially all of the assets
of the  Company,  or the sale of the  entire  share  capital  of the  Company to
another  corporation,  (whether  for  consideration  in cash  or in the  form of
securities  of any kind) (a  "merger"),  each  option  under  the Plan  shall be
assumed  or  an  equivalent  option  shall  be  substituted  by  the  purchasing
corporation or a parent or subsidiary of such purchasing corporation, unless the
Board  determines,  in the exercise of its sole  discretion  and in lieu of such
assumption  or  substitution,  that the  participant  shall  have  the  right to
exercise  the option to  purchase  such number of whole  ordinary  shares of the
Company determined by dividing the amount accumulated in such employee's payroll
deduction  account by the fair market  value of a share on the date fixed by the
Board.  If the  Board  makes an  option  exercisable  in lieu of  assumption  or
substitution in the event of a merger or sale of assets,  the Board shall notify
the participant at least twenty (20) days prior to the date the shares are to be
purchased, and the Plan will terminate immediately following such purchase.

The Board may, if it so determines in the exercise of its sole discretion,  also
make  provision for  adjusting  the Reserves,  as well as the price per ordinary
share  comprised  in each  outstanding  option,  in the event  that the  Company
effects one or more  reorganisations,  recapitalizations,  rights  offerings  or
other increases or reductions of share capital, or in the event of a merger.

15.  NONASSIGNABILITY

Neither payroll  deductions  credited to a participant's  account nor any rights
with regard to the exercise of an option or to receive shares under the Plan may
be assigned,  transferred,  pledged or  otherwise  disposed of in any way (other
than by will, the laws of descent and  distribution or as provided in Section 22
hereof) by the participant. Any such attempt at assignment,  transfer, pledge or
other disposition shall be without effect.

<PAGE> 134

16.  REPORTS

Individual  accounts will be maintained for each  participant in the Plan.  Each
participant  shall  receive  promptly  after the end of each  Offering  Period a
report  of his  or her  account  setting  forth  the  total  payroll  deductions
accumulated (and if applicable, the Conversion Rate (as defined in Section 9(g))
at which such  participant's  payroll  deductions  were  converted  into  Pounds
Sterling),  the number of shares  acquired,  the per share price thereof and the
remaining cash balance, if any, carried forward to the next Offering Period.

17.  NOTICE OF DISPOSITION

Each participant shall notify the Company if the participant  disposes of any of
the  shares  acquired  in any  Offering  Period  pursuant  to this  Plan if such
disposition  occurs  within two years from the Offering  Date or within one year
from the Purchase Date on which such shares were acquired (the "Notice Period").
Unless such  participant  is disposing  of any of such shares  during the Notice
Period, such participant shall keep the certificates representing such shares in
his or her name (and not in the name of a nominee) during the Notice Period. The
Company may, at any time during the Notice Period,  place a legend or legends on
any certificate representing shares acquired pursuant to the Plan requesting the
Company's  transfer  agent to notify the Company of any  transfer of the shares.
The  obligation  of the  participant  to  provide  such  notice  shall  continue
notwithstanding the placement of any such legend on the certificates.

18.  NO RIGHTS TO CONTINUED EMPLOYMENT

     (a)  Neither this Plan nor the grant of any option  hereunder  shall confer
          any right on any  employee  to remain in the employ of the  Company or
          any Subsidiary, or restrict the right of the Company or any Subsidiary
          to terminate such employee's employment.

     (b)  In the event that any person  holding an option  under the Plan ceases
          to be employed by the Company or a Subsidiary for whatever reason,  he
          shall have no right to any  compensation in respect of the loss of his
          right to receive shares under this Plan.

19.  EQUAL RIGHTS AND PRIVILEGES

All eligible  employees  shall have equal rights and privileges  with respect to
the Plan so that the Plan qualifies as an "employee  stock purchase plan" within
the  meaning  of  Section  423 or any  successor  provision  of the Code and the
related  regulations.  Any  provision  of the Plan  which is  inconsistent  with
Section 423 or any successor provision of the Code shall, without further act or
amendment  by the  Company  or  the  Board,  be  reformed  to  comply  with  the
requirements  of Section  423.  This Section 19 shall take  precedence  over all
other provisions in the Plan.

20.  NOTICES

<PAGE> 135

All notices or other  communications by a participant to the Company under or in
connection  with the Plan shall be deemed to have been duly given when  received
in  the  form  specified  by the  Company  at the  location,  or by the  person,
designated by the Company for the receipt thereof.

21.  TERM; SHAREHOLDER APPROVAL

This Plan shall become effective on the date the Plan is adopted and approved by
the  shareholders  of the  Company  which  shall be in any manner  permitted  by
applicable  corporate law. No  acquisition of shares  pursuant to the Plan shall
occur prior to such  shareholder  approval.  The Plan shall  continue  until the
earlier  to occur of  termination  by the  Board,  issue of all of the  ordinary
shares reserved for issue under the Plan, or ten (10) years from the adoption of
the Plan by the Board.

22.  DESIGNATION OF BENEFICIARY

     (a)  A participant  may file a written  designation of a beneficiary who is
          to receive any shares and cash, if any, from the participant's account
          under the Plan in the event of such participant's  death subsequent to
          the end of an  Offering  Period but prior to  delivery  to him of such
          shares  and  cash.  In  addition,  a  participant  may file a  written
          designation  of a  beneficiary  who is to  receive  any cash  from the
          participant's   account   under   the  Plan  in  the   event  of  such
          participant's death prior to a Purchase Date.

     (b)  Such  designation of beneficiary  may be changed by the participant at
          any time by written notice. In the event of the death of a participant
          and in the absence of a beneficiary  validly designated under the Plan
          who is living at the time of such  participant's  death,  the  Company
          shall deliver such shares or cash to the executor or  administrator of
          the estate of the participant, or if no such executor or administrator
          has been appointed (to the knowledge of the Company),  the Company, in
          its  discretion,  may deliver  such shares or cash to the spouse or to
          any one or more dependents or relatives of the  participant,  or if no
          spouse,  dependent or relative is known to the  Company,  then to such
          other person as the Company may designate.

23.  CONDITIONS UPON ACQUISITION OF SHARES; LIMITATION ON SALE OF SHARES

     (a)  Shares  shall not be  acquired  by a  participant  with  respect to an
          option  unless  the  exercise  of such  option  and the  transfer  and
          delivery  of such  shares  pursuant  thereto  shall  comply  with  all
          applicable provisions of law, domestic or foreign, including,  without
          limitation,  the  Securities  Act of 1933, as amended,  the Securities
          Exchange  Act  of  1934,  as  amended,   the  rules  and   regulations
          promulgated  thereunder,  and the  requirements  of any stock exchange
          upon which the shares may then be listed, and shall be further subject

<PAGE> 136

          to the  approval  of  counsel  for the  Company  with  respect to such
          compliance.

     (b)  Where the Company or any of its  Subsidiaries  or the Trust is obliged
          to account for tax or  national  insurance  contributions  for which a
          participant  is liable,  by virtue of the  acquisition of shares under
          this Plan and none of the  Company or any of its  Subsidiaries  or the
          Trust:

          (i)  is able to  withhold  the  appropriate  amount of tax or national
               insurance from the participant's remuneration; or

          (ii) has received a payment from the  participant  of a  corresponding
               amount,

          then the Company or its  Subsidiary or the Trust,  as the case may be,
          shall be entitled to discharge  such  liability by selling such number
          of shares of those the  participant  is entitled to acquire to satisfy
          the minimum required amount of tax and  transferring  the balance,  if
          any, of those shares to the Participant.

24.  AMENDMENT OR EXTENSION OF THE PLAN

The Board may at any time amend or extend the term of the Plan, provided that no
amendment  shall be made without the prior approval of the  shareholders  of the
Company in general  meeting,  except for:  (a) minor  amendments  to benefit the
administration  of the Plan; (b) alternations or additions that are necessary or
desirable in order to comply with the laws and regulations in the United Kingdom
or the United  States of America or to obtain or  maintain  approval of the Plan
from any  government or other  regulatory or advisory body whether in the United
Kingdom,  the  United  States of America or  elsewhere,  provided  that any such
alteration or addition shall not affect the basic principles of the plan; or (c)
alterations  or  additions  to ensure and  maintain  treatment of the Plan as an
employee  stock  purchase plan under Code Section 423. No amendment may make any
change in an option previously granted which would adversely affect the right of
any  participant.  In accordance with Code Section 423, no amendment may be made
by the Board  without  approval of the  shareholders  of the  Company  within 12
months of the adoption of such amendment if such amendment would either increase
the number of shares that may be issued under the Plan or change the designation
of the employees (or class of employees) eligible for participation in the Plan.

25.  GOVERNING LAW

The Plan and all agreements,  documents and instruments entered into pursuant to
the Plan shall be governed by and construed in accordance with the internal laws
of the State of California, excluding that body of law pertaining to conflict of
laws.




<PAGE> 137

EXHIBIT 13.01


                  PORTIONS OF MERANT 1999 ANNUAL REPORT DETAIL

                                   MERANT PLC
                        REMUNERATION COMMITTEE'S REPORT
                                   UK FORMAT

                       FIFTEEN MONTHS ENDED APRIL 30 1999

     The MERANT Executive Remuneration Committee consists of Mr. Burns
(Chairman), Mr. Berty and Mr. Hughes.

     The Committee ensures that remuneration is appropriate to each executive
director's responsibilities, taking into consideration the overall financial and
business position of the Company, the highly competitive industry of which
MERANT is part, salary scales within the Company, and the importance of
recruiting and retaining management of the appropriate calibre.

EXECUTIVE DIRECTORS' REMUNERATION POLICY

     The chief components of remuneration are as follows:

          Basic salary:  Salary rates for executive directors are determined by
     reference to relevant market data for the countries in which the directors
     perform their duties, and are normally reviewed on an annual basis. In
     general, the Committee's philosophy is to have base salary rates lower than
     those of others in the market, with higher rates of pay for performance. In
     addition, the rates for executive directors take into account the salary
     levels of staff as a whole in each country.

          Performance-related pay:  Executive directors are eligible for annual
     performance-related bonuses, which are calculated based on fixed formulae
     measuring MERANT's performance against targets set at the beginning of each
     year. Such bonuses are earned on a pro-rata basis in proportion to the
     level of achievement relative to the performance targets set, subject to
     certain minimum thresholds.

          The philosophy is to offer greater than market opportunities in terms
     of bonus compensation, scaling upwards if the performance of MERANT exceeds
     the targets set out at the beginning of the period. In the current period
     such bonuses were based on targets measuring achievement against
     performance, measured in terms of audited earnings per share. On the basis
     of that achievement, executive directors could earn bonuses up to 150% of
     their basic salary entitlements.

          Pension contributions:  The Company does not operate a pension scheme
     for its directors, but has made contributions to an executive director's
     own personal pension in lieu of salary entitlement.

          Compensation for loss of office:  The level of compensation offered by
     the Company is determined by the need to provide executive directors with
     competitive packages in accordance with the criteria described elsewhere in
     this "Directors' Remuneration Policy" section, but would not exceed the
     equivalent of two years' pay (salary plus calculated portion of bonus, or
     performance-related pay).

          Share options:  Executive directors are eligible to participate in the
     MERANT share option plans, details of which are set out in note 24 to the
     financial statements on page 100. The grant of share options to directors
     is designed to ensure that an element of their remuneration is directly
     related to long-term growth in shareholder value.

          Long term incentives:  Executive directors are not eligible for any
     other long-term incentive payments.

          Service agreements:  Upon his appointment the Chief Executive Officer
     entered into a three-year service agreement with the Company, expiring on
     December 1, 2001. On early termination by the Company, he is entitled to
     one year's salary and bonus and a further one year salary and bonus for
     services to be rendered to the Company over 18 months and for a
     non-competition covenant. The agreement stipulates that in the event of a
     change in control, the agreement is automatically extended for a three-year
     term commencing on the date of change in control.

                                       12
<PAGE> 138

REMUNERATION FOR NON-EXECUTIVE DIRECTORS

     Remuneration for non-executive directors is determined by the Board based
upon the advice of an independent advisor who has provided details of
comparables. Directors are not involved in any discussions or decisions about
their own remuneration.

     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 the Company's Articles of
Association.

     Non-executive directors are eligible to participate in the MERANT share
option plans, details of which are set out in note 24 to the financial
statements on page 100.

     None of the non-executive directors have a service contracts with a notice
period in excess of one year, or with provision for predetermined compensation
on termination of an amount which equals or exceeds one year's salary and
benefits.

DIRECTORS' REMUNERATION

     The following table analyses the remuneration earned by each director in
the fifteen month period ended April 30, 1999 and for the year ended January 31,
1998:

<TABLE>
<CAPTION>
                                            PERFORMANCE-                           BENEFITS-   COMPENSATION
                                   SALARY   RELATED PAY               PENSION       IN-KIND      FOR LOSS     TOTAL   TOTAL
                                   -------  ------------   FEES    CONTRIBUTIONS    GBP'000      OF OFFICE     1999    1998
                                   GBP'000    GBP'000      GBP'000    GBP'000         (b)         GBP'000     GBP'000 GBP'000
                                   -------  ------------   ------- -------------   ---------   ------------   ------- -------
<S>                                <C>      <C>            <C>     <C>             <C>         <C>            <C>     <C>
Fifteen months ended April 30
  1999
  J Michael Gullard..............                            94                       24                       118       50
  Harold Hughes..................                            27                       12                        39       18
  J Sidney Webb (died March 24
    1999)........................                            23                                                 23        5
  Martin Waters..................   207         451           7                       12            788       1,465     489
  Michel Berty (appointed
    September 24 1998)...........                            10                       12                        22       --
  Kevin Burns (appointed
    September 24 1998)...........                            11                       12            121        144       --
  Gary Greenfield (appointed
    September 24 1998) (a).......   195         151                                               1,281       1,627      --
  Paul Adams (resigned September
    24 1998).....................   126         122                      5                                     253      210
  Ron Forbes (resigned May 14
    1998)........................    24          69                      1                                      94      164
  Marcelo Gumucio (resigned June
    21 1997).....................    --          --          --         --            --             --         --      629
                                    ---         ---         ---         --            --          -----       -----   -----
                                    552         793         172          6            72          2,190       3,785   1,565
                                    ===         ===         ===         ==            ==          =====       =====   =====
</TABLE>

- ---------------
(a) Compensation for loss of office and non-competition covenants for Mr. Burns
    and Mr. Greenfield related to payments made under existing INTERSOLV
    contracts assumed in the acquisition.
(b) Benefits in kind relate to the purchase of shares for the benefit of
    directors.

                                       13
<PAGE> 139

The following table summarises directors' remuneration, including gains realised
on exercise of share options.

<TABLE>
<CAPTION>
                                                               1999    1998
PERIODS ENDED                                                 GBP'000 GBP'000
-------------                                                 ------- -------
<S>                                                           <C>     <C>
All directors:
Aggregate emoluments........................................  3,779   1,559
Sums paid to third parties for directors' services..........      6       6
Gain on exercise of share options...........................     28     889
                                                              -----   -----
                                                              3,813   2,454
                                                              -----   -----
Highest paid director:
Aggregate emoluments........................................  1,627     629
Gain on exercise of share options...........................     --     889
                                                              -----   -----
                                                              1,627   1,518
                                                              -----   -----
</TABLE>

     Gains on exercise of share options are calculated as at the date of
exercise although the shares may have been retained.

     Upon Mr. Forbes' resignation as a director, the Company entered into a
consultancy agreement with an entity with which Mr. Forbes is affiliated to
provide management consulting services to the Company for a two-year period. The
agreement provided for the sum of  GBP 75,800 (exclusive of VAT) to be paid in
advance. For hours worked in excess of the minimum, payment will be made by the
Company at the rate of  GBP 200 per hour.

     Upon the resignation of Mr. Waters as Chief Executive Officer of the
Company on December 1, 1998, the Company entered into a settlement agreement and
release with Mr. Waters, pursuant to which the Company agreed to make a payment
of U.S. $1,300,000 to Mr. Waters. In addition the Company entered into a
consultancy agreement with Mr. Waters under the terms of which Mr. Waters will
receive $200,000 for services provided over a period of one year from the date
of his resignation.

DIRECTORS' SHAREHOLDINGS

     The beneficial interests of the current directors in the share capital of
MERANT are as follows:

<TABLE>
<CAPTION>
                                                           APRIL 30   JANUARY 31
                                                             1999        1998
                                                           --------   ----------
<S>                                                        <C>        <C>
J Michael Gullard, Chairman..............................   77,500       5,000
Harold Hughes............................................  110,000     100,000
Martin Waters............................................   10,000          --
Michel Berty.............................................   10,000          --*
Kevin Burns..............................................   60,000          --*
Gary Greenfield , Chief Executive Officer................   25,155          --*
                                                           -------     -------
</TABLE>

- ---------------
* At date of appointment in the cases of Mr. Berty, Mr. Burns and Mr. Greenfield

     The shareholdings quoted above have been restated to give effect to the
sub-division of the Company's ordinary shares, which took effect on March 13,
1998 (see note 25 to the financial statements on page 102). Certain of these
holdings are held in the form of ADSs. There have been no changes in these
holdings since the year end.

                                       14
<PAGE> 140

DIRECTORS' SHARE OPTIONS

     The following table sets out the numbers of options to acquire ordinary
shares or ADSs held by each director, including the changes in holdings during
the period. The numbers and prices of the options quoted below have been
restated to give effect to the sub-division of the Company's ordinary shares.

<TABLE>
<CAPTION>
                                                                          NUMBER OF OPTIONS
                                            OPTION    ----------------------------------------------------------
                            DATE OF         PRICE     JANUARY 31                                       APRIL 30        LATEST
                         OPTION GRANT      (IN GBP)    1998 (1)    GRANTED    EXERCISED     LAPSED     1999 (2)    EXERCISE DATE
                       -----------------   --------   ----------   --------   ---------   ----------   ---------   --------------
<S>                    <C>                 <C>        <C>          <C>        <C>         <C>          <C>         <C>
J Michael Gullard....        June 2 1994     2.13        50,000                                           50,000      June 2 2004
                            June 21 1996     1.67       250,000                                          250,000     June 21 2006
Harold Hughes........     August 19 1992     3.00        50,000                                           50,000   August 19 2002
                            June 16 1994     2.40        10,000                                           10,000     June 16 2004
Martin Waters........  September 16 1997     4.20     1,187,500                           (1,187,500)          0              n/a
                       September 16 1997     4.20     1,812,500                           (1,812,500)          0              n/a
                                                                                                                    September 24,
Michel Berty.........                        3.49(4)     50,415                                           50,415             2007
                                                                                                                     February 15,
Kevin J. Burns.......                        5.02(4)    546,565                                          546,565             2006
Gary Greenfield......                        6.42(4)  2,819,550                                        2,819,550      May 1, 2008
                          January 4 1999     1.05     3,250,000                                        3,250,000   January 4 2009
</TABLE>

- ---------------
(1) Or date of appointment, if later

(2) Or date of resignation, if earlier

(3) Gains on exercise of share options are calculated as at the date of exercise
    although the shares may have been retained.

(4) The options held by M Berty, Mr Burns and Mr Greenfield at the date of their
    appointment represent options issued to them by INTERSOLV, Inc which were
    converted into options to acquire ADSs in the Company, as explained in note
    24 to the financial statements. They are denominated in U.S. dollars, and
    for the above disclosures have been converted to pounds sterling using the
    exchange rate as at April 30, 1999 of  GBP 1.00 = $1.61.

     Prior to his resignation, Paul Adams exercised 8,000 options on August 7,
1998, which he had been granted in 1990 at  GBP 1.084 per share. On the date of
exercise, the market price was  GBP 4.62 per share, which represented a gain of
GBP 28,288. No other directors exercised any options during the period.

     The market price of the shares at April 30, 1999 was  GBP 1.47 and the
range during the fifteen month period was  GBP 0.97 to  GBP 7.18.

On behalf of the Committee

/s/ KEVIN BURNS

Kevin J. Burns
Chairman of the Executive Remuneration Committee
August 4, 1999

                                       15
<PAGE> 141

                                   MERANT PLC
                           FINANCIAL STATEMENTS 1999

                      SELECTED CONSOLIDATED FINANCIAL DATA
                                   US FORMAT

     The following selected financial data should be read in conjunction with,
and is qualified in its entirety by reference to, the financial statements of
MERANT, expressed in U.S. dollars, set forth on pages 31 to 55 of this report.

<TABLE>
<CAPTION>
                                                                THREE MONTHS
                                                   YEAR ENDED      ENDED                YEARS ENDED JANUARY 31,
(IN THOUSANDS OF U.S. DOLLARS -- EXCEPT PER SHARE  APRIL 30,     APRIL 30,     -----------------------------------------
AND ADS DATA, PERCENTAGES AND EMPLOYEES)              1999          1998         1998       1997       1996       1995
- -------------------------------------------------  ----------   ------------   --------   --------   --------   --------
<S>                                                <C>          <C>            <C>        <C>        <C>        <C>
RESULTS OF OPERATIONS:
Net revenue.................................        $374,202      $106,987     $362,919   $283,640   $280,097   $285,529
Income before non-recurring items...........          16,604        18,485       43,606      2,280      6,734     41,133
Non-recurring items (see note 2, below).....         (49,662)      (17,292)     (17,468)   (37,603)   (23,069)   (18,265)
Income (loss) before income taxes...........         (26,724)        2,344       30,073    (32,377)   (11,628)    19,840
Net income (loss)...........................         (28,532)        1,489       20,148    (35,856)   (14,867)     7,467
Net income (loss) per share (note 3, below):
    Basic...................................           (0.20)         0.01         0.15      (0.27)     (0.11)      0.06
    Diluted.................................           (0.20)         0.01         0.14      (0.27)     (0.11)      0.06
    Basic -- per ADS........................           (1.00)         0.05         0.73      (1.35)     (0.57)      0.29
    Diluted -- per ADS......................           (1.00)         0.05         0.70      (1.35)     (0.57)      0.29
Weighted average number of shares outstanding, in
  thousands
    Basic...................................         143,130       137,823      137,351    133,002    130,602    130,893
    Diluted.................................         143,130       145,618      144,326    133,002    130,602    130,893
    Basic -- ADS equivalent.................          28,626        27,565       27,470     26,600     26,120     26,179
    Diluted -- ADS equivalent...............          28,626        29,124       28,865     26,600     26,120     26,179
FINANCIAL POSITION AT END OF PERIOD:
Cash and short-term investments.............         121,384       126,907      118,572     95,876     92,077    121,171
Total assets................................         323,082       333,715      333,074    257,887    272,523    302,521
Long term obligations.......................              --           648          612      1,314      3,018      1,367
Shareholders' equity........................         152,211       179,442      172,073    123,493    157,109    175,868
FINANCIAL CONDITION:
Working capital.............................        $ 89,619      $101,727     $ 94,230   $ 62,421   $ 69,005   $102,961
Current ratio...............................            1.57          1.64         1.64       1.52       1.71       2.09
Return on net revenue: excluding non-recurring
  items.....................................           -7.6%          12.2%         9.5%       n/m       -0.2%       6.9%
Return on average equity: excluding non-
  recurring items (annualized)..............             n/m          29.1%        23.3%       n/m        0.4%      11.0%
EMPLOYEE INFORMATION:
Average number of employees.................           2,014         1,970        1,852      1,711      1,667      1,559
Number of employees at end of period........           2,018         1,963        1,900      1,698      1,708      1,618
Net revenue per employee (annualized).......        $    186      $    217     $    196   $    166   $    168   $    183
</TABLE>

- ---------------
n/m not a meaningful number.
NOTES:

1. Data for all periods presented has been restated to include business
   combinations which have been accounted for using the pooling-of-interests
   method (see note 2 to the consolidated financial statements on page 40).

2. Details of the non-recurring items are set out in note 5 to the consolidated
   financial statements on page 44.

3. For years through January 31, 1998, annual amounts reflect the financial data
   of INTERSOLV, Inc on an April 30 year. Financial data for the three months
   ended April 30, 1998 are included in both the "Three months ended April 30,
   1998" and the year ended January 31, 1998.

4. Shares and per-share data for all periods presented have been restated to
   comply with SFAS 128 "Earnings per share" and to reflect the 5-for-1 stock
   split of the Company's ordinary shares, which was effective as of the close
   of business on March 13, 1998 (see note 14 to the consolidated financial
   statements on page 54). Each American Depositary Share represents five
   ordinary shares.

                                       16
<PAGE> 142

                                   MERANT PLC
                           FINANCIAL STATEMENTS 1999

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
                OF OPERATIONS AND FINANCIAL CONDITION US FORMAT

     The following discussion should be read in conjunction with the financial
statements of MERANT plc and its subsidiaries ("MERANT" or "the Company") in
U.S. dollars, on pages 31 to 55.

     This discussion contains certain "forward-looking statements" (as such term
is defined in Section 27A of the U.S. Securities Act of 1933, as amended). Such
statements involve a number of risks, uncertainties and other factors that could
cause actual results to differ materially from those indicated by the forward
looking statements as a result of the factors set forth below under the section
"Risk factors that may influence future operating results."

     Effective February 16, 1999, the Company changed its corporate name from
"Micro Focus Group Plc" to "MERANT plc".

     Effective November 30, 1998, the Company elected to change its fiscal year
end and accounting reference date to April 30 from January 31. The Company is
therefore reporting results for the fiscal year ended April 30, 1999 ("fiscal
1999"). References to fiscal 1998 and fiscal 1997 are to the years ended January
31, 1998 and January 31, 1997, respectively. This report also discloses results
for the three-month fiscal period ended April 30, 1998 (referred to as "the 1998
transition period"), which were the basis of a Transition Report filed with the
SEC on Form 20-F.

RESULTS OF OPERATIONS

     On September 24, 1998, the Company merged with INTERSOLV, Inc in a
transaction accounted for using the pooling-of-interests method. Accordingly the
Company's financial statements for all periods prior to the merger have been
restated to reflect the merger. The consolidated financial statements at January
31, 1998, and for the years ended January 31, 1998 and 1997, have been restated
to include the financial results of INTERSOLV, Inc at April 30, 1998, and for
the years ended April 30, 1998 and 1997, respectively. Also during fiscal 1999,
the Company acquired two of its foreign distributors in transactions accounted
for as purchases. For further information on these transactions, see the
sections entitled "Business combinations" on pages 22 to 23.

     MERANT reported a net loss for fiscal 1999 of $28.5 million or $1.00 per
American Depositary Share ("ADS") as compared to net income of $1.5 million or
$0.05 per ADS diluted in the 1998 transition period, net income of $20.1 million
or $0.70 per ADS diluted in fiscal 1998 and a net loss of $35.9 million or $1.35
per ADS in fiscal 1997. These results include non-recurring charges of $49.7
million, $17.3 million, $17.5 million and $37.6 million in 1999, the 1998
transition period, 1998 and 1997, respectively.

     The table below sets forth results of operations as a percentage of net
revenue for fiscal 1999, the 1998 transition period and fiscal 1998 and 1997 and
also shows the percentage change between the three fiscal years.

<TABLE>
<CAPTION>
                                             PERCENTAGE OF NET REVENUE                      YEAR TO YEAR
                                ---------------------------------------------------       PERCENTAGE CHANGE
                                             THREE MONTHS   YEAR ENDED   YEAR ENDED   -------------------------
                                YEAR ENDED      ENDED        JANUARY      JANUARY     FISCAL 1998   FISCAL 1997
                                APRIL 30,     APRIL 30,        31,          31,           TO            TO
                                   1999          1998          1998         1997      FISCAL 1999   FISCAL 1998
                                ----------   ------------   ----------   ----------   -----------   -----------
<S>                             <C>          <C>            <C>          <C>          <C>           <C>
NET REVENUE
  Product revenue.............      52%           57%           55%          57%           -3%           22%
  Maintenance revenue.........      26%           23%           24%          27%           12%           17%
  Service revenue.............      22%           20%           21%          16%            8%           67%
                                   ----          ----          ----         ----         -----         -----
     TOTAL NET REVENUE........     100%          100%          100%         100%            3%           28%
                                   ----          ----          ----         ----         -----         -----
</TABLE>

                                       17
<PAGE> 143

<TABLE>
<CAPTION>
                                             PERCENTAGE OF NET REVENUE                      YEAR TO YEAR
                                ---------------------------------------------------       PERCENTAGE CHANGE
                                             THREE MONTHS   YEAR ENDED   YEAR ENDED   -------------------------
                                YEAR ENDED      ENDED        JANUARY      JANUARY     FISCAL 1998   FISCAL 1997
                                APRIL 30,     APRIL 30,        31,          31,           TO            TO
                                   1999          1998          1998         1997      FISCAL 1999   FISCAL 1998
                                ----------   ------------   ----------   ----------   -----------   -----------
<S>                             <C>          <C>            <C>          <C>          <C>           <C>
COST OF REVENUE
  Cost of product revenue.....       4%            3%            4%           4%            9%            8%
  Cost of maintenance
     revenue..................       7%            5%            6%           8%           20%          -11%
  Cost of service revenue.....      18%           17%           17%          11%            9%           97%
                                   ----          ----          ----         ----         -----         -----
     TOTAL COST OF REVENUE....      29%           25%           27%          24%           11%           43%
                                   ----          ----          ----         ----         -----         -----
Gross profit..................      71%           75%           73%          76%            0%           23%
                                   ----          ----          ----         ----         -----         -----
OPERATING EXPENSES
  Research and development....      16%           14%           17%          23%           -2%           -5%
  Sales and marketing.........      42%           37%           37%          45%           16%            6%
  General and
     administrative...........       9%            7%            7%           8%           27%           18%
  Non-recurring charges.......      13%           16%            5%          13%          184%          -54%
                                   ----          ----          ----         ----         -----         -----
     TOTAL OPERATING
       EXPENSES...............      80%           74%           66%          89%           25%           -4%
                                   ----          ----          ----         ----         -----         -----
(LOSS) INCOME FROM
  OPERATIONS..................      -9%            1%            7%         -12%         -226%         -174%
Interest income, net..........       2%            1%            1%           1%           61%           34%
                                   ----          ----          ----         ----         -----         -----
(LOSS) INCOME BEFORE INCOME
  TAXES.......................      -7%            2%            8%         -11%         -189%         -193%
Income taxes..................      -1%           -1%           -3%          -1%          -82%          185%
                                   ----          ----          ----         ----         -----         -----
NET (LOSS) INCOME.............      -8%            1%            6%         -13%         -242%         -156%
                                   ----          ----          ----         ----         -----         -----
</TABLE>

  Net revenue

     The Company's products are generally licensed to end users pursuant to
license agreements.

     The Company also offers its customers a broad range of services, including
maintenance, support, training and consulting. Maintenance services consist
primarily of enhancements and upgrades to products as well as telephone support
concerning the use of the Company's products. Training and consulting services
are focused on assisting customers in using the Company's products along with
assisting customers in application development needs.

     The Company's product and service offerings are focused in four primary
solution areas: Application Development Management ("ADM", or MERANT PVCS
series), Enterprise Data Connectivity ("EDC", or MERANT DataDirect series),
Application Creation and Transformation ("ACT", or MERANT Micro Focus series)
and Enterprise Consulting Solutions ("ECS", or MERANT Consulting). These four
solution areas are collectively referred to as the Company's key products or
solution areas.

     Revenue by Solution Area

     Total net revenue for fiscal 1999 was $374.2 million, which is a 3%
increase over fiscal 1998.

     ACT and ADM revenues grew due to increased license and service fee
revenues, reflecting continuing increased demand for these products. ECS revenue
growth was constant reflecting increased competition for products and services
to support Year 2000 renewal projects. These increases were partially offset by
a decrease in revenues for EDC, which declined 5% primarily due to decreased
revenue in the Asia-Pacific area caused by a downturn in the general business
climate partially offset by revenue increases in other geographic areas.

     Total revenue for fiscal 1998 was $362.9 million, which was a 28% increase
over fiscal 1997. Growth was driven by increased revenue for ACT and ADM, which
grew 26% and 32%, respectively. Revenues for these solution areas grew due to
increased license and service fee revenue, reflecting increased demand for these

                                       18
<PAGE> 144

products. The increase in ACT in fiscal 1998 reflected initial worldwide sales
of the Company's Softfactory 2000 and NetExpress products, increased UNIX
product sales and revenue from consulting. ECS also grew rapidly, due to
increased demand for transformation services focused on Year 2000 remediation.

     Product revenue

     Product revenue decreased by $5.6 million or 3% to $193.1 million in fiscal
1999 relative to fiscal 1998, having previously increased by $36.4 million or
22% to $198.8 million in fiscal 1998 relative to 1997. The decrease in revenue
in 1999 was primarily due to the weakness in North American revenue caused by a
decrease in the demand for the Company's Year 2000 products, along with
integration issues related to the INTERSOLV acquisition. The Company's North
American Year 2000 business continued to be affected by declining market prices
and declining demand for inventory and remediation product and services
offerings. The decrease in ACT product revenue was somewhat offset by the
increase in ADM product revenue.

     The increase in revenue in 1998 reflected higher sales of ACT's Year 2000
and ADM products. EDC product revenue was down slightly, due to lower revenues
in the Asia-Pacific area, and the Company exited from certain non-strategic
areas.

     Maintenance revenue

     Maintenance revenue increased by $10.8 million or 12% to $98.9 million in
fiscal 1999 relative to fiscal 1998, and by $12.5 million or 17% to $88.0
million in fiscal 1998 relative to 1997. The increases in fiscal 1999 and 1998
resulted from a combination of growth in the installed customer base and renewal
of existing maintenance contracts for all key products.

     Service revenue

     Service revenue increased by $6.1 million or 8% to $82.2 million in fiscal
1999 relative to fiscal 1998, and by $30.4 million or 67% to $76.1 million in
fiscal 1998 relative to 1997. Higher demand for consulting and training services
in all solution areas in 1999 more than offset the decrease experienced in Year
2000 transformation projects. The increase in 1998 resulted mainly from
increased demand for Year 2000 renewal services and the acquisition of the
consulting organization of Millennium UK Limited.

     North American revenue

     In fiscal 1999, North America revenue declined 5% to $223.0 million. In
fiscal 1998 North American revenue increased 30% to $235.5 million. In fiscal
1999, the Company experienced a decline for ACT products. In fiscal 1998 the
Company had experienced growth in all key solution areas.

     International revenue

     In fiscal 1999, international revenue was $151.2 million or 20% greater
than fiscal 1998. The increase reflects growth within European markets including
the acquisition of certain distributors.

  Cost of revenue

     Cost of product revenue is comprised principally of the cost of product
materials (including the purchase of disks and CDs, transfer of data to
electronic media and printing of manuals), packaging and distribution costs, and
royalties to third party software developers for the licensing of certain add-on
software products. Such costs increased by $1.1 million or 9% to $14.4 million
in fiscal 1999 relative to fiscal 1998, and by $1.0 million or 8% to $13.3
million in fiscal 1998 relative to 1997 and represented 7%, 7% and 8% of product
revenue in fiscal years 1999, 1998 and 1997, respectively.

     Cost of maintenance revenue is comprised principally of compensation for
technical support personnel. Such costs increased by 20% to $24.4 million in
fiscal 1999 relative to fiscal 1998, having previously decreased by 11% to $20.5
million in fiscal 1998. Cost of maintenance revenue represented 25%, 23% and 30%
of maintenance revenue in fiscal years 1999, 1998 and 1997, respectively. The
cost increases in 1999 reflect the
                                       19
<PAGE> 145

growth in maintenance revenue as well as the addition of personnel to the
telephone support functions, to support the growing customer base. The cost
decreases in fiscal 1998 were the result of lower costs resulting from the
restructuring of operations in 1997.

     Cost of service revenue is comprised principally of compensation and
expenses of training and consulting personnel. Such costs increased by $5.7
million or 9% to $68.1 million in fiscal 1999 relative to fiscal 1998, and by
$30.7 million or 97% to $62.4 million in fiscal 1998 relative to 1997, and
represented 83%, 82% and 69% of service revenue in fiscal years 1999, 1998 and
1997, respectively. The increases in amount and as a percentage of revenue
during this three year period were primarily the result of increased investment
in personnel needed to support the growing demand for consulting and training
services in all solution areas. The acquisition of Millennium U.K. Limited, a
consulting organization, also contributed to the increase.

  Research and development

     Research and development costs consist principally of compensation for
software developers and related costs incurred, after adjusting for the
proportion of such costs capitalized (in accordance with Statement of Financial
Accounting Standard No. 86) and the amortization of previously capitalized
software costs. Research and development spending supports the development and
enhancement of new and existing products and is consistent with the Company's
strategy of investing heavily to improve and expand its product lines.

     Expenditure on internal software research and development decreased by $2.6
million or 5% to $53.6 million in fiscal 1999 relative to fiscal 1998, and by
$4.5 million or 7% to $56.2 million in fiscal 1998 relative to fiscal 1997 and
represented 14%, 15% and 21% of net revenue in fiscal years 1999, 1998 and 1997,
respectively. The decreases in research and development expenditure in fiscal
1998 reflect a lower relative cost structure following the restructuring of
operations in 1997.

     In fiscal 1999, 1998 and 1997, $8.5 million, $10.3 million, and $17.7
million, representing 16%, 18% and 29%, respectively, of these costs, were
capitalized as software product assets, and will be amortized over their
estimated economic lives of three or four years. Amortization in fiscal 1999,
1998 and 1997, excluding non-recurring items, amounted to $14.8 million, $14.9
million, and $21.4 million, resulting in a net charge to research and
development costs in those years of $6.2 million, $4.6 million, and $3.7
million, respectively.

     The Company believes that ongoing development of new products and features
is required to maintain and enhance its competitive position. Accordingly, while
the Company will continue to control expenses where possible, the Company
anticipates that aggregate research and development expenses will increase over
time, and may not be directly related to the level of net revenue realized in
future quarters.

  Sales and marketing

     Sales and marketing costs include compensation, travel and facility costs
for sales, pre-sales and marketing personnel, and publicity costs such as
advertising and trade shows. Such costs increased by $21.0 million or 16% to
$155.7 million in fiscal 1999 relative to fiscal 1998, and by $8.0 million or 6%
to $134.7 million in fiscal 1998 relative to 1997, and represented 42%, 37% and
45% of net revenue in fiscal years 1999, 1998 and 1997, respectively. The
increase in sales and marketing costs in fiscal 1999 and 1998 reflected sales
force expansion, higher commissions and higher advertising and marketing costs,
including those associated with the new corporate name and product launches. The
increase in costs as percentage of revenue in fiscal 1999 was the result of
lower than expected revenue in the North American market relative to our
investment in the sales and marketing organizations. The decrease in costs as a
percentage of revenue in fiscal 1998 was the result of the Company's ability to
effectively focus its sales and marketing efforts on its primary solution areas
combined with savings realized in certain non-strategic areas.

     The Company believes that continued investments in sales, marketing,
customer support and promotional activities are essential to maintaining its
competitive position. The Company is expanding its sales and support staffs and,
accordingly, anticipates that sales and marketing expenses will be higher in
future periods, but decrease from fiscal 1999 levels as a percentage of net
revenue.

                                       20
<PAGE> 146

  General and administrative

     General and administrative costs include the Company's group management,
finance, legal and human resources operations. Such costs increased by $7.4
million or 27% to $35.2 million in fiscal 1999 relative to fiscal 1998, and by
$4.3 million or 18% to $27.7 million in fiscal 1998 relative to 1997, and
represented 9%, 7% and 8% of revenue in fiscal years 1999, 1998 and 1997,
respectively. The increase in 1999 was due to higher costs resulting from the
merger of INTERSOLV along with continued investment in infrastructure and
systems and higher goodwill amortization from acquisitions accounted for under
purchase accounting. Fiscal 1998 costs increased to support our rapidly
expanding business along with additional goodwill charges resulting from recent
acquisitions.

     The Company anticipates that general and administrative expenses will
increase in future quarters, but decrease as a percentage of net revenue.

  Non-recurring charges

     The Company has recorded non-recurring charges of $49.7 million, $17.5
million and $37.6 million in fiscal 1999, 1998 and 1997, respectively.

     In the second quarter of fiscal 1999, the Company recorded a charge of
$49.7 million in respect of the merger with INTERSOLV, and the subsequent
restructuring of the combined businesses. Aggregate direct transaction costs of
$24.5 million represented charges for investment bankers, employee contractual
obligations, stamp duties and listing fees associated with the issuance and
listing of new shares on the London Stock Exchange and other professional fees.
In addition, a charge of $25.2 million was recorded to reflect costs associated
with integration efforts. This charge was primarily comprised of the write-off
of redundant or impaired assets and severance costs.

     In fiscal 1998, the Company recognized non-recurring costs of $17.5
million, net. This charge included a $15.7 million write off of purchased
research and development costs arising from the SQL acquisition, with the
balance principally related to costs of $2.0 million which arose when INTERSOLV
exited selected non-strategic product areas.

     In fiscal 1997, the Company incurred non-recurring costs of $37.6 million.
As a result of a comprehensive business strategy review of its primary market
opportunities, INTERSOLV recorded a charge of $28.9 million to write down
capitalized and purchased software and certain related intangible assets to
their net realizable values. In addition, the Company incurred costs totalling
$8.7 million in connection with a reduction in the Company's workforce of
approximately 95 people, facility closures and consolidations, and asset
write-downs.

  Interest income

     Interest earned on cash short-term investments, net of interest expense,
increased by $2.4 million or 61% to $6.3 million in fiscal 1999 relative to
fiscal 1998, and by $1.0 million or 34% to $3.9 million in fiscal 1998 relative
to 1997. The increases in fiscal 1999 and 1998 represented the impact of higher
cash balances.

     The Company has a hedging program to minimize foreign exchange gains or
losses, where possible, from recorded foreign-currency denominated assets and
liabilities. This program involves the use of borrowings and forward foreign
exchange contracts in certain European currencies, including the euro. The
Company does not hedge anticipated foreign currency revenues and expenses not
yet incurred.

  Income taxes

     The Company's reported tax rates in fiscal 1999, 1998 and 1997 were -7%,
33% and -11%, respectively, which compare to U.K. statutory rates applicable to
the Company of 31%, 31% and 33%, respectively.

     The tax rate in both 1999 and 1997 was significantly affected by
non-recurring charges, certain of which were not deductible for tax purposes.
The differences between the reported tax rates and the U.K. statutory rates
principally reflect the impact of permanent differences between accounting
profits and taxable profits,

                                       21
<PAGE> 147

primarily the difference in the treatment of amortisation of goodwill. The
Company's tax rate is also affected by the distribution of taxable profits and
losses among the tax jurisdictions in which the Company operates.

     An analysis of the charge for income taxes, including an analysis of
differences between the effective rate and the U.K. statutory rates, is given in
note 11 to the consolidated financial statements on page 47.

     The income tax returns of certain of the Company's U.S. subsidiaries for
fiscal years ended January 31, 1993 through 1997 are under examination by the
Internal Revenue Service, which has proposed increases to the amount of U.S.
income taxes due in respect of those fiscal years. Any adjustments that may
result from this examination are not expected to have a material adverse impact
on the Company's consolidated operating results or its financial position.

  Business combinations

     During fiscal 1999, MERANT completed three acquisitions.

     On May 15, 1998, the company acquired all of the outstanding stock of its
Italian distributor, Micro Focus Italia, s.r.l., for total consideration of
approximately $4.6 million. On August 13, 1998, the Company acquired all of the
outstanding stock of its Australian distributor, Advanced Software Engineering
Pty Ltd., for total consideration of approximately $2.5 million. These
transactions have been accounted for using the purchase method. Accordingly, the
excess of the purchase price over the respective estimated fair value of the net
tangible assets of each company, which amounted to $7.3 million in the
aggregate, was allocated to goodwill, and is being amortized over its economic
life which is estimated to be four years.

     On September 24, 1998, the Company completed the merger with INTERSOLV in a
transaction accounted for using the pooling-of-interests method. Under the terms
of the agreement, each common share of INTERSOLV was exchanged for 0.55 MERANT
American Depositary Shares ("ADSs"). In addition, each outstanding option or
right to purchase or acquire shares of INTERSOLV common stock was assumed by the
Company and became an option or right to purchase or acquire MERANT ADSs, with
appropriate adjustments to the price and number of shares based on the exchange
ratio of 0.55 ADSs per INTERSOLV share. The merger was structured as a tax-free
reorganization under U.S. tax law. The Company issued approximately 12.6 million
new MERANT ADSs (representing approximately 63.1 million new MERANT ordinary
shares) in exchange for INTERSOLV's common stock and share equivalents
outstanding, which at the time of the completion of the transaction represented
approximately 46% of MERANT's share capital on a fully-diluted basis. Prior to
the merger, INTERSOLV was a Rockville, Maryland-based public corporation listed
on the Nasdaq National Market. INTERSOLV was a provider of software solutions
that facilitate the development, delivery and deployment of business information
systems. INTERSOLV's products and services were focused primarily in the areas
of application development management, enterprise data connectivity and
enterprise application renewal.

     During the three-month fiscal period ended April 30, 1998, INTERSOLV
acquired all of the outstanding stock of SQL Software Ltd in exchange for
1,251,450 common shares in INTERSOLV (equivalent to 3,441,488 ordinary shares in
the Company). The transaction was accounted for using the purchase method. The
cost of the acquisition was $19.2 million, of which $15.7 million was allocated
to purchased research and development and written off on completion of the
acquisition since no technological feasibility or alternative future use could
be demonstrated. Additionally, $2.4 million was allocated to goodwill and other
intangibles, and is being amortized over its economic life which is estimated to
be five years.

     In fiscal 1998, the Company made two acquisitions.

     On January 20, 1998, the Company acquired all of the outstanding stock of
XDB Systems, Inc. ("XDB") in exchange for 1,891,975 ordinary shares in the
Company. XDB, a privately-held corporation based in Columbia, Maryland, was a
provider of DB2 database development, maintenance and connectivity solutions.
The combination was accounted for using the pooling-of-interests method.

     Also in fiscal 1998, the Company acquired all of the outstanding stock of
Millennium UK Limited ("Millennium"), a privately-held consulting firm, in
exchange for 745,710 ordinary shares in the Company

                                       22
<PAGE> 148

and a cash payment of $3.2 million. Millennium provided consulting and project
management services and had specialized expertise in the estimating, planning
and management of Year 2000 compliance projects. The transaction was accounted
for using the purchase method. Accordingly, the excess of the purchase price
over the estimated fair value of the net tangible assets, which amounted to $6.7
million, was allocated to goodwill, and is being amortised over its economic
life, which is primarily estimated to be three years.

     Further informations on these transactions is given in note 2 to the
consolidated financial statements on page 40.

  Year 2000 consideration.

     The Year 2000 problem is the result of the widespread practice since the
early days of computing of using only two digits to refer to a year (such as
"98" for "1998") instead of four digits in computer systems. When the Year 2000
arrives or the computer system refers to dates after December 31, 1999, such
systems will interpret the two digits "00" as "1900" as opposed to "2000".
Failure to address this problem could cause results ranging from system failures
to erroneous calculations in date-dependent operations for dates falling after
December 31, 1999. The Company has instituted various projects to become Year
2000 ready. "Year 2000 ready" as used herein means that the performance or
functionality of the Company's internal systems will not be significantly
affected by the dates prior to, during and after the Year 2000.

  State of Readiness

     The Company has developed and implemented an enterprise-wide plan to
analyze and address potential Year 2000 issues affecting its internal systems,
its interaction with third party vendors and suppliers, and its products and
services.

     The Company has established a Year 2000 Project Team to implement a
comprehensive four-phase Year 2000 readiness plan addressing the Year 2000
readiness of the Company's internal systems. The Year 2000 readiness plan is
comprised of four phases (inventory, analysis, remediation and validation
phases). The inventory, analysis and remediation stages of the Year 2000
readiness plan have been substantially completed in all material respects with
respect to the Company's material internal systems, and the Company expects to
substantially complete the validation phase of the plan in all material respects
by August 31, 1999. The Year 2000 readiness plan covers IT systems (desktop,
laptop, servers, routers, hubs, switches, and remote access systems, operating
systems, software and critical business systems), non-IT embedded systems
(telephone, voice messaging, teleconferencing, data services and equipment, fax,
copiers and similar equipment), facilities (elevators, security systems, card
access systems and similar systems), and the Company's vendors and suppliers. As
part of the inventory phase, the Company sought confirmation from its material
suppliers on the current Year 2000 readiness of their systems and/or their
intended time schedule for achieving Year 2000 readiness. During the remainder
of calendar 1999, the Company will also be completing, reviewing and updating
its contingency and disaster recovery plans and preparing a detailed action plan
for the crossover of the Company into the next millennium.

     With respect to its software products, each of the Company's product
business units have completed a Year 2000 assessment of its currently offered
products. In preparing for the Year 2000 date change, the Company has adopted
the Year 2000 compliance standard published by the British Standards Institute
(BSI) -- BSI DISC PD2000-1 "A Definition of Year 2000 Conformity Requirements."
As a result of this assessment, the Company believes that the vast majority of
its currently offered products are Year 2000 compliant, and expects virtually
all of its remaining currently offed products to become compliant during
calendar 1999 through new releases. In any event, the Company expects that all
the then current versions of its offered products will be Year 2000 compliant
before the end of calendar 1999. Because Year 2000 compliance is generally
integrated into its normal product development activities, the Company has not
incurred and does not expect to incur any significant incremental expenses in
addressing this issue in its product lines. The Company believes that a small
number of customers who receive product support from the Company are operating
product versions that may not be Year 2000 compliant or products that the
Company has replaced or intends to replace with comparable Year 2000 compliant
products. The Company believes that the vast

                                       23
<PAGE> 149

majority of such customers are migrating and will continue to migrate to
compliant versions and products through new releases, which the Company is
strongly encouraging. In addition, certain former customers may be operating
non-compliant versions of products in respect of which the Company's agreed-upon
product support and warranty periods have expired. The Company has not
undertaken, and does not plan to undertake in the future, an assessment of
whether these former customers are taking appropriate steps to address any
related Year 2000 issues.

     The Company does not expect customers who license or migrate to Year 2000
compliant versions of its products to experience any material Year 2000 failures
caused by such products. In addition, the Company believes that its licenses and
other agreements contain customary and appropriate limitations on the Company's
obligations with respect to any Year 2000 failures that may be caused by its
current or former products. However, there can be no assurance that the
Company's expectations and beliefs as to these matters will prove to be
accurate. Moreover, the Company's products are used in IT systems containing
third-party hardware and software, some of which may not be Year 2000 compliant.
Many of the Company's customers use legacy computer systems that are expected to
be particularly susceptible to Year 2000 compliance issues. Various commentators
have predicted that a significant amount of litigation may arise out of Year
2000 compliance issues. While the Company has not been subject to any Year 2000
product claims or lawsuits to date, there can be no assurance that customers or
former customers will not bring claims or lawsuits against the Company seeking
compensation for losses associated with Year 2000-related failures. A material
adverse outcome in a Year 2000 claim or lawsuit could have a material adverse
effect on the Company's business, financial condition and results of operations.

     A small number of the products the Company sells are licensed from third
parties. Although the current versions of these products have generally been
warranted to the Company as being Year 2000 compliant, these products have
generally not been subjected to the same extensive Company testing as those
products developed or acquired by the Company. The Company is therefore working
with these third party suppliers to obtain assurance of Year 2000 compliance.

     The Company has designated its website as the Company's "Year 2000 Internet
Website" under the terms of the Year 2000 Information and Readiness Disclosure
Act (the "Act") (S.2392). The information provided on past and present pages on
this website regarding the Year 2000 compliance of Company products has been
designated as "Year 2000 Readiness Disclosures." The pages on this website have
been and will continue to be the Company's primary means for communicating to
customers regarding the Year 2000 compliance of its products.

  Demand for Year 2000 Remediation Products and Services

     The Company anticipates that demand in the Year 2000 product and service
market will decline, perhaps rapidly, in anticipation of or following the Year
2000, and the demand for the Company's Year 2000 compliance products and
services may also decline significantly as a result of new technologies,
competition or other factors. In the quarter ended October 31, 1998, the
Company's Year 2000 business was affected by customers moving to the later
stages of their remediation processes, for which the Company did not have the
appropriate products generally available until November, 1998. If these factors
were to continue, the Company's license revenue and professional service fees
could be materially and adversely affected.

  Costs and Risks Associated with Year 2000 Issues; Contingency Plans

     The Company currently does not anticipate that it will incur material
operating expenses or be required to invest heavily in internal systems
improvements as a result of Year 2000 readiness issues. In addition, the Company
has not incurred and does not currently expect to incur any significant
incremental expenses in addressing this issue in its product and services. Total
expenditures, excluding personnel costs of existing staff, related to the Year
2000 readiness of the Company's internal systems is not expected to be material.
However, there can be no assurance that the Company will not experience
significant additional expenses for unforeseen Year 2000 issues, including those
out of the reasonable control of the Company.

                                       24
<PAGE> 150

     Although the Company believes that its Year 2000 readiness efforts are
designed to appropriately identify and address those Year 2000 issues that are
within the Company's control, there can be no assurance that the Company's
efforts will be fully effective or that Year 2000 issues will not have a
material adverse effect on the Company's business, financial condition or
results of operations. The novelty and complexity of the issues presented and
the Company's dependence on the preparedness of third parties are among the
factors that could cause the Company's efforts to be less than fully effective.
Moreover, Year 2000 issues present many risks that are simply beyond the
Company's control, such as the potential effects of Year 2000 issues on the
economy in general and on the Company's business partners and customers in
particular. The Company intends to continue to evaluate both existing and newly
identified Year 2000 risks and to develop and implement such further responsive
measures as it deems appropriate.

     The Company is developing a contingency plan and a disaster recovery plan,
as well as an action plan for the crossover of the Company into the next
millennium. Such plans seek to minimize the impact of the Year 2000 problem on
the Company's business, financial condition and results of operations. During
the remainder of calendar 1999, the Company will be reviewing and updating such
plans.

  Euro considerations

     Effective January 1, 1999, eleven of the fifteen member countries of the
European Union adopted the euro as their legal currency. Beginning on such date,
the participating countries established fixed euro conversion rates between
their existing sovereign currencies and the euro. The euro now trades on
currency exchanges and is available for non-cash transactions. As of May 1,
1999, the Company's internal systems have the ability to price and invoice
customers in the euro. The Company is also engaging in foreign exchange and
hedging activities in the euro. The Company will continue to modify the internal
systems that will be affected by this conversion during fiscal 2000, and does
not expect the costs of further system modifications to be material. There can
be no assurance, however, that the Company will be able to complete such
modifications to comply with euro requirements, which could have a material
adverse effect on the Company's business, financial condition and results of
operations. The Company will continue to evaluate the impact of the introduction
of the euro on its foreign exchange and hedging activities, functional currency
designations, and pricing strategies in the new economic environment. In
addition, the Company faces risks to the extent that banks and vendors upon whom
the Company relies and their suppliers are unable to make appropriate
modifications to support the Company's operations with respect to euro
transactions. While the Company will continue to evaluate the impact of the
euro, management does not believe its introduction will have a material adverse
effect upon the Company's business, financial condition or results of
operations.

  Risk Factors that may influence future operating results

     The Company operates in a rapidly changing environment that involves a
number of risks, some of which are beyond the Company's control. This section of
the discussion highlights some of these risks and the possible impact of these
factors on future results of operations.

     The factors set forth below as well as statements made elsewhere in the
Company's Annual Report contain certain forward-looking statements that are
based on the beliefs of the Company's management, as well as assumptions made
by, and information currently available to, the Company's management. The
Company's actual results, performance or achievements in the remainder of fiscal
2000 and beyond could differ materially from those expressed in, or implied by,
any such forward-looking statements.

     Factors that could cause or contribute to such material differences
include, but are not limited to, those discussed in this section below, as well
as those discussed elsewhere in the Company's Annual Report and these financial
statements. The Company undertakes no obligation to release publicly any updates
or revisions to any such forward-looking statements that may reflect events or
circumstances occurring after the date of the Company's Annual Report. For more
information regarding forward-looking statements, see Further Information for
Shareholders -- Special Note on Forward-Looking Statements on page 106 of this
Report.

     Year 2000 Spending Policies.  Many of our customers and potential customers
could potentially implement policies that prohibit or strongly discourage making
changes or additions to their internal computer
                                       25
<PAGE> 151

systems until after January 1, 2000. If companies implement such a policy, we
could experience lower revenues if potential customers who might otherwise
purchase our products or services delay purchases until after January 1, 2000 in
an effort to stabilize their internal computer systems in order to cope with the
Year 2000 problem or because their information technology budgets have been
diverted to address Year 2000 issues. If our potential customers delay
purchasing our products and services in preparation for Year 2000 problem, our
business could be seriously harmed.

     Integration of INTERSOLV; Synergies.  In September 1998, the Company
acquired all the share capital of INTERSOLV. The Company acquired INTERSOLV with
the expectation that the acquisition will result in long-term strategic
benefits. Realization of these anticipated benefits depends in part on whether
the operations and administration of the companies are fully integrated in an
efficient and effective manner. There can be no assurance that this will occur.
The combined company's integration efforts have yet to be fully completed and
are still ongoing. The successful integration of MERANT and INTERSOLV will
require, among other things, integration of the product offerings of the
companies, sales and marketing and research and development efforts, the
cooperation and coordination of the business managers of the two companies, and
the integration of globally dispersed operations. It is possible that this
integration will not be accomplished smoothly or successfully, and that efforts
to achieve integration may require more time, expense and management attention
than anticipated. The diversion of management's attention from day-to-day
operations and any difficulties encountered in the integration process could
have a material adverse effect on the Company's business, financial condition
and results of operations. If the integration of the Company's and INTERSOLV's
operations is not successful, if the combined companies do not achieve the
operational efficiencies and other business synergies that are anticipated or if
those synergies are not achieved as quickly as may be expected by financial
analysts or at the level expected by financial analysts, or if the effect of the
merger on earnings per share is not in line with the expectation of financial
analysts, the market price of the MERANT ordinary shares or the MERANT ADSs
could be significantly and adversely affected.

     Fluctuations in Operating Results; Absence of Significant Backlog.  The
Company's future operating results are subject to quarterly and annual
fluctuations due to a variety of factors, including demand for the Company's
products, the size and timing of customer orders and the lengthy sales cycle,
product life cycles, the ability of the Company to introduce and market new and
enhanced versions of the Company's products on a timely basis, the introduction
and acceptance of new products and product enhancements by the Company or its
competitors, customer order deferrals in anticipation of new or enhanced
products or technologies, the timing of product introductions or enhancements by
the Company or its competitors, technological changes in the software industry,
changes in the mix of distribution channels through which the Company's products
are offered, purchasing patterns of distributors and retailers, including
customer budgeting cycles, the quality of products sold, price and other
competitive conditions in the industry, changes in the Company's level of
operating expenses, changes in the Company's sales incentive plans, the
cancellation of licenses during the warranty period, non-renewal of maintenance
agreements, the effects of extended payment terms (particularly for
international customers), economic conditions generally or in various geographic
areas, and other factors discussed in this section.

     A relatively high percentage of the Company's operating expenses is fixed
over the short term and if anticipated revenue for a fiscal quarter does not
occur or is delayed, the operating results for that quarter will be immediately
and adversely affected. The Company historically has operated with little
product backlog, because its products are generally shipped as orders are
received. As a result, revenue of the Company in any quarter will depend on the
volume and timing of, and the ability to fill, orders received in that quarter.
In addition, a substantial portion of the Company's revenue for most quarters is
booked and shipped in the last month of the quarter such that the magnitude of
the quarterly fluctuations may not become evident until late in or even at the
end of the particular quarter.

     Seasonality of Operating Results.  The Company's 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, the
Company has historically experienced lower revenue for the first quarter of a
fiscal year than in the fourth quarter of the prior fiscal year. The Company
typically has recognized a high proportion of its quarterly revenue during the
last month of a fiscal quarter and significant fluctuations in new order revenue
                                       26
<PAGE> 152

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 the Company's expenses do not vary with revenue.
Due to all of the foregoing factors, it is possible that in some future quarters
the Company's operating results will be below the expectations of stock market
analysts and investors and that the Company's share price would likely be
materially adversely affected.

     Product Concentration.  A large portion of the Company's total net revenue
is derived from products and related services for mainframe application
development in the COBOL language and COBOL compilers running on workstations
and personal computers. The Company expects that a substantial portion of its
total net revenue will be derived from such products and services in the future.
As a result, the Company's future operating results depend upon continued market
acceptance and use of the COBOL language. Any decline in the demand for or
market acceptance or use of the COBOL language or mainframes as a result of
competition, technological change or other factors could have a material adverse
effect on the Company's business, financial condition and results of operations.

     Year 2000 Business and Compliance Issues.  Information concerning the
Company's state of Year 2000 readiness, the demand for its Year 2000 remediation
products and services, the costs associated with its Year 2000 issues and its
contingency plans, and the Company's state of euro readiness is incorporated
herein by reference to the information included above in this Annual Report
Detail under the captions entitled "Year 2000 considerations" and "Euro
considerations" in the "Management's Discussion and Analysis of Results of
Operations and Financial Condition" section.

     Rapid Technological Change; Dependence on New Products.  The Company is in
a market that is subject to rapid technological change. The Company must
continually adapt to that change by improving its products and introducing new
products, technologies and services. The growth and financial performance of the
Company will depend in part on its ability, on a timely and cost-effective
basis, to develop and introduce enhancements of existing products and new
products that accommodate the latest technological advances and standards,
customer requirements and market conditions. The Company's ability to develop
and market enhancements of existing products and new products depends in part on
its ability to attract and retain qualified employees. In the past, the Company
has experienced delays and increased expenses in developing certain new
products. Any failure by the Company to anticipate or respond adequately to
changes in technology and market conditions, to complete product development and
introduce new products on a timely basis and with an adequate level of
performance and functionality, or to attract and retain qualified employees,
could materially adversely affect the Company's business, financial condition
and results of operations.

     Competition.  The markets in which the Company competes are characterized
by rapid technological change and aggressive competition. The Company expects
competition to increase in the future from existing competitors and from other
companies that may enter the Company's existing or future markets with similar
or substitute solutions that may be less costly or provide better performance or
functionality than the Company's products. Some of the Company's current and
prospective competitors in its product and service markets have greater
financial, marketing or technical resources than the Company 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 can the Company. There can be
no assurance that other companies will not 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 possessing
technological, marketing or other competitive advantages may emerge and rapidly
acquire market share. Furthermore, there can be no assurance that the Company
will be able to compete effectively in the future in the professional services
market.

     Susceptibility to General Economic Conditions.  The Company's revenue and
results of operations are subject to fluctuations in the general economic
conditions in the various areas of the world in which it does business. The
risks inherent in conducting international business generally include exposure
to exchange rate fluctuations (see the section entitled "Exchange rate
fluctuations" below), longer payment cycles, greater difficulties in accounts
receivable collection and enforcing agreements, tariffs and other restrictions
on foreign trade, U.S. export requirements, economic and political instability,
withholding and other tax consequences, restrictions on repatriation of
earnings, and the burdens of complying with a wide variety of foreign laws. In

                                       27
<PAGE> 153

addition, the laws of certain foreign countries in which the Company's products
may be marketed may not protect the Company's intellectual property rights to
the same extent, as do the laws of the United States and Europe.

     There can be no assurance that the factors described above will not have an
adverse effect on the Company's future international revenue

     Dependence on Key Personnel.  Several of the senior management personnel of
the Company are relatively new to the Company, including the Company's Chief
Executive Officer and Chief Financial Officer, and the Company's 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 there can be no assurance that the Company will be able to attract
and retain a sufficient number of qualified personnel to conduct its business in
the future. The Company's success depends to a significant degree upon the
continued contributions of its key management, marketing, product development,
professional services and operational personnel, including key personnel of
acquired companies. The Company will not have employment agreements with most of
its key personnel, nor does it maintain key person life insurance on any of
these persons.

     Management of Growth.  Both the Company and INTERSOLV have recently
experienced a period of rapid growth in net revenue. This growth has placed a
significant strain on the financial, management, operational and other resources
of the combined companies, and if it continues is expected to continue to place
a significant strain on the Company's financial, management, operational and
other resources. There can be no assurance that the Company's management
personnel, systems, procedures and controls will be adequate to support the
Company's existing and future operations.

     Volatility of Stock Price.  The market price of the Company's securities
has experienced significant price volatility, particularly since the
announcement of the Company's proposed acquisition of INTERSOLV in June 1998,
and such volatility may occur in the future. Factors such as actual or
anticipated fluctuations in the Company's operating results, changes in
financial estimates by securities analysts, announcements of technological
innovations, new products or new contracts by the Company or its competitors,
developments with respect to patents, copyrights or proprietary rights,
conditions and trends in the software and other technology industries, adoption
of new accounting standards affecting the software industry, general market
conditions and other factors may have a significant impact on the market price
of the Company's securities. Furthermore, the stock market has 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 the Company's securities.

     Recent and Future Acquisitions.  The challenges of integrating the
organizations and operations of the Company and INTERSOLV have been compounded
by ongoing efforts associated with the integration of recent acquisitions by
both companies, including the acquisitions by the Company of Millennium UK
Limited in April 1997, XDB Systems, Inc. in January 1998, Micro Focus Italia
S.r.L. in May 1998 and Advanced Software Engineering Pty. Ltd. in August 1998
and the acquisition by INTERSOLV of SQL Software, Ltd. in March 1998. The
Company also acquired Essential Software, Inc. (dba The Marathon Group) in
August 1999. The Company is still in the process of integrating the operations
acquired in these transactions with its own. There can be no assurance that the
anticipated benefits of recently concluded business combinations will be
realized. In addition, these acquisitions have required significant additional
management resources and attention. The Company expects to continue growing its
business through acquisitions. If the Company is unsuccessful in integrating and
managing the recently acquired businesses or other businesses it may acquire in
the future, the Company's business, financial condition and results of
operations could be adversely affected in future periods.

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

                                       28
<PAGE> 154

  Exchange rate fluctuations

     MERANT prepares separate consolidated financial statements expressed in
U.S. dollars and G.B. pounds. Revenue, costs and expenses arising in currencies
other than the reporting currency are translated using average exchange rates.
Assets and liabilities denominated in currencies other than the reporting
currency are translated at exchange rates in effect at the balance sheet date.

     The majority of the Company's net revenue arises in U.S. dollars
(approximately 60% in 1999), whereas its costs are incurred approximately
equally in U.S. dollars and other currencies, predominately G.B. pounds.
Consequently fluctuations in exchange rates, particularly between the U.S.
dollar and the G.B. pound, may have a significant impact on the Company's
operating results, notably when expressed in G.B. pounds.

     In 1999, 1998 and 1997, fluctuations between the U.S. dollar and the G.B.
pound have not been significant, and net exchange rate gains or losses on
operational transactions have been immaterial.

  LIQUIDITY AND CAPITAL RESOURCES

     In fiscal 1999, operating activities generated $18.3 million in cash.
Investing activities used $16.4 million, primarily due to investment of $8.5
million in capitalized and purchased software and $6.4 million in fixed assets.

     Financing activities in the form of share option exercises and purchases
under the employee stock purchase plan generated $1.9 million which offset the
$3.1 million net repayment of various debt obligations. Overall cash increased
$0.1 million.

     In fiscal 1998, operating activities generated $44.1 million in cash, after
spending $3.5 million for various acquisition-related costs. Investing
activities used $62.3 million, as the Company invested $10.3 million in
capitalized and purchased software and $18.3 million in fixed assets. Financing
activities in the form of share option exercises and purchases under the
employee stock purchase plan generated $11.0 million which partially offset the
$3.5 million net repayment of various debt obligations. Overall cash decreased
$11.0 million.

     In fiscal 1997, operating activities generated $26.5 million in cash, after
spending $3.2 million for various acquisition-related costs.

     Investing activities used $27.3 million, as the Company invested $17.7
million in capitalized and purchased software and $11.0 million, net, in fixed
assets. Financing activities in the form of share option exercises and
repurchases of Company's common stock, net, generated $1.3 million. In addition
borrowings under the line of credit increased $6.4 million. Overall cash
increased $5.6 million.

     At April 30, 1999 the Company had cash and short-term investments amounting
to $121.4 million. (1998: $126.9 million).

     The Company has in place a line of credit under the terms of which
unsecured financing of up to $8.0 million is available until January 2001. At
April 30, 1999, borrowings totalling $2.7 million had been made against this
line of credit compared to $1.7 million at the end of fiscal 1998 (1998: $1.7
million).

     MERANT believes it is important to maintain a conservative capital
structure and a strong cash position. Cash is primarily invested in liquid money
market investments. The Company's 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.

     The Company believes that existing cash balances in combination with
internally generated funds and its available bank line of credit will be more
than sufficient to meet cash requirements in fiscal 2000.

                                       29
<PAGE> 155

  MARKET RISK

     The Company is exposed to financial market risks, including interest rates
and foreign currency exchange rates. The Company does not use derivative
financial instruments for speculative or trading purposes.

     The primary objective of the Company's investment policy is to preserve
principal while maximising yield without significantly increasing risk. At April
30, 1999, the fair value of the Company's financial instruments with exposure to
interest rate risk was $35,000,000. A hypothetical 50 basis point increase in
interest rates would result in an approximate $174,000 decrease in the fair
value of the Company's securities. This sensitivity analysis is performed on the
Company's financial positions at April 30, 1999. Actual results may differ
materially from this analysis.

     The Company is exposed to the effects of foreign currency exchange rate
fluctuations, particularly, but not exclusively, between the U.S. dollar and
G.B. pounds sterling. The Company has established a hedging program utilising
foreign currency forward contracts, which substantially have maturities of sixty
days or less, to hedge the value of assets and liabilities recorded in foreign
currencies against fluctuations in exchange rates. The foreign exchange forward
contracts used are non-leveraged, over the counter instruments that involve
little complexity. No foreign currency exchange contracts were outstanding at
April 30, 1999.


                                       30
<PAGE> 156

                                   MERANT PLC
                           FINANCIAL STATEMENTS 1999

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                   US FORMAT

<TABLE>
<CAPTION>
                                                                  THREE MONTHS
                                                     YEAR ENDED      ENDED       YEAR ENDED    YEAR ENDED
                                                     APRIL 30,     APRIL 30,     JANUARY 31,   JANUARY 31,
AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND ADS DATA     1999          1998          1998          1997
- ---------------------------------------------------  ----------   ------------   -----------   -----------
<S>                                                  <C>          <C>            <C>           <C>
NET REVENUE
  Product revenue.................................    $193,144      $61,384       $198,793      $162,439
  Maintenance revenue.............................      98,858       24,533         88,015        75,524
  Service revenue.................................      82,200       21,070         76,111        45,677
                                                      --------      -------       --------      --------
     TOTAL NET REVENUE............................     374,202      106,987        362,919       283,640
                                                      --------      -------       --------      --------
COST OF REVENUE
  Cost of product revenue.........................      14,390        3,392         13,255        12,304
  Cost of maintenance revenue.....................      24,445        5,599         20,446        22,957
  Cost of service revenue.........................      68,074       17,409         62,376        31,706
                                                      --------      -------       --------      --------
     TOTAL COST OF REVENUE........................     106,909       26,400         96,077        66,967
                                                      --------      -------       --------      --------
GROSS PROFIT......................................     267,293       80,587        266,842       216,673
                                                      --------      -------       --------      --------
OPERATING EXPENSES
  Research and development (note 4)...............      59,851       14,551         60,828        64,311
  Sales and marketing.............................     155,680       40,137        134,671       126,642
  General and administrative......................      35,158        7,414         27,737        23,440
  Non-recurring charges (note 5)..................      49,662       17,292         17,468        37,603
                                                      --------      -------       --------      --------
     TOTAL OPERATING EXPENSES.....................     300,351       79,394        240,704       251,996
                                                      --------      -------       --------      --------
(LOSS) INCOME FROM OPERATIONS.....................     (33,058)       1,193         26,138       (35,323)
Interest income, net..............................       6,334        1,151          3,935         2,946
                                                      --------      -------       --------      --------
(LOSS) INCOME BEFORE INCOME TAXES.................     (26,724)       2,344         30,073       (32,377)
Income taxes (note 11)............................      (1,808)        (855)        (9,925)       (3,479)
                                                      --------      -------       --------      --------
NET (LOSS) INCOME.................................    $(28,532)     $ 1,489       $ 20,148      $(35,856)
                                                      --------      -------       --------      --------
Net (loss) income per share: basic (note 6).......    $  (0.20)     $  0.01       $   0.15      $  (0.27)
Net (loss) income per ADS: basic (note 6).........    $  (1.00)     $  0.05       $   0.73      $  (1.35)
Shares used in computing net (loss) income per
  share: basic (note 6)...........................     143,130      137,823        137,351       132,327
ADSs used in computing net (loss) income per ADS:
  basic (note 6)..................................      28,626       27,565         27,470        26,465
Net (loss) income per share: diluted (note 6).....    $  (0.20)     $  0.01       $   0.14      $  (0.27)
Net (loss) income per ADS: diluted (note 6).......    $  (1.00)     $  0.05       $   0.70      $  (1.35)
Shares used in computing net (loss) income per
  share: diluted (note 6).........................     143,130      145,618        144,326       132,327
ADSs used in computing net (loss) income per ADS:
  diluted (note 6)................................      28,626       29,124         28,865        26,465
</TABLE>

- ---------------

NOTE: Share and per share data for all periods presented has been restated to
      comply with SFAS 128 -- Earnings Per Share (see note 1 to the consolidated
      financial statements on page 36) and to reflect the 5-for-1 stock split of
      the Company's Ordinary Shares, which was effective as of the close of
      business on March 13, 1998 (see note 14 to the consolidated financial
      statements on page 54.) Each American Depositary Share ("ADS") represents
      five Ordinary Shares.

 See accompanying notes to consolidated financial statements on pages 35 to 55.

                                       31
<PAGE>  157

                                   MERANT PLC
                           FINANCIAL STATEMENTS 1999

                          CONSOLIDATED BALANCE SHEETS
                                   US FORMAT

<TABLE>
<CAPTION>
                                                              APRIL 30,   APRIL 30,
                    AMOUNTS IN THOUSANDS                        1999        1998
                    --------------------                      ---------   ---------
<S>                                                           <C>         <C>
ASSETS
CURRENT ASSETS:
  Cash and cash equivalents.................................  $ 86,580    $ 86,459
  Short-term investments....................................    34,804      40,448
  Accounts receivable, net of allowances for doubtful
     accounts of $4,785 ($5,133 in 1998)....................   111,317     101,847
  Prepaid expenses and other assets.........................    13,485      11,871
                                                              --------    --------
     TOTAL CURRENT ASSETS...................................   246,186     240,625
                                                              --------    --------
FIXED ASSETS:
  Property, plant and equipment, net (note 7)...............    46,090      52,212
  Goodwill, net of amortization of $7,271 ($3,686 in
     1998)..................................................    10,239       6,520
  Software product assets, net of amortization of $129,060
     ($113,027 in 1998).....................................    17,007      25,234
  Other assets..............................................     3,560       9,124
                                                              --------    --------
     TOTAL ASSETS...........................................  $323,082    $333,715
                                                              --------    --------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
  Borrowings (note 8).......................................  $  2,716    $  5,137
  Accounts payable..........................................    12,150      15,170
  Accrued employee compensation and commissions.............    24,352      25,860
  Income taxes payable......................................    18,325      15,583
  Deferred revenue..........................................    69,155      55,477
  Other current liabilities.................................    29,869      21,670
                                                              --------    --------
     TOTAL CURRENT LIABILITIES..............................   156,567     138,897
                                                              --------    --------
Long term debt and other liabilities........................        --         648
Deferred income taxes (note 11).............................    14,304      14,727
                                                              --------    --------
     TOTAL LIABILITIES......................................  $170,871    $154,272
                                                              --------    --------
COMMITMENTS AND CONTINGENCIES (notes 9 and 10)
SHAREHOLDERS' EQUITY:
  Ordinary shares: 2 pence (G.B.) par value 212,000 shares
     authorized 143,673 shares issued and outstanding
     (142,012 in 1998)......................................  $  4,691    $  4,679
  Additional paid-in capital................................   154,868     153,171
  Treasury stock (3,810 shares; 1998: 3,926 shares).........    (7,552)     (7,769)
  Retained earnings.........................................     8,850      37,382
  Accumulated other comprehensive loss......................    (8,646)     (8,020)
                                                              --------    --------
     TOTAL SHAREHOLDERS' EQUITY.............................   152,211     179,443
                                                              --------    --------
     TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.............  $323,082    $333,715
                                                              --------    --------
</TABLE>

- ---------------

NOTE: Share data for all periods presented has been restated to reflect the
      5-for-1 stock split of the Company's Ordinary Shares, which was effective
      as of the close of business on March 13, 1998 (see note 14 to the
      consolidated financial statements on page 54.) Each American Depositary
      Share ("ADS") represents five Ordinary Shares.

 See accompanying notes to consolidated financial statements on pages 35 to 55.

                                       32
<PAGE> 158

                                   MERANT PLC
                           FINANCIAL STATEMENTS 1999

                      CONSOLIDATED STATEMENTS OF CASH FLOW
                                   US FORMAT

<TABLE>
<CAPTION>
                                                                          THREE MONTHS      YEAR          YEAR
                                                             YEAR ENDED      ENDED          ENDED         ENDED
                                                             APRIL 30,     APRIL 30,     JANUARY 31,   JANUARY 31,
IN THOUSANDS                                                    1999          1998          1998          1997
- ------------                                                 ----------   ------------   -----------   -----------
<S>                                                          <C>          <C>            <C>           <C>
OPERATING ACTIVITIES
  NET (LOSS) INCOME........................................   $(28,532)     $  1,489      $ 20,148      $(35,856)
  Adjustments to reconcile net (loss) income to cash
    provided by operations
    Depreciation of fixed assets...........................     12,571         4,166        12,276        14,156
    Amortization of software product assets................     14,751         3,332        14,916        21,390
    Amortization of goodwill...............................      3,585           464         1,391            --
    Write-down of software and intangible assets...........      2,000            --            --        22,535
    Write-down of purchased research and development.......         --        15,739        15,739            --
    Gain on sale of discontinued product lines.............         --           423           423            --
    Restructuring/acquisition charges......................      4,774          (496)         (496)       (3,247)
    Loss on sale of fixed assets...........................         --         1,780           207           504
    Deferred income taxes..................................       (423)       (4,426)           --         2,004
  Changes in operating assets and liabilities:
    Accounts receivable....................................     (4,134)        2,840       (42,287)          878
    Prepaid expenses and other assets......................     (1,614)       (1,500)         (942)        3,987
    Accounts payable.......................................     (3,020)        5,162         2,992          (457)
    Accrued employee compensation..........................     (1,508)       (3,403)        6,581          (890)
    Income taxes payable...................................      2,742         3,059         6,219        (2,204)
    Deferred revenue.......................................     13,678          (349)        5,524           191
    Other current liabilities..............................      3,445         2,814         1,366         3,553
                                                              --------      --------      --------      --------
NET CASH PROVIDED BY OPERATING ACTIVITIES..................     18,315        31,094        44,057        26,544
                                                              --------      --------      --------      --------
INVESTING ACTIVITIES
  Purchases of property, plant and equipment, net of
    capital lease obligations incurred.....................     (6,449)       (4,815)      (18,269)      (11,932)
  Software product assets..................................     (8,524)       (2,480)      (10,285)      (17,739)
  Proceeds from sale of discontinued product lines.........         --         1,200         1,200            --
  Acquisition of subsidiaries, net of cash balances
    acquired...............................................     (7,304)        1,589        (1,848)           --
  Available-for-sale securities............................      5,649        (4,132)      (33,639)        1,654
  Disposals of property, plant and equipment...............         --            13           570           916
  Other....................................................         --            --            --          (209)
                                                              --------      --------      --------      --------
NET CASH USED BY INVESTING ACTIVITIES......................    (16,628)       (8,625)      (62,271)      (27,310)
                                                              --------      --------      --------      --------
FINANCING ACTIVITIES
  Issuance of ordinary shares, net of expenses.............      1,709         2,613         9,879         4,770
  Own shares...............................................        217            --         1,190        (3,445)
  Borrowings...............................................         --            --            --         6,422
  Repayment of borrowings..................................     (3,051)       (7,705)       (3,509)           --
  Repayment of capital leases..............................        (18)           (1)          (73)         (233)
                                                              --------      --------      --------      --------
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES...........     (1,143)       (5,093)        7,487         7,514
                                                              --------      --------      --------      --------
Effect of exchange rate changes on cash....................       (651)          247          (316)       (1,139)
                                                              --------      --------      --------      --------
Increase (decrease) in cash................................        121        17,623       (11,043)        5,609
Adjusted for INTERSOLV cash flow previously reported.......         --       (13,420)           --            --
Cash at beginning of period................................     86,459        82,256        93,299        87,690
                                                              --------      --------      --------      --------
CASH AT END OF PERIOD......................................   $ 86,580      $ 86,459      $ 82,256      $ 93,299
                                                              ========      ========      ========      ========
Supplemental disclosure of cash flow information:
  Income taxes paid during the period......................   $  4,317      $    207      $  1,464      $  1,291
                                                              ========      ========      ========      ========
  Interest paid during the period..........................   $    239      $    116      $    976      $    789
                                                              ========      ========      ========      ========
</TABLE>

 See accompanying notes to consolidated financial statements on pages 35 to 55.

                                       33
<PAGE> 159

                                   MERANT PLC
                           FINANCIAL STATEMENTS 1999

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                   US FORMAT

<TABLE>
<CAPTION>
                                                                                                      ACCUMULATED
                                       ORDINARY   ADDITIONAL                         COMPREHENSIVE       OTHER
                            NUMBER      SHARES     PAID-IN     TREASURY   RETAINED      INCOME       COMPREHENSIVE
IN THOUSANDS               OF SHARES    AMOUNT     CAPITAL      STOCK     EARNINGS      (LOSS)       INCOME (LOSS)    TOTAL
- ------------               ---------   --------   ----------   --------   --------   -------------   -------------   --------
<S>                        <C>         <C>        <C>          <C>        <C>        <C>             <C>             <C>
BALANCE, JANUARY 31,
  1996...................   131,876     $4,553     $118,318    $ (8,959)  $ 47,758                      $(5,793)     $155,877
Share options
  exercised..............       885          4        2,843       1,922         --                           --         4,769
Repurchase of ordinary
  shares.................    (1,048)        --           --      (3,445)        --                           --        (3,445)
Conversion of loan
  notes..................     2,607          9        3,580                                                             3,589
Comprehensive (loss):
  Net (loss).............        --         --           --          --    (35,856)    $(35,856)             --       (35,856)
  Unrealised (loss) on
    marketable
    securities, net of
    taxes................        --         --           --          --         --          (92)            (92)          (92)
  Currency translation
    adjustment...........        --         --           --          --         --       (1,349)         (1,349)       (1,349)
                                                                                       --------
  Comprehensive (loss)...                                                               (37,297)
                            -------     ------     --------    --------   --------     --------         -------      --------
BALANCE, JANUARY 31,
  1997...................   134,320      4,566      124,741     (10,482)    11,902                       (7,234)      123,493
Share options
  exercised..............     3,204         37        8,272       2,713         --                           --        11,022
Issued for
  acquisitions...........     4,186         37       18,741          --         --                           --        18,778
Conversion of loan
  notes..................        36         --           48          --         --                           --            48
Comprehensive income:
  Net income.............        --         --           --          --     20,148       20,148              --        20,148
  Unrealised gain on
    marketable
    securities, net of
    taxes................        --         --           --          --         --          134             134           134
  Currency translation
    adjustment...........        --         --           --          --         --       (1,550)         (1,550)       (1,550)
                                                                                       --------
  Comprehensive income...                                                                18,732
                            -------     ------     --------    --------   --------     --------         -------      --------
BALANCE, JANUARY 31,
  1998...................   141,746      4,640      151,802      (7,769)    32,050                       (8,650)      172,073
Share options
  exercised..............       266         39        1,369          --         --                           --         1,408
Comprehensive income:
  Net income.............        --         --           --          --      1,489        1,489              --         1,489
  Unrealised gain on
    marketable
    securities, net of
    taxes................        --         --           --          --         --          (72)            (72)          (72)
  Currency translation
    adjustment...........        --         --           --          --         --          696             696           696
                                                                                       --------
  Comprehensive income...                                                                 2,113
Adjustments re transition
  period.................                                                    3,843                            6         3,849
                            -------     ------     --------    --------   --------     --------         -------      --------
BALANCE, APRIL 30,
  1998...................   142,012      4,679      153,171      (7,769)    37,382                       (8,020)      179,443
Share options
  exercised..............     1,661         12        1,697         217                                                 1,926
Comprehensive (loss):
  Net (loss).............        --         --           --          --    (28,532)     (28,532)                      (28,532)
  Unrealised (loss) on
    marketable
    securities, net of
    taxes................        --         --           --          --         --            5               5             5
  Currency translation
    adjustment...........        --         --           --          --         --         (631)           (631)         (631)
                                                                                       --------
  Comprehensive (loss)...                                                               (29,158)
                            -------     ------     --------    --------   --------     --------         -------      --------
BALANCE, APRIL 30 1999...   143,673     $4,691     $154,868    $ (7,552)  $  8,850                      $(8,646)     $152,211
                            =======     ======     ========    ========   ========     ========         =======      ========
</TABLE>

 See accompanying notes to consolidated financial statements on pages 35 to 55.
                                       34
<PAGE> 160

                                   MERANT PLC
                           FINANCIAL STATEMENTS 1999

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   US FORMAT

     Effective November 30, 1998, MERANT plc ("the Company") elected to change
its fiscal year end and accounting reference date to April 30 from January 31.
The Company is therefore reporting results for the fiscal year ended April 30,
1999 ("fiscal 1999"). References to fiscal 1998 and fiscal 1997 are to the years
ended January 31, 1998 and January 31, 1997, respectively. This report also
discloses results for the three-month fiscal period ended April 30, 1998, which
were the basis of a Transition Report filed with the SEC on Form 20-F.

     The Company statutory accounts, within the meaning of section 240 of the
Companies Act 1985 of Great Britain, are drafted in accordance with accounting
principles generally accepted in the U.K. ("U.K. GAAP"). Copies of those
financial statements, for the fifteen-month period ended April 30, 1999, are
available from the Company's offices in Newbury and Rockville.

     Effective February 16, 1999, the Company changed its corporate name from
Micro Focus Group Plc to MERANT plc.

NOTE 1  SIGNIFICANT ACCOUNTING POLICIES

  Nature of operations

     MERANT designs, develops and markets computer software products and
provides related support services. Approximately 55% of its revenue is derived
from the license of software products, either directly to end-users or in the
form of distribution rights to original equipment manufacturers. Approximately
25% is derived from the provision of product support and maintenance services,
and the balance from the provision of professional services, principally
training and consulting. Product licenses are sold and supported in more than 60
countries. The principal market is the United States, which accounts for
approximately 60% of revenue; a further 20% of revenue is derived from customers
in Europe and approximately 10% is earned in the Pacific Rim, and the remaining
10% from customers located in the rest of the world.

  Principles of consolidation

     The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries, including INTERSOLV, Inc, which
merged with the Company effective September 24, 1998. They have been prepared in
accordance with U.S. GAAP, which differs from U.K. GAAP, particularly as to the
treatment of acquisitions and goodwill and the presentation of certain items in
the financial statements.

     As more fully described in Note 2, the Company has concluded several
business combinations in the past three fiscal years. These transactions have
been accounted for either under the pooling-of-interests method or the purchase
method, as appropriate. With respect to the merger with INTERSOLV, Inc, which
was accounted for using the pooling-of-interests method, the consolidated
financial statements at January 31, 1998, and for the years ended January 31,
1998 and 1997, have been restated to include the financial results of INTERSOLV,
Inc at April 30, 1998, and for the years ended April 30, 1998 and 1997,
respectively. Consequently, financial data for the three months ended April 30,
1998 are included in both the three months ended April 30, 1998 and the year
ended January 31, 1998. All significant inter-company balances and transactions
have been eliminated on consolidation.

     Certain reclassifications of data presented in the 1998 and 1997 financial
statements and related notes have been made to conform with the 1999
presentation. Specifically, the presentation of net revenue and cost of revenue
in the statements of income has been revised in order to analyse service revenue
and related direct costs between maintenance and other services. The results of
operations of the Company are not affected by this changed presentation.

                                       35
<PAGE> 161
                                   MERANT PLC
                           FINANCIAL STATEMENTS 1999

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   US FORMAT

NOTE 1  SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

  Use of estimates

     The preparation of financial statements in accordance with U.S. GAAP
requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual results
could differ from those estimates.

  Revenue recognition

     The Company has adopted Statement of Position ("SOP") 97-2 "Software
Revenue Recognition with Respect to Certain Transactions". Adoption of SOP 97-2
did not have a material effect on the Company's results of operations or
financial condition.

     Product revenue: the Company's standard end user license agreement for the
Company's products provides for an initial fee to use the product in perpetuity
up to a maximum number of users. The Company also enters into other types of
license agreements, typically with major end user customers, which allow for the
use of the Company's products, usually restricted by the number of employees,
the number of users, or the license term. Fees from licenses are recognized as
revenue upon product shipment, provided a signed agreement is in place, fees are
fixed or determinable, and collection of the resulting receivable is deemed
probable. Fees from licenses sold together with consulting services are
generally recognized upon shipment provided that the above criteria have been
met and payment of the license fees is not dependent upon the performance of the
consulting services. In instances where the aforementioned criteria have not
been met, both the license and consulting fees are recognized under the
percentage of completion method of contract accounting. The Company provides for
sales returns based on historical rates of return.

     Maintenance revenue: maintenance agreements generally call for the Company
to provide technical support and software updates to customers. Revenue on
technical support and software update rights is recognized ratably over the term
of the support agreement. Payments for maintenance fees are generally made in
advance and are nonrefundable.

     Service revenue: the Company provides consulting and education services to
its customers. Revenue from such services is generally recognized as the
services are performed.

  Advertising costs

     Advertising costs are charged to operations when incurred. Advertising
expense, which includes media, agency and promotional expenses, amounted to
$12,984,000, $2,704,000 $8,791,000 and $14,388,000 in fiscal 1999, the three
month fiscal period to April 30, 1998 and in fiscal 1998 and 1997, respectively.

  Net income per share

     The Company adopted SFAS 128 "Earnings per Share" in the third quarter of
fiscal 1998. All prior year net income per share data reported herein has been
restated accordingly.

     Basic net income per share is calculated as net income divided by the
weighted average number of ordinary shares outstanding during the period.

     Diluted net income per share is calculated as net income divided by the
weighted average number of ordinary shares outstanding during the period,
including dilutive ordinary share equivalents, represented by shares issuable
upon exercise of share options. The computation assumes the proceeds from the
exercise of

                                       36
<PAGE> 162
                                   MERANT PLC
                           FINANCIAL STATEMENTS 1999

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   US FORMAT

NOTE 1  SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

share options are used to repurchase the Company's ordinary shares at their
average market price during each period.

     Earnings per share data is set out in note 6 to the consolidated financial
statements on page 45. The Company also reports net earnings per American
Depositary Share ("ADS") equivalent; each ADS represents five ordinary shares.

  Income taxes

     The provision for income taxes includes U.K., U.S. and other income taxes
currently payable and those deferred because of temporary differences between
financial and tax reporting.

  Cash, cash equivalents and short-term investments

     Cash and cash equivalents include cash placed on short-term deposit and
short-term money market instruments where the maturity date is less than three
months from the initial date of deposit.

     In accordance with SFAS 115, "Accounting for Certain Investments in Debt
and Equity Securities," the appropriate classification of debt securities is
determined at the time of purchase and re-evaluated at each balance sheet date.
Debt securities that the Company has the intent and the ability to hold until
maturity are classified as held-to-maturity, and all other debt securities are
classified as available-for-sale.

     Short-term investments represents available-for-sale securities with
original maturities in excess of three months from the initial date of
investment. The cost of securities sold is based on the specific identification
method.

  Derivative financial instruments

     The Company enters into forward foreign currency contracts to hedge the
value of assets and liabilities recorded in foreign currencies against
fluctuations in exchange rates.

     For these financial instruments, no impact on financial position or results
of operations would result from a change in the underlying exchange rate, as a
change in the derivatives value would be offset by an opposite change in the
hedged exposure. The Company does not hold or issue derivatives for speculative
trading purposes.

  Concentration of credit risk

     Financial instruments which potentially subject the Company to
concentrations of credit risk, as defined by SFAS 105 "Disclosure of Information
about Financial Instruments with Off-Balance Sheet Risk and Financial
Instruments with Concentration of Credit Risk", consist principally of
short-term investments, foreign exchange contracts and trade receivables.

     MERANT places its short-term investments only in high quality financial
instruments and limits the amounts invested with any one issuer. The Company is
exposed to credit risk in the event of default by these institutions to the
extent of the amount recorded on the balance sheet. The counterparties to the
agreements relating to the Company's foreign exchange contracts are financial
institutions of high credit standing. Concentrations of credit risk with respect
to trade receivables are limited due to the large, widespread customer base
which encompasses many different industries and countries. The Company performs
ongoing credit evaluations of its customers and generally does not require
collateral. The Company maintains reserves

                                       37
<PAGE> 163
                                   MERANT PLC
                           FINANCIAL STATEMENTS 1999

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   US FORMAT

NOTE 1  SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

for potential losses, and such losses have been within management's
expectations. No single customer represented more than 5% of MERANT's revenue in
1999, 1998 or 1997.

  Translation of foreign currencies

     Assets and liabilities denominated in currencies other than US dollars are
translated at exchange rates in effect at the balance sheet date. Revenue, costs
and expenses are translated using average rates. Translation adjustments
resulting from the process of translating financial statements denominated in
currencies other than U.S. dollars are dealt with separately in shareholders'
equity.

  Inventories

     Inventories, consisting principally of diskettes and technical manuals, are
stated at the lower of cost or market, using the first-in, first-out method.
Contracts in progress, representing engineering costs associated with
non-cancelable license agreements prior to delivery, are included in inventories
and expensed when the related revenue is recognized. Inventories are included in
the balance sheet under Prepaid Expenses and Other Assets.

  Property, plant and equipment

     Property, plant and equipment is stated at cost less accumulated
depreciation and amortization. Depreciation and amortization is computed using
the straight-line method over estimated economic lives from the time the asset
is put into use. Present estimated economic lives are as follows:

<TABLE>
<S>                                                        <C>
Office buildings.........................................  40 years
Leasehold improvements...................................  over the lease term
Computer equipment.......................................  3-5 years
Office equipment.........................................  7-11 years
Transportation equipment.................................  3-4 years
</TABLE>

  Leasing

     Leases which transfer substantially all the benefits and risks of ownership
of an asset to the Company are capitalized as fixed assets. The amount
capitalized is the net present value of future lease payments, this sum also
being treated as a liability.

     Depreciation on such leased assets is provided at rates calculated to write
off the capitalized cost over the shorter of the lease term and the asset's
economic life. Lease payments are apportioned between finance charges (computed
on the basis of implicit interest rates) and a reduction in the original
liability.

     Rentals paid under operating leases are expensed on a straight line basis
over the term of the lease.

  Goodwill

     Goodwill represents the excess of amounts paid on business acquisitions
over the aggregate fair value of the net assets acquired. Goodwill arising on a
purchase is capitalized as an intangible fixed asset and amortized over its
estimated useful life. The estimated life will depend on the length of the
future period expected to benefit from the purchase. Where there is a potential
impairment of goodwill, based on cash flow projections of the businesses
acquired, amortization is accelerated.

                                       38
<PAGE> 164
                                   MERANT PLC
                           FINANCIAL STATEMENTS 1999

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   US FORMAT

NOTE 1  SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

  Software product assets (capitalized software development costs)

     Costs related to the initial development and design of new software
products prior to the establishment of technological feasibility are written off
as research and development costs. Once technological feasibility has been
reasonably established, either by the completion and successful testing of a
detailed program design, or by the creation and testing of an operative working
model, further development costs incurred are capitalized as software product
assets, in compliance with Statement of Financial Accounting Standards ("SFAS")
No. 86 "Accounting for the Cost of Computer Software to be Sold, Leased or
Otherwise Marketed".

     Software licensed for inclusion in the MERANT product set, including
software acquired through acquisitions which meets the provisions for
capitalization under SFAS 86, is also included in software product assets.

     During fiscal 1999, the three-month fiscal period ended April 30, 1998, and
fiscal 1998 and 1997, purchased software totaling $--, $--, $1.1 million and
$--, respectively was added to software product assets.

     Software product assets are amortized using the straight line method over
the economic life of the products, which in most cases is estimated to be three
to four years. Where a shortfall in future revenue from a product is
anticipated, amortization is accelerated. In the event that the remaining
estimated economic life of a product is judged to be reduced significantly, the
carrying amount of the capitalized software costs may be reduced.

     Amortization of software product assets is included in research and
development costs.

  Stock based compensation

     The Company accounts for its stock-based employee compensation plans using
the intrinsic value method prescribed by APB Opinion No. 25 "Accounting for
Stock Options Issued to Employees", and accordingly, since all options are
granted with an exercise price equal to the fair value of the shares at the date
of grant, recognizes no compensation expense for share option grants.

     Pro-forma disclosures of net income (loss) and net income (loss) per share
computed as if the fair-value-based method had been applied are made in
accordance with SFAS 123 "Accounting for Stock Based Compensation".

  Other recent pronouncements

     In fiscal 1999, the Company adopted SFAS 130 "Reporting Comprehensive
Income", SFAS 131 "Disclosures About Segments of an Enterprise and Related
Information", and SFAS 132 "Disclosures About Pension and Other Post-Retirement
Benefits". SFAS 130 requires disclosure of comprehensive income, represented by
net income plus other changes in non-owner shareholders' equity, including
unrealised gains and losses on SFAS 115 securities and foreign currency
translation adjustments. The Company discloses this data in its Consolidated
Statements of Shareholders' Equity.

     SFAS 131 changes the way in which corporations identify and report
operating segments in annual and interim financial statements. The statement
requires selected information and related disclosure about products and
services, geographic areas and major customers. Such information is reported in
note 12 to the

                                       39
<PAGE> 165
                                   MERANT PLC
                           FINANCIAL STATEMENTS 1999

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   US FORMAT

NOTE 1  SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

consolidated financial statements. Compliance with the requirements of these
statements did not affect the Company's results from operations or financial
position.

     SFAS 132 standardises disclosure requirements for pensions and other
post-retirement benefits.

     In December 1998 the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 98-9 "Modification of SOP 97-2, Software
Revenue Recognition with Respect to Certain Transactions". SOP 98-9 rescinds
certain provisions of 97-2 and permits the residual method for the calculation
of residual amounts for delivered elements. Adoption of this standard is not
expected to have a material effect on the Company's results from operations or
financial position.

     In June, 1998 the Financial Accounting Standards Board issued SFAS 133
"Accounting for Derivative Instruments and Hedging Activities". This statement
establishes accounting and reporting standards for derivative instruments and
requires recognition and measurement of all derivatives as assets or
liabilities. The Company will be required to adopt SFAS 133 in fiscal 2002.
Compliance is not expected to have a material effect on the Company's results
from operations or financial position.

NOTE 2  BUSINESS COMBINATIONS

     During fiscal 1999 MERANT completed three acquisitions.

     On May 15, 1998 the Company acquired all of the outstanding stock of its
Italian distributor, Micro Focus Italia, s.r.l. for total consideration of
$4,600,000. MF Italia changed its name to MERANT s.r.l. on March 1, 1999.

     On August 13, 1998 the Company acquired all of the outstanding stock of its
Australian distributor, Advanced Software Engineering Pty, Ltd for total
consideration of $2,480,000. ASE changed its name to MERANT Pty Limited on
February 16, 1999.

     Both transactions have been accounted for using the purchase method.
Accordingly, the excess of the estimated purchase price over the estimated fair
value of the net tangible assets of each of the acquired companies has been
allocated to goodwill, and the net assets and results of operations of both
companies have been combined with those of MERANT as of the respective dates of
acquisition and for the periods subsequent to acquisition, respectively.
Goodwill arising on the acquisitions, which amounted to $7,304,000, is being
amortised over its estimated economic life of four years.

     The results of operations of both these acquired companies prior to the
acquisitions were not material, and thus pro forma information has not been
provided.

     On September 24, 1998 the Company acquired all of the outstanding stock of
INTERSOLV, Inc ("INTERSOLV") in exchange for 63,084,000 ordinary shares in the
Company which represented a value of $272,000,000 on the date the merger was
completed. INTERSOLV, a public corporation based in Maryland, U.S.A., and listed
on the Nasdaq National Market, was a provider of software solutions that
facilitate the development, delivery and deployment of business information
systems. INTERSOLV's products and services were focused primarily in the areas
of application development management, enterprise data connectivity and
enterprise application renewal.

     Immediately prior to the transaction, INTERSOLV had a total of 22,940,000
outstanding shares. Under the terms of the agreement, each common share of
INTERSOLV was exchanged for 0.55 MERANT American Depositary Shares ("ADSs"). In
addition, each outstanding option or right to purchase or acquire shares of
INTERSOLV stock was assumed by the Company and became an option or right to
purchase or
                                       40
<PAGE> 166
                                   MERANT PLC
                           FINANCIAL STATEMENTS 1999

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   US FORMAT

NOTE 2  BUSINESS COMBINATIONS -- (CONTINUED)

acquire MERANT ADSs, with appropriate adjustments to the price and number of
shares based on the exchange ratio of 0.55 ADSs per INTERSOLV share. The merger
was structured as a tax-free reorganization under U.S. tax law. The Company
issued 12,617,000 new MERANT ADSs (representing 63,084,000 new MERANT ordinary
shares) in exchange for INTERSOLV's common stock and share equivalents
outstanding, which at the time of the completion of the transaction represented
approximately 46% of MERANT's share capital on a fully-diluted basis.

     The combination has been accounted for using the pooling-of-interests
method, and previously reported consolidated financial statements have been
restated to include the financial position and results of operations of
INTERSOLV. The following table reconciles the operating results for prior
periods to the amounts reflecting restatement of prior years to include
INTERSOLV operations.

<TABLE>
<CAPTION>
                                  FROM MAY 1,    THREE MONTHS
                                    1998 TO         ENDED       YEAR ENDED    YEAR ENDED
                                 SEPTEMBER 24,    APRIL 30,     JANUARY 31,   JANUARY 31,
(IN THOUSANDS)                       1998            1998          1998          1997
- --------------                   -------------   ------------   -----------   -----------
<S>                              <C>             <C>            <C>           <C>
Net revenue:
MERANT.........................    $ 68,256        $ 48,650      $167,309      $123,227
INTERSOLV......................      67,033          58,369       196,480       160,413
Eliminations...................          --             (32)         (870)
                                   --------        --------      --------      --------
As restated....................    $135,289        $106,987      $362,919      $283,640
                                   --------        --------      --------      --------
Net income (loss):
MERANT.........................    $  1,099        $  5,337      $ 14,633      $(14,690)
INTERSOLV......................      (2,138)         (3,848)        5,515       (21,166)
                                   --------        --------      --------      --------
As restated....................    $ (1,039)       $  1,489      $ 20,148      $(35,856)
                                   --------        --------      --------      --------
</TABLE>

     The Company recorded a charge of $49,662,000 in the second quarter of 1999
in connection with the INTERSOLV merger (see note 5 to the consolidated
financial statements on page 44).

     During the three-month fiscal period ended April 30, 1998, the Company
acquired, through its subsidiary, INTERSOLV, Inc, all of the outstanding stock
of SQL Software Ltd ("SQL") in exchange for the equivalent of 3,441,488 ordinary
shares in the Company. SQL was a privately-held UK-based provider of process
automation tools.

     The transaction was accounted for using the purchase method. The cost of
the transaction, including acquisition costs, was $19,200,000, of which
$15,739,000 was allocated to purchased research and development and was written
off at the time of acquisition since no technological feasibility or alternative
future use could be demonstrated. Additionally, $2,400,000 allocated to goodwill
and other intangibles, and is being amortized over its estimated economic life
which is estimated to be five years.

     In fiscal 1998 the Company completed two acquisitions.

     On January 20, 1998, the Company acquired all of the outstanding stock of
XDB Systems, Inc ("XDB") in exchange for 1,891,975 ordinary shares in the
Company which represented a value of $14,243,000 on the date the merger was
completed. The combination was accounted for using the pooling-of-interests
method. XDB, a privately-held corporation based in Columbia, Maryland, was a
provider of DB2 database development, maintenance and connectivity solutions.
The Company incurred charges in the third quarter of 1998 of approximately $1.6
million in connection with activities to complete this acquisition.

                                       41
<PAGE> 167
                                   MERANT PLC
                           FINANCIAL STATEMENTS 1999

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   US FORMAT

NOTE 2  BUSINESS COMBINATIONS -- (CONTINUED)

     On April 30, 1997, the Company acquired all of the outstanding stock of
Millennium UK Limited ("Millennium"), a privately-held consulting firm, for a
total consideration of $6,400,000, satisfied by a cash payment of $3,200,000 and
the issue of 745,710 ordinary shares in the Company. Millennium provided
specialized consulting and project management services. The transaction was
accounted for using the purchase method. Accordingly, the excess of the purchase
price over the estimated fair value of the net tangible assets, which amounted
to $6,737,000, was allocated to goodwill and is being amortised over its
estimated economic life, which is estimated to be three years.

NOTE 3  FINANCIAL INSTRUMENTS

     The Company invests its excess cash in accordance with an investment policy
approved by the Board of Directors. This policy authorizes investment in U.S.
government securities, municipal bonds, certificates of deposit with
highly-rated financial institutions and other specified money market instruments
of similar liquidity and credit quality.

     The Company has classified all of its investment securities as
available-for-sale and carries such securities at fair value, based on quoted
market prices. Unrealized gains and losses are reported as a separate component
of shareholders' equity. Available-for-sale securities with original maturities
of less than three months are classified as cash equivalents.

     Estimated fair values of financial instruments are based on quoted market
prices. The carrying amounts and fair value of the Company's financial
instruments are as follows:

<TABLE>
<CAPTION>
                                                            APRIL 30,   APRIL 30,
(IN THOUSANDS)                                                1999        1998
- --------------                                              ---------   ---------
<S>                                                         <C>         <C>
Cash and cash equivalents.................................   $86,580     $86,459
Short term investments....................................    34,804      40,448
                                                             -------     -------
</TABLE>

     Cash, cash equivalents and short term investments include the following
available-for-sale securities as defined in note 1:

<TABLE>
<CAPTION>
                                                        GROSS UNREALIZED   ESTIMATED
(IN THOUSANDS)                                 COST      GAINS (LOSSES)    FAIR VALUE
- --------------                                -------   ----------------   ----------
<S>                                           <C>       <C>                <C>
At April 30, 1999:
Money market funds..........................  $   173           --          $   173
Commercial paper............................    9,062         $  1            9,063
Variable rate notes.........................    4,409           --            4,409
Federal agency issues.......................    8,306          (21)           8,285
Corporate bonds and notes...................   22,595           (3)          22,592
                                              -------         ----          -------
                                              $44,545         $(23)         $44,522
                                              -------         ----          -------
At April 30, 1998:
Money market funds..........................  $   815           --          $   815
Commercial paper............................   20,721         $ 10           20,731
Certificates of deposit.....................    7,971           10            7,981
Federal agency issues.......................    3,870            5            3,875
Auction rate securities.....................    3,319           --            3,319
Corporate bonds and notes...................   22,954           42           22,996
                                              -------         ----          -------
                                              $59,650         $ 67          $59,717
                                              -------         ----          -------
</TABLE>

                                       42
<PAGE> 168
                                   MERANT PLC
                           FINANCIAL STATEMENTS 1999

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   US FORMAT

NOTE 3  FINANCIAL INSTRUMENTS -- (CONTINUED)

     The cost and estimated fair values of available-for-sale securities at
April 30, 1999 are set forth below:

<TABLE>
<CAPTION>
                                                                           ESTIMATED
                                                        GROSS UNREALIZED     FAIR
(IN THOUSANDS)                                 COST      GAINS (LOSSES)      VALUE
- --------------                                -------   ----------------   ---------
<S>                                           <C>       <C>                <C>
Less than three months......................  $ 9,717         $  1          $ 9,718
Between 3-12 months.........................   14,749            7           14,756
Over 12 months..............................   20,079          (31)          20,048
                                              -------         ----          -------
                                              $44,545         $(23)         $44,522
                                              -------         ----          -------
</TABLE>

     For balance sheet presentation, available-for-sale securities are
classified as follows:

<TABLE>
<CAPTION>
                                                            APRIL 30,   APRIL 30,
(IN THOUSANDS)                                                1999        1998
- --------------                                              ---------   ---------
<S>                                                         <C>         <C>
Cash and cash equivalents.................................   $ 9,718     $19,269
Short term investments....................................    34,804      40,448
                                                             -------     -------
                                                             $44,522     $59,717
                                                             -------     -------
</TABLE>

     Due to its worldwide operations, the Company is exposed to the effects of
foreign currency exchange rate fluctuations, particularly, but not exclusively,
between the U.S. dollar and G.B. pounds sterling. The Company uses derivative
financial instruments to reduce its exposure to market risks from changes in
foreign currency exchange rates. The derivative instruments used, which are
foreign exchange forward contracts, are non-leveraged, over-the-counter
instruments which involve little complexity.

     The notional amounts of foreign currency contracts were $-- and $4,800,000
at April 30, 1999 and April 30, 1998, respectively, and were predominantly to
exchange U.S. dollars for G.B. pounds sterling. Substantially all forward
foreign currency contracts entered into by the Company have maturities of 60
days or less.

  Sale of receivables

     In fiscal 1998 the Company entered into agreements to sell $2,536,000 in
accounts receivable at a net discount of approximately 7.25%, which was charged
to operations as incurred. $2,161,000 of these accounts receivable were sold on
a recourse basis, of which $520,000 remains outstanding at April 30, 1999 for
which the Company remains liable in the event of default.

NOTE 4  RESEARCH AND DEVELOPMENT COSTS

<TABLE>
<CAPTION>
                                            THREE MONTHS       YEAR          YEAR
                               YEAR ENDED       ENDED          ENDED         ENDED
                               APRIL 30,      APRIL 30,     JANUARY 31,   JANUARY 31,
(IN THOUSANDS)                    1999          1998           1998          1997
- --------------                 ----------   -------------   -----------   -----------
<S>                            <C>          <C>             <C>           <C>
Research and development
  costs, before
  capitalization.............   $53,624        $13,699      $   56,197    $    60,660
Costs capitalized as software
  product assets.............    (8,524)        (2,480)        (10,285)       (17,739)
Amortisation of capitalized
  costs......................    14,751          3,332          14,916         21,390
                                -------        -------      ----------    -----------
                                $59,851        $14,551      $   60,828    $    64,311
                                -------        -------      ----------    -----------
</TABLE>

                                       43
<PAGE> 169
                                   MERANT PLC
                           FINANCIAL STATEMENTS 1999

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   US FORMAT

NOTE 5  NON-RECURRING ITEMS

     During the second quarter of fiscal 1999, the Company incurred charges
amounting to $49,662,000 in respect of the acquisition of INTERSOLV, Inc and the
subsequent restructuring of the combined businesses. Aggregate direct
transaction costs totaling $24,549,000 were incurred for investment banker fees,
employee contractural obligations, the cost of listing new shares on the London
Stock Exchange and other professional fees. Costs associated with subsequent
integration efforts totaled $25,113,000 and were primarily comprised of the
write-off of redundant assets, distributor agreement buyouts and severance
costs. The write-off of redundant assets results primarily from duplicative
facilities and assets. Severance costs of $982,000 related to approximately 75
employees in the Company's administrative functions.

     Provisions for restructuring charges, included in other current liabilities
amounted to $5,910,000 and $--at April 30, 1999 and April 30, 1998 respectively.

     In the transition period to April 30, 1998, the Company recognized
non-recurring costs of $17,468,000, net, in its subsidiary company, INTERSOLV,
Inc. This charge included a $15,739,000 write off of purchased research and
development costs arising from the SQL acquisition, and costs of $1,800,000 on
exiting non-strategic product lines.

     As explained in note 1, the Company's results for fiscal 1998 include the
results of INTERSOLV, Inc for the year ended April 30, 1998 and consequently
also include the above non-recurring charge of $17,468,000.

     In fiscal 1997, the Company recorded non-recurring charges of $37,603,000.
INTERSOLV, Inc completed a comprehensive business strategy review of its primary
market opportunities, which led the company to record a charge of $28,933,000 to
write down capitalized and purchased software and certain related intangible
assets to their net realizable values. In addition, the Company incurred costs
totalling $8,670,000 in connection with a workforce reduction, facility closures
and consolidations, and asset write-downs.

                                       44
<PAGE> 170
                                   MERANT PLC
                           FINANCIAL STATEMENTS 1999

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   US FORMAT

NOTE 6  EARNINGS PER SHARE

     The following table discloses the net (loss) income per share and net
(loss) income per ADS equivalent; each ADS represents five ordinary shares. In
1999 3,435,000 ordinary share equivalents were antidilutive and therefore
excluded from the computation.

<TABLE>
<CAPTION>
                                                THREE MONTHS      YEAR          YEAR
                                   YEAR ENDED      ENDED          ENDED         ENDED
                                   APRIL 30,     APRIL 30,     JANUARY 31,   JANUARY 31,
          IN THOUSANDS                1999          1998          1998          1997
          ------------             ----------   ------------   -----------   -----------
<S>                                <C>          <C>            <C>           <C>
Net (loss) income per share:
Numerator for basic and diluted
  net (loss) income per share:
  net (loss) income..............   $(28,532)     $  1,489      $ 20,148      $(35,856)
                                    --------      --------      --------      --------
Denominator for basic net (loss)
  income per share -- weighted
  average shares outstanding.....    143,130       137,823       137,351       132,327
Dilutive share options...........         --         7,795         6,975            --
                                    --------      --------      --------      --------
Denominator for diluted net
  (loss) income per share........    143,130       145,618       144,326       132,327
                                    --------      --------      --------      --------
Net (loss) income per ADS:
Numerator for basic and diluted
  net (loss) income per ADS: net
  (loss) income..................   $(28,532)     $  1,489      $ 20,148      $(35,856)
                                    --------      --------      --------      --------
Denominator for basic net (loss)
  income per ADS -- weighted
  average ADSs outstanding.......     28,626        27,565        27,470        26,465
Dilutive share options...........         --         1,559         1,395            --
                                    --------      --------      --------      --------
Denominator for diluted net
  (loss) income per ADS..........     28,626        29,124        28,865        26,465
                                    --------      --------      --------      --------
</TABLE>

NOTE 7  PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
                                                          APRIL 30,   APRIL 30,
(IN THOUSANDS)                                              1999        1998
- --------------                                            ---------   ---------
<S>                                                       <C>         <C>
Land and buildings......................................  $ 22,263    $ 22,679
Leasehold improvements..................................     9,964       9,595
Computer and communications equipment & software........    70,845      73,413
Office equipment........................................    13,387       8,881
Transportation equipment................................       383         268
                                                          --------    --------
Property, plant and equipment -- at cost................   116,842     114,836
Less: accumulated depreciation and amortization.........   (70,752)    (62,624)
                                                          --------    --------
Property, plant and equipment -- net....................  $ 46,090    $ 52,212
                                                          --------    --------
</TABLE>

                                       45
<PAGE> 171
                                   MERANT PLC
                           FINANCIAL STATEMENTS 1999

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   US FORMAT

NOTE 7  PROPERTY, PLANT AND EQUIPMENT -- (CONTINUED)

     During fiscal 1999, the three-month fiscal period ended April 30, 1998 and
fiscal 1998 and 1997 depreciation expense, including depreciation on leased
assets, totalled $12,571,000, $4,166,000, $12,276,000 and $14,156,000
respectively.

NOTE 8  BORROWINGS

     Short term borrowings consist of:

<TABLE>
<CAPTION>
                                                             APRIL 30,   APRIL 30,
(IN THOUSANDS)                                                 1999        1998
- --------------                                               ---------   ---------
<S>                                                          <C>         <C>
Bank loan..................................................   $2,716      $1,652
Notes payable..............................................       --       3,485
                                                              ------      ------
                                                              $2,716      $5,137
                                                              ------      ------
</TABLE>

     The bank loan represents borrowings against an unsecured revolving
multi-currency facility, under the terms of which financing of up to
GBP 5,000,000 ($8,050,000 at April 30, 1999) or its equivalent in such other
currency as the Company may determine, is available until January 2001.
Borrowings under this facility bear interest at 0.75% above the London Interbank
Offered Rate ("LIBOR"). The amount outstanding against this credit line at April
30, 1999 represented loans totaling 2.6 million euros which were incurring
interest at a composite rate of 3.5%. The amount outstanding at April 30, 1998
represented a loan of 10 million French francs, which was incurring interest at
3.6%.

     The notes payable represented an unsecured credit arrangement with two
banks which expired in September, 1998. The weighted average interest rate
during fiscal 1998 was 8.5%.

NOTE 9  COMMITMENTS

     The Company leases office space and equipment under operating leases
expiring at various dates through 2017. In most cases, it is anticipated that
these leases will be renewed or replaced by other leases in the normal course of
business.

     The Company also leases transportation equipment under capital leases.
Minimum lease commitments as at April 30, 1999 are as follows:

<TABLE>
<CAPTION>
(IN THOUSANDS)
YEARS ENDED APRIL 30                                          OPERATING LEASES
- --------------------                                          ----------------
<S>                                                           <C>
2000........................................................      $12,509
2001........................................................        9,402
2002........................................................        7,472
2003........................................................        6,205
2004 and thereafter.........................................        8,443
                                                                  -------
Total minimum lease payments................................      $44,031
                                                                  -------
Less: amount representing interest..........................
Present value of net minimum lease payments.................
</TABLE>

     During fiscal 1999, the three-month fiscal period ended April 30, 1998 and
fiscal 1998 and 1997, rent expense totalled $12,086,000 $2,592,000, $10,206,000
and $9,793,000 respectively.

                                       46
<PAGE> 172
                                   MERANT PLC
                           FINANCIAL STATEMENTS 1999

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   US FORMAT

NOTE 10  CONTINGENCIES

     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 complaint, which was filed on
June 9, 1999. The lead plaintiffs seek to have the matter certified as a class
action of purchasers of the American Depository Shares of the Company during the
period from June 17, 1998 to November 12, 1998, including the former
shareholders of INTERSOLV, Inc who acquired American Depositary Shares in
connection with the merger involving the two companies. The consolidated
complaint alleges various violations of the federal securities laws and seeks
unspecified compensatory damages for alleged failure to disclose material
nonpublic information concerning the Company's business condition and prospects.

     The Company has filed a motion to transfer the matter to the Northern
District of California. The Company intends to defend all of this litigation
vigorously. However, due to the inherent uncertainties of litigation, the
Company cannot accurately predict the ultimate outcome of the litigation. Any
unfavorable outcome of litigation could have an adverse impact on the Company's
business, financial condition and results of operations.

     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 the Company's financial position, results of operations, or
liquidity.

NOTE 11  INCOME TAXES

     Income taxes consist of:

<TABLE>
<CAPTION>
                                                THREE MONTHS
                                   YEAR ENDED       ENDED       YEAR ENDED    YEAR ENDED
                                   APRIL 30,      APRIL 30,     JANUARY 31,   JANUARY 31,
(IN THOUSANDS)                        1999          1998           1998          1997
- --------------                     ----------   -------------   -----------   -----------
<S>                                <C>          <C>             <C>           <C>
Current:
  U.K. ..........................   $(1,535)        $(726)        $5,319        $  760
  U.S. federal...................        --            --          1,910           (88)
  U.S. state.....................       250           118            669           (91)
  Other..........................     3,711         1,755          1,917           893
                                    -------         -----         ------        ------
                                      2,426         1,147          9,815         1,474
                                    -------         -----         ------        ------
Deferred:
  U.K. ..........................      (618)         (292)           110         1,489
  U.S. federal...................        --            --             --           439
  U.S. state.....................        --            --             --            77
                                    -------         -----         ------        ------
                                       (618)         (292)           110         2,005
                                    -------         -----         ------        ------
Total:...........................   $ 1,808         $ 855         $9,925        $3,479
                                    -------         -----         ------        ------
</TABLE>

                                       47
<PAGE> 173
                                   MERANT PLC
                           FINANCIAL STATEMENTS 1999

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   US FORMAT

NOTE 11  INCOME TAXES -- (CONTINUED)

     The following table analyzes the differences between the U.K. statutory tax
rate and the effective tax rate for fiscal 1999.

<TABLE>
<CAPTION>
                                                  THREE MONTHS
                                  YEAR ENDED         ENDED       YEAR ENDED    YEAR ENDED
                                  APRIL 30,        APRIL 30,     JANUARY 31,   JANUARY 31,
                                     1999             1998          1998          1997
                                  ----------      ------------   -----------   -----------
<S>                            <C>                <C>            <C>           <C>
U.K. statutory tax rate......        30.9%           31.0%          31.3%         33.0%
Goodwill.....................        -2.5%              --             --            --
Permanent differences and
  other items................         6.6%            5.5%           1.7%         -5.8%
Non-recurring charges........       -41.8%              --             --        -37.9%
                                    ------           -----          -----        ------
Effective tax rate...........        -6.8%           36.5%          33.0%        -10.7%
                                    ------           -----          -----        ------
</TABLE>

     Deferred income taxes, all of which are non-current, are as follows:

<TABLE>
<CAPTION>
                                                            APRIL 30,   APRIL 30,
(IN THOUSANDS)                                                1999        1998
- --------------                                              ---------   ---------
<S>                                                         <C>         <C>
Capitalized software......................................   $ 9,651     $10,648
Valuation allowances......................................     5,502       6,774
Property..................................................    (1,287)       (811)
Bad debts.................................................        --        (984)
Tax losses................................................    (2,950)     (2,786)
Mark to market............................................       773          --
Research and development credits..........................    (2,368)       (800)
Other.....................................................     4,983       2,686
                                                             -------     -------
                                                             $14,304     $14,727
                                                             -------     -------
</TABLE>

     Deferred tax relative to the different tax jurisdictions is as follows:

<TABLE>
<CAPTION>
                                                            APRIL 30,   APRIL 30,
(IN THOUSANDS)                                                1999        1998
- --------------                                              ---------   ---------
<S>                                                         <C>         <C>
U.K. .....................................................   $ 8,323     $10,111
U.S.A. ...................................................     5,981       4,616
                                                             -------     -------
                                                             $14,304     $14,727
                                                             -------     -------
</TABLE>

     The corporate income tax returns of certain U.S. subsidiaries are under
examination by the Internal Revenue Service, which has proposed certain
adjustments. The Company believes that the outcome of the examination will not
give rise to any material adjustment to the financial statements.

NOTE 12  BUSINESS SEGMENT INFORMATION

     As explained in note 1 to the consolidated financial statements on page 39,
the Company has adopted SFAS 131 "Disclosures About Segments of an Enterprise
and Related Information", which establishes new standards for the way in which
corporations identify and report operating segments in annual and interim
financial statements. The statement requires selected information and related
disclosure about products and

                                       48
<PAGE> 174
                                   MERANT PLC
                           FINANCIAL STATEMENTS 1999

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   US FORMAT

NOTE 12  BUSINESS SEGMENT INFORMATION -- (CONTINUED)

services, geographic areas and major customers. Adoption of SFAS 131 does not
effect the Company's consolidated financial position, results of operations, or
liquidity.

     The Company operates in four business segments, as indicated below. The
products and services of each segment are marketed throughout the world. The
major product and service lines by segment are as follows:

     Application Creation and Transformation ("ACT")
     Application Development Management ("ADM")
     Enterprise Data Connectivity ("EDC")
     Enterprise Consulting Solutions ("ECS")

     The accounting policies of each business segment are the same as those
described in the summary of significant accounting policies. Intersegment sales
and transfers are priced as if the sales or transfers were to third parties. The
Company evaluates business segment performance on operating income before income
taxes and exclusive of restructuring charges and other non-recurring items. The
Company currently does not separately accumulate and report asset information by
market segment.

     No single customer accounts for more than 5% of revenue.

     A summary of the Company's operations by business segment, net of
inter-segment trading, is shown below:

<TABLE>
<CAPTION>
                                                THREE MONTHS      YEAR
                                   YEAR ENDED      ENDED          ENDED      YEAR ENDED
                                   APRIL 30,     APRIL 30,     JANUARY 31,   JANUARY 31,
(IN THOUSANDS)                        1999          1998          1998          1997
- --------------                     ----------   ------------   -----------   -----------
<S>                                <C>          <C>            <C>           <C>
Net revenues
ACT..............................   $178,033      $ 49,640      $174,983      $138,343
ADM..............................    116,772        34,425       107,463        81,155
EDC..............................     41,610        12,850        43,878        48,501
ECS..............................     35,975         9,525        35,845        12,399
Discontinued products............      1,812           547         1,750         3,242
                                    --------      --------      --------      --------
                                    $374,202      $106,987      $362,919      $283,640
                                    --------      --------      --------      --------
Operating income, before non-
  recurring charges
ACT..............................     12,680        12,834        38,941        11,122
ADM..............................     29,624        11,744        31,149        15,648
EDC..............................      6,748         3,164         6,042         5,091
ECS..............................      4,263           152         6,323          (249)
Discontinued products............         --           307        (3,242)           --
                                    --------      --------      --------      --------
                                    $ 53,315      $ 28,201      $ 79,213      $ 31,612
                                    --------      --------      --------      --------
</TABLE>

                                       49
<PAGE> 175
                                   MERANT PLC
                           FINANCIAL STATEMENTS 1999

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   US FORMAT

NOTE 12  BUSINESS SEGMENT INFORMATION -- (CONTINUED)

     Presented below is a reconciliation of segmental operating income, before
non-recurring charges, to consolidated income before income taxes:

<TABLE>
<CAPTION>
                                                 THREE MONTHS      YEAR
                                   YEAR ENDED       ENDED          ENDED      YEAR ENDED
                                   JANUARY 31,    APRIL 30,     JANUARY 31,   JANUARY 31,
(IN THOUSANDS)                        1999           1998          1998          1997
- --------------                     -----------   ------------   -----------   -----------
<S>                                <C>           <C>            <C>           <C>
Segment operating income.........   $ 53,315       $ 28,201      $ 79,213      $ 31,612
Corporate non-allocated costs....    (24,043)        (7,414)      (27,737)      (23,440)
Non-recurring charges............    (49,662)       (17,292)      (17,468)      (37,603)
Interest income, net.............     (6,334)        (1,151)       (3,935)       (2,946)
                                    --------       --------      --------      --------
                                    $(26,724)      $  2,344      $ 30,073      $(32,377)
                                    --------       --------      --------      --------
</TABLE>

     Presented below is an analysis of the Company's revenue, based on the
location of the selling organization, and long-lived assets:

<TABLE>
<CAPTION>
                                                THREE MONTHS
                                   YEAR ENDED      ENDED       YEAR ENDED    YEAR ENDED
                                   APRIL 30,     APRIL 30,     JANUARY 31,   JANUARY 31,
(IN THOUSANDS)                        1999          1998          1998          1997
- --------------                     ----------   ------------   -----------   -----------
<S>                                <C>          <C>            <C>           <C>
Revenue:
  United States..................   $222,967      $ 66,818      $235,549      $178,456
  United Kingdom.................     72,090        24,189        57,627        40,562
  Europe (excluding U.K.)........     61,986        10,387        46,306        44,901
  Other..........................     17,159         5,593        23,437        19,721
                                    --------      --------      --------      --------
                                    $374,202      $106,987      $362,919      $283,640
                                    --------      --------      --------      --------

                                   APRIL 30,     APRIL 30,     JANUARY 31,   JANUARY 31,
(IN THOUSANDS)                        1999          1998          1998          1997
- --------------                      --------      --------      --------      --------
Long-lived assets:
  United States..................   $ 20,760      $ 28,692      $ 28,341      $ 21,014
  United Kingdom.................     53,341        61,232        55,511        47,338
  Europe (excluding U.K.)........      2,183         2,473         2,419         2,157
  Other..........................        612           693         5,678         6,154
                                    --------      --------      --------      --------
                                    $ 76,896      $ 93,090      $ 91,949      $ 76,663
                                    ========      ========      ========      ========
</TABLE>

NOTE 13  EMPLOYEE BENEFIT PLANS

  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 and such other eligible persons as the Board may determine. 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. Unexercized
options lapse when the optionholder ceases to be employed by MERANT or at a
predetermined expiry date (of up to ten years from the date of grant), whichever
occurs first.

                                       50
<PAGE> 176
                                   MERANT PLC
                           FINANCIAL STATEMENTS 1999

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   US FORMAT

NOTE 13  EMPLOYEE BENEFIT PLANS -- (CONTINUED)

     In September 1998 shareholders approved the 1998 Share Option Plan, which
authorized the Company to grant options over a maximum of 15,079,000 shares.
Such authority will expire on September 24, 2008. During the year 6,453,000
options were granted under this plan, of which 25% become exercisable one year
from the date of grant and the remaining 75% in equal monthly installments over
the following three years.

     Options are no longer issuable under any of the Company's previous share
option plans, but options granted under those plans continue to be exercisable
in accordance with the original grant rules.

     The 1996 Share Option Plan was approved by shareholders in June 1996 and
authorised the Company to grant options over a maximum of 3,786,845 shares
(representing 5% of the issued share capital of the Company at that time); such
authority expired on June 18, 1999. During the year, 938,705 options were
granted under this plan, exercisable in annual installments over a five-year
period commencing one year from the date of grant. No further options will be
granted under this plan.

     Options are also outstanding under share option plans adopted by MERANT as
a result of recent corporate acquisitions, as set forth below. No further
options will be granted under these plans.

     Pursuant to the combination with INTERSOLV, Inc, ("INTERSOLV"), the Company
adopted INTERSOLV's 1997 Employee Stock Option Plan, 1992 Stock Option Plan,
1982 Stock Option Plan, and the option plans previously assumed by INTERSOLV
from companies which it had acquired. Under the agreement, each outstanding
option or right to purchase or acquire shares of INTERSOLV stock was assumed by
the Company and became an option or right to purchase or acquire American
Depositary Shares ("ADSs") in the Company, with appropriate adjustments to the
price and number of shares based on the exchange ratio of 0.55 ADSs per
INTERSOLV share. During fiscal 1999, but prior to its acquisition by the
Company, INTERSOLV granted 528,711 options to acquire shares of its common stock
(equivalent to 1,453,955 options to acquire shares in the Company) under its
1997 Employee Stock Option Plan, exercisable in annual installments over a
four-year period commencing one year from the date of grant. The agreement
entitles option-holders to acquire ADSs at U.S. dollar-denominated amounts; for
the purposes of the following disclosures, option prices have been converted
from U.S. dollars to pounds sterling using the exchange rate at April 30, 1999,
which was  GBP 1.00=$1.61; and options and prices are converted to
share-equivalents.

     Pursuant to the agreement to acquire XDB Systems, Inc, ("XDB") in fiscal
1998, the Company adopted XDB's 1992 Share Option Plan and 1996 Share Option
Plan. Under the agreement, XDB's former option-holders are entitled to exercise
their options in return for shares in the Company. At April 30, 1999, 124,548 of
these options remained outstanding.

     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 Micro Focus Group Employee Benefit
Trust 1994 ("the Trust"). The Trust was established to further the Company's
policy of encouraging share ownership by its employees. At April 30 1999, MTL
owned 3,810,075 shares. Options granted by MTL and outstanding at April 30 1999
totaled 2,938,800, and a further 110,000 shares were reserved for options
granted before MTL purchased the shares. The remaining 761,275 shares were
available for the grant of further options. The shares held by the Trust are
shown in the balance sheet as treasury stock within shareholder's equity.

                                       51
<PAGE> 177
                                   MERANT PLC
                           FINANCIAL STATEMENTS 1999

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   US FORMAT

NOTE 13  EMPLOYEE BENEFIT PLANS -- (CONTINUED)

     Share option activity under all of the Company's share option plans is
summarized below:

<TABLE>
<CAPTION>
                                                  NUMBER        OPTION PRICE PER
                                                 OF SHARES    SHARE IN G.B. POUNDS
                                                -----------   --------------------
<S>                                             <C>           <C>
Outstanding, January 31, 1996.................   16,853,835       GBP0.11-GBP5.77
Options granted...............................   13,933,979       GBP1.17-GBP1.94
Options exercised.............................     (127,655)      GBP0.11-GBP1.93
Options cancelled.............................  (10,182,097)      GBP0.11-GBP5.77
                                                -----------       ---------------
Outstanding, January 31, 1997.................   20,478,062       GBP0.11-GBP4.32
Options granted...............................   10,738,678       GBP0.97-GBP7.41
Options exercised.............................   (2,597,688)      GBP0.11-GBP3.70
Options cancelled.............................   (6,639,266)      GBP0.11-GBP4.52
                                                -----------       ---------------
Outstanding, January 31, 1998.................   21,979,786       GBP0.11-GBP7.41
Options granted...............................      947,870       GBP6.25-GBP7.15
Options exercised.............................     (398,843)      GBP0.11-GBP3.49
Options cancelled.............................     (625,429)      GBP0.11-GBP4.20
                                                -----------       ---------------
Outstanding, April 30, 1998...................   21,903,384       GBP0.11-GBP7.41
Options granted...............................   10,648,660       GBP1.06-GBP6.28
Options exercised.............................     (807,512)      GBP0.11-GBP3.70
Options cancelled.............................   (6,066,428)      GBP0.11-GBP4.52
                                                -----------       ---------------
Outstanding, April 30, 1999...................   25,678,104       GBP0.11-GBP7.15
                                                -----------       ---------------
</TABLE>

     The following tables summarize information about share options outstanding
at April 30, 1999:

<TABLE>
<CAPTION>
                 AUTHORITY FOR                     NUMBER       OPTION PRICE PER
              ISSUANCE OF OPTIONS                OF SHARES    SHARE IN G.B. POUNDS
              -------------------                ----------   --------------------
<S>                                              <C>          <C>
1991 Share Option Plan.........................   2,215,429       GBP1.13-GBP3.49
1996 Share Option Plan.........................   2,978,640       GBP1.47-GBP7.15
1998 Share Option Plan.........................   6,453,000       GBP1.06-GBP1.49
XDB plans......................................      44,530       GBP5.39-GBP7.41
INTERSOLV plans................................  10,937,930       GBP0.11-GBP3.61
                                                 ----------       ---------------
Options over unissued shares...................  22,629,304       GBP0.11-GBP7.41
The Trust......................................   3,048,800       GBP1.37-GBP4.85
                                                 ----------       ---------------
                                                 25,678,104       GBP0.11-GBP7.41
</TABLE>

<TABLE>
<CAPTION>
                                NUMBER OUTSTANDING   WEIGHTED AVERAGE   WEIGHTED AVERAGE
RANGES OF                          AT APRIL 30,      CONTRACTUAL LIFE    EXERCISE PRICE
EXERCISE PRICES                        1999              (MONTHS)       (IN G.B. POUNDS)
- ---------------                 ------------------   ----------------   ----------------
<S>                             <C>                  <C>                <C>
GBP0.10-GBP2.00...................      13,262,144             102                1.26
GBP2.01-GBP3.00...................       7,570,625              87                2.44
GBP3.01-GBP7.41...................       4,845,335             100                4.09
                                        ----------             ---                ----
                                        25,678,104              97                2.14
                                        ----------             ---                ----
</TABLE>

                                       52
<PAGE> 178
                                   MERANT PLC
                           FINANCIAL STATEMENTS 1999

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   US FORMAT

NOTE 13  EMPLOYEE BENEFIT PLANS -- (CONTINUED)

     An analysis of those options currently exercisable as of April 30, 1999 is
set forth below:

<TABLE>
<CAPTION>
                                               NUMBER EXERCISABLE   WEIGHTED AVERAGE
RANGES OF                                         AT APRIL 30,       EXERCISE PRICE
EXERCISE PRICES                                       1999          (IN G.B. POUNDS)
- ---------------                                ------------------   ----------------
<S>                                            <C>                  <C>
GBP0.10-GBP2.00..................................       3,671,859             1.56
GBP2.01-GBP3.00..................................       5,442,154             2.44
GBP3.01-GBP7.41..................................       2,557,508             4.09
                                                       ----------             ----
                                                       11,671,521             2.43
                                                       ----------             ----
</TABLE>

  Pro-forma data

     As stated in note 1, the Company has elected to follow APB 25 and related
Interpretations in accounting for its employee share options because, as
discussed below, the alternative fair value accounting provided for under SFAS
123 requires the use of option valuation models that were not developed for use
in valuing employee share options. Under APB 25, because the exercise price of
the Company's options equals the market price of the underlying shares on the
date of grant, no compensation expense is recognized.

     Pro forma information regarding net income (loss) and net income (loss) per
share is required by SFAS 123, and has been determined as if the Company had
accounted for employee share options granted since January 31, 1995 under the
fair value method of that Statement. The fair value for these options was
estimated at the date of grant using a Black-Scholes option pricing model with
the following weighted-average assumptions for 1999, 1998 and 1997: risk-free
interest rate based on Treasury Strip, No Principal from the Wall Street Journal
for maturity of six years, based on the date of grant; dividend yields of 0%;
volatility factors of the expected market price of 0.647 in 1999 and 0.378 in
1998 and 1997; and an average expected life of the option of six years.

     The Black-Scholes valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, the option valuation models require the input of
highly subjective assumptions including the expected share price volatility.
Because the Company's options have characteristics significantly different from
those of traded options and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of the fair
value of the Company's options.

     For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma net income (loss) and diluted net income (loss) per share data is set
forth below:

<TABLE>
<CAPTION>
                                                 THREE MONTHS
                                   YEAR ENDED       ENDED       YEAR ENDED    YEAR ENDED
                                   JANUARY 31,    APRIL 30,     JANUARY 31,   JANUARY 31,
(IN THOUSANDS)                        1999           1998          1998          1997
- --------------                     -----------   ------------   -----------   -----------
<S>                                <C>           <C>            <C>           <C>
Net loss (income) (in
  thousands).....................   ($37,646)       ($ 380)       $14,012      ($40,026)
Net loss (income) per share......   ($  0.26)       ($0.00)       $  0.10      ($  0.30)
</TABLE>

     The effects on pro forma disclosures of applying SFAS 123 are not likely to
be representative of such effects in future years since SFAS 123 is applicable
only to options granted since January 31, 1995. The effect will not be fully
reflected in the pro forma disclosures until 2001.

                                       53
<PAGE> 179
                                   MERANT PLC
                           FINANCIAL STATEMENTS 1999

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   US FORMAT

NOTE 13  EMPLOYEE BENEFIT PLANS -- (CONTINUED)

  Employee stock purchase plan

     Most INTERSOLV employees were eligible to participate in the INTERSOLV
employee stock purchase plan, which was authorized to grant rights to purchase
INTERSOLV's common stock. Eligible employees could purchase shares of
INTERSOLV's common stock at a purchase price equivalent to 85% of market value.

     The plan was terminated effective September 24, 1998. During fiscal 1999,
the three-month fiscal period ended April 30, 1998 and fiscal 1998 and 1997,
respectively, are equivalent to 465,515, --, 787,480 and 558,460 shares in the
Company were purchased under this plan.

  Warrants

     In fiscal 1997, INTERSOLV issued warrants to purchase 140,000 INTERSOLV
shares at an exercise price of $10.375. These warrants were assumed by the
Company and became warrants to acquire ADSs in the Company at $5.70625 per ADS.
At April 30, 1999, the warrants were fully exercisable; they expire in 2006.

  Retirement plans

     MERANT has entered into arrangements to provide pensions for its employees
on a defined contribution basis. Contributions, which are independently
administered by insurance companies and other financial institutions, are
expensed in the year in which they become payable.

     In the United States, MERANT's plan qualifies under Section 401(k) of the
Internal Revenue Code. Under the plan, MERANT matches contributions made by
participating employees up to certain predetermined thresholds. Arrangements for
employees in other countries have been established on similar bases, subject to
local conditions and practices in the countries concerned.

     In fiscal 1999, the three-month fiscal period ended April 30, 1998 and
fiscal 1998 and 1997, contributions totalling $1,934,000, $483,000, $1,202,000
and $1,125,000 respectively, have been expensed.

NOTE 14  SHARE SPLIT

     The Company's ordinary shares were split on a 5-for-1 basis with effect
from close of business on March 13, 1998. The Company's American Depositary
Shares ("ADSs") did not split, although the conversion rights of such ADSs were
adjusted such that each ADS represents five ordinary shares.

NOTE 15  COMPREHENSIVE INCOME

     Components of other comprehensive income (loss) consists of the following:

<TABLE>
<CAPTION>
                                                        THREE MONTHS
                                           YEAR ENDED      ENDED       YEAR ENDED    YEAR ENDED
                                           APRIL 30,     APRIL 30,     JANUARY 31,   JANUARY 31,
                                              1999          1998          1998          1997
                                           ----------   ------------   -----------   -----------
<S>                                        <C>          <C>            <C>           <C>
Foreign currency translation
  adjustments............................   $(8,629)      $(7,998)       $(8,694)      $(7,144)
Unrealized gain (loss) on marketable
  securities, net of tax.................       (23)          (28)            44           (90)
Other....................................         6             6             --            --
                                            -------       -------        -------       -------
                                            $(8,646)      $(8,020)       $(8,650)      $(7,234)
                                            =======       =======        =======       =======
</TABLE>

                                       54
<PAGE> 180
                                   MERANT PLC
                           FINANCIAL STATEMENTS 1999

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   US FORMAT

NOTE 16  SUBSEQUENT EVENT

     On August 3, 1999, the Company completed the acquisition of Essential
Software, Inc. (d/b/a The Marathon Group), a privately-held Internet
professional services firm based in Raleigh, North Carolina for a total
consideration of $15 million payable in cash.

NOTE 17  QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

     Quarterly financial information for fiscal 1999 and 1998, and for the
fiscal quarter ended April 30, 1998 is as follows:

<TABLE>
<CAPTION>
                                                FIRST    SECOND     THIRD     FOURTH
IN THOUSANDS (EXCEPT PER ADS DATA)             QUARTER   QUARTER   QUARTER   QUARTER     TOTAL
- ----------------------------------             -------   -------   -------   --------   --------
<S>                                            <C>       <C>       <C>       <C>        <C>
Year ended April 30, 1999:
Net revenue..................................  $95,275   $87,159   $95,717   $ 96,051   $374,202
Non-recurring items..........................       --   (49,662)       --         --    (49,662)
Operating income (loss)......................    9,591   (49,497)    6,104        744    (33,058)
Net income (loss)............................    7,229   (42,304)    5,212      1,331    (28,532)
Net income (loss) per ADS: basic.............     0.25     (1.47)     0.18       0.05      (1.00)
Net income (loss) per ADS: diluted...........     0.24     (1.47)     0.18       0.05      (1.00)
                                               -------   -------   -------   --------   --------
Fiscal quarter ended April 30, 1998:
Net revenue..................................                                $106,987   $106,987
Non-recurring items..........................                                 (17,292)   (17,292)
Operating income.............................                                   1,193      1,193
Net income...................................                                   1,489      1,489
Net income per ADS: basic....................                                    0.05       0.05
Net income per ADS: diluted..................                                    0.05       0.05
                                               -------   -------   -------   --------   --------
Year ended January 31, 1998:
Net revenue..................................  $73,175   $86,895   $92,494   $110,355   $362,919
Non-recurring items..........................     (176)       --        --    (17,292)   (17,468)
Operating income.............................    3,566     8,108    13,271      1,193     26,138
Net income...................................    2,980     5,886     9,793      1,489     20,148
Net income per ADS: basic....................     0.11      0.21      0.36       0.05       0.73
Net income per ADS: diluted..................     0.11      0.20      0.34       0.05       0.70
                                               -------   -------   -------   --------   --------
</TABLE>

- ---------------
NOTES: Data for all periods presented has been restated to reflect the
       pooling-of-interest accounting in connection with the acquisitions made
       during 1999 and 1998 (see note 2 to the consolidated financial statements
       on page 40).

       Share and per share data has been restated to reflect the 5-for-1 stock
       split of the Company's ordinary shares (see note 14 to the consolidated
       financial statements on page 54).

                                       55
<PAGE>  181

                                   MERANT PLC
                           FINANCIAL STATEMENTS 1999

                         REPORT OF INDEPENDENT AUDITORS
                                   US FORMAT

To the Board of Directors and Shareholders
of MERANT plc

     We have audited the accompanying consolidated balance sheets of MERANT plc
and subsidiaries as of April 30, 1999 and 1998, and the related consolidated
statements of income, shareholders' equity and cash flows for the year ended
April 30, 1999, the three-month period ended April 30, 1998 and for each of the
two years in the period ended January 31, 1998 on pages 31 to 55. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements based on our
audits.

     The consolidated financial statements give retroactive effect to the
combination of the Company and INTERSOLV, Inc. which has been accounted for
using the pooling-of-interests method as described in note 2 to the financial
statements on page 40.

     We did not audit the financial statements of INTERSOLV, Inc, which
statements reflect total assets constituting 39% of the related consolidated
financial statement total at April 30, 1998, and net revenue constituting
approximately 55%, 54% and 57% of the related consolidated financial statement
totals for the three month period ended April 30, 1998 and for the years ended
January 31, 1998 and January 31, 1997, respectively. Those statements, which
were prepared in accordance with accounting principles generally accepted in the
United States, were audited by other auditors whose report has been furnished to
us, and our opinion, insofar as it relates to amounts included for INTERSOLV,
Inc for 1998 and 1997, is based solely on the report of the other auditors.

     We conducted our audits in accordance with United Kingdom auditing
standards which do not differ in any significant respect from United States
generally accepted auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits and the report of
other auditors provide a reasonable basis for our opinion.

     In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of MERANT plc at April
30, 1999 and 1998, and the consolidated results of its operations and its
consolidated cash flows for the year ended April 30, 1999, the three-month
period ended April 30, 1998 and for each of the two years in the period ended
January 31, 1998, in conformity with accounting principles generally accepted in
the United States.

Ernst & Young
Reading, England
August 4 1999

                                       56
<PAGE>  182


                                   MERANT PLC
                              FINANCIAL STATEMENTS
                       FIFTEEN MONTHS ENDED APRIL 30 1999

                      SELECTED CONSOLIDATED FINANCIAL DATA
                                   UK FORMAT

     The following selected financial data should be read in conjunction with,
and is qualified in its entirety by reference to, the financial statements of
MERANT, expressed in G.B. pounds, set out on pages 72 to 103 of this report.

<TABLE>
<CAPTION>
                                                                           PERIODS ENDED:
                                                    ------------------------------------------------------------
IN THOUSANDS OF G.B. POUNDS                         APRIL 30   JANUARY 31   JANUARY 31   JANUARY 31   JANUARY 31
(EXCEPT PER SHARE DATA, PERCENTAGES AND EMPLOYEES)    1999        1998         1997         1996         1995
- --------------------------------------------------  --------   ----------   ----------   ----------   ----------
<S>                                                 <C>        <C>          <C>          <C>          <C>
OPERATING RESULTS FOR THE PERIOD:
Revenue.......................................      215,473      97,015       73,089       77,258       89,885
Profit/(loss) before taxation and exceptional
  items.......................................          259      15,217         (614)        (541)      12,871
Exceptional items.............................      (11,831)         --       (5,195)      (6,001)      (4,148)
(Loss)/profit before taxation.................      (11,572)     15,217       (5,809)      (6,542)       8,723
Retained (loss)/profit for the period.........      (15,279)     10,426       (7,281)      (6,470)       4,590
(Loss)/Earnings per share: basic..............        (14.3P)      14.0p       (10.2p)       (8.7p)        6.4p
(Loss)/Earnings per share: diluted............        (14.3P)      13.3p       (10.2p)       (8.7p)        6.4p
Average number of shares in issue (thousands)...    110,714      78,735       75,780       74,215       71,680
FINANCIAL POSITION AT END OF PERIOD:
Cash and bank deposits........................       75,394      51,518       44,725       38,972       55,823
Total assets..................................      322,361     123,824      100,204      111,828      124,302
Creditors: amounts falling due after more than one
  year........................................           --          12           15           66          193
Total shareholders funds......................      217,109      70,892       61,124       70,187       72,856
FINANCIAL CONDITION:
Working capital...............................       62,370      36,195       26,611       27,306       36,554
Current ratio.................................         1.67        1.78         1.81         1.76         1.80
Return on revenue: excluding exceptional items...       N/A          11%         n/a          n/a           10%
Return on average equity: excluding exceptional
  items.......................................          N/A          16%         n/a          n/a           12%
EMPLOYEE INFORMATION
Average number of employees...................        1,461         768          646          735          751
Period end number of employees................        2,018         827          626          708          788
Revenue per employee (annualised).............          147         126          113          105          120
(Loss) profit after taxation per employee:
  excluding exceptional items (annualised)....           (5)         14           (3)          (2)          12
</TABLE>

- ---------------

NOTES: Details of the exceptional items are set out in note 8 to the
       consolidated financial statements on page 89.

       Shares and per-share data for prior periods has been restated to comply
       with FRS 14 -- Earnings per Share and to reflect the 5-for-1 sub-division
       of the Company's ordinary shares, which took effect from the close of
       business on March 13, 1998 (see note 25 to the consolidated financial
       statements on page 102).

                                       57
<PAGE> 183

                                   MERANT PLC
                              FINANCIAL STATEMENTS
                       FIFTEEN MONTHS ENDED APRIL 30 1999

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
                     OF OPERATIONS AND FINANCIAL CONDITION
                                   UK FORMAT

     This discussion has been prepared in accordance with U.S. reporting
practice and is presented here so that readers of the U.K. format financial
statements have the same information as readers of the U.S. format financial
statements. It should be read in conjunction with the financial statements of
MERANT plc and its subsidiary undertakings ("MERANT") in G.B. pounds, on pages
72 to 103.

     On February 16 1999, the Company changed its corporate name from "Micro
Focus Group Plc" to "MERANT plc".

     On September 24, 1998, the Company acquired INTERSOLV, Inc. ("INTERSOLV")
in a transaction which approximately doubled the size of the Company in terms of
revenue, costs and employees, and resulted in the Company incurring significant
charges against current operations. Also, the Company elected to change its
financial year end and accounting reference date to April 30 from January 31 and
is therefore reporting results for the fifteen-month period ended April 30,
1999.

     For these two reasons, the reported results for 1999 are difficult to
compare with the results for 1998, and consideration of these factors should be
made in any review of variances in revenue and costs.

RESULTS OF OPERATIONS

     The Company has reported a loss for the period, after taxation, of
GBP 15.3m or 14.3 pence per share as compared to a profit after taxation in
1998 of GBP 10.4m or 13.3 pence per share diluted. The loss for the current
period is after providing for certain charges resulting from the acquisition of
INTERSOLV.

     The Company's results include the results of INTERSOLV from September 24,
1998, the date of its acquisition (or the "INTERSOLV Acquisition"). Goodwill
arising on the acquisition--representing the excess of the consideration over
the net value of the assets acquired--totalled  GBP 140.1m. This amount has been
capitalised as an intangible asset, which will be amortised through the profit
and loss account over a four year period. Amortisation of this goodwill is
therefore expected to result in an annual charge of approximately  GBP 35m,
subject to any future reviews an of impairment. In the period up to April 30
1999, the Company recorded a charge of  GBP 21.2m, which is included in the
profit and loss account under general and administrative costs. In addition,
the Company recorded a one-time exceptional charge of  GBP 11.8m in connection
with the costs incurred to restructure the combined business following the
merger of the two companies. Because of the fundamental nature of this
restructuring, this charge is disclosed separately in the profit and loss
account, below. The Company does not expect to incur any additional costs in
connection with the merger

     During 1999 the Company also acquired two of its foreign distributors.
Details of the acquisitions are set out below under the section "Acquisitions"
on page 63.

     The following table discloses operating results as a percentage of revenue
for each of last three financial years and the percentage changes relative to
the previous year for each of the last two years. Throughout this

                                       58
<PAGE> 184

discussion, references to 1999 are to the fifteen-month period ended April 30,
1999, and references to 1998 and 1997 are to the years ended January 31, 1998
and January 31, 1997 respectively.

<TABLE>
<CAPTION>
                                          PERCENTAGE OF NET REVENUE
                                  ------------------------------------------             YEAR TO YEAR
                                  FIFTEEN MONTHS                                      PERCENTAGE CHANGE
                                      ENDED        YEAR ENDED    YEAR ENDED    --------------------------------
                                    APRIL 30,      JANUARY 31,   JANUARY 31,     1998 TO           1997 TO
                                       1999           1998          1997           1999             1998
                                  --------------   -----------   -----------   ------------   -----------------
                                                                               (ANNUALISED)
<S>                               <C>              <C>           <C>           <C>            <C>
REVENUE
  Product revenue...............        55%            62%           58%            56%               44%
  Maintenance revenue...........        26%            29%           40%            60%               -4%
  Service revenue...............        19%             9%            2%           293%              434%
                                       ----           ----          ----          -----             -----
     TOTAL REVENUE..............       100%           100%          100%            78%               33%
                                       ----           ----          ----          -----             -----
COST OF REVENUE
  Cost of product revenue.......         4%             8%            9%             7%                9%
  Cost of maintenance revenue...         8%             7%           14%            95%              -35%
  Cost of service revenue.......        14%             9%            2%           164%              645%
                                       ----           ----          ----          -----             -----
     TOTAL COST OF REVENUE......        26%            24%           25%            95%               25%
                                       ----           ----          ----          -----             -----
GROSS PROFIT....................        74%            76%           75%            72%               35%
                                       ----           ----          ----          -----             -----
OPERATING EXPENSES
  Research and development......        16%            20%           33%            40%              -19%
  Sales and marketing...........        41%            37%           41%           101%               18%
  General and administrative....        19%             6%           11%           414%              -20%
                                       ----           ----          ----          -----             -----
     TOTAL OPERATING EXPENSES...        76%            63%           85%           113%               -1%
                                       ----           ----          ----          -----             -----
OPERATING (LOSS)/PROFIT.........        -2%            13%          -10%          -125%             -270%
Exceptional item -- fundamental
  restructuring.................        -5%             --            --             --                --
                                       ----           ----          ----          -----             -----
(LOSS)/PROFIT AFTER EXCEPTIONAL
  ITEM..........................        -7%            13%          -10%          -200%             -270%
Interest income.................         2%             3%            2%            39%               48%
Interest expense................         --             --            --            66%              233%
                                       ----           ----          ----          -----             -----
(LOSS)/PROFIT BEFORE TAXATION...        -5%            16%           -8%          -161%             -362%
Taxation........................        -2%            -5%           -2%           -38%              225%
                                       ----           ----          ----          -----             -----
RETAINED (LOSS)/PROFIT
  FOR THE PERIOD................        -7%            11%          -10%          -217%             -243%
</TABLE>

  Revenue

     The Company's products are generally licenced to end users pursuant to a
licence agreement that restricts the use of the product to a designated number
of developers. The Company also offers its customers a broad range of services,
including maintenance, support, training and consulting. Maintenance services
consist primarily of enhancements and upgrades to products as well as telephone
support concerning the use of the Company's products. Training and consulting
services are focused on assisting customers in using the Company's products.

     The Company's product and service offerings are focused in four primary
solution areas: Application Development Management (or "ADM", which includes
MERANT PVCS series), Enterprise Data Connectivity (or "EDC", which includes
MERANT DataDirect series), Application Creation and Transformation (or "ACT",
which includes MERANT Micro Focus series) and Enterprise Consulting Solutions
(or "ECS", which includes MERANT Consulting). These four solution areas are
collectively referred to as the Company's key products or solution areas.

                                       59
<PAGE> 185

     Total revenue for the fifteen-month period ended April 30 1999 increased by
GBP 118.5m or 122% to  GBP 215.5m relative to the twelve month period ended
January 31 1998 and by  GBP 23.9m or 33% to  GBP 97.0m in 1998. Most of the
1999 increase was the result of the INTERSOLV Acquisition combined with the
additional three months in 1999. Revenue from the business prior to the
INTERSOLV Acquisition ("Existing Business") increased by 9% in 1999 on an
annualised basis. The increase in 1998 reflected initial worldwide sales of the
Company's SoftFactory 2000 and NetExpress products, increased UNIX product
sales and revenue from consulting services.

  Revenue by Solution Area

     Total revenue for the fifteen-month period ended April 30 1999 increased
by GBP 118.5m or 122% to  GBP 215.5m relative to the twelve month period ended
January 31 1998 and by  GBP 23.9m or 33% to  GBP 97.0m in 1998. Most of the
1999 increase was the result of the INTERSOLV Acquisition combined with the
additional three months in 1999. Revenue from Existing Business increased by 9%
in 1999 on an annualised basis. The Existing Business increase in fiscal 1998
reflected initial worldwide sales of the Company's SoftFactory 2000 and
NetExpress products, increased UNIX product sales and revenue from consulting.

  Product revenue

     Product revenue increased by  GBP 57.8m or 96% to  GBP 118.2 million
relative to 1998, having previously increased by  GBP 18.5m or 44% to  GBP
60.5m in 1998 relative to 1997. Most of the 1999 increase was the result of the
INTERSOLV Acquisition combined with the additional three months in 1999.
Revenue from Existing Business increased by 4% on an annualised basis. Growth
in European markets in 1999, more than offset weakness in North American
revenue caused by a decrease in the Company's Year 2000 business, the effects
of the Company's sales force reorganization and integration issues related to
the INTERSOLV acquisition. The increase in revenue in 1998 reflected higher
sales of ACT product revenue in all geographies.

  Maintenance revenue

     Maintenance revenue increased by  GBP 28.2m or 100% to  GBP 56.5m relative
to 1998, having previously decreased by  GBP 1.3m or 4% to  GBP 28.2m in 1998
relative to 1997. Most of the 1999 increase was the result of the INTERSOLV
Acquisition combined with the additional three months in 1999. Revenue from
Existing Business increased by 3% in 1999 on an annualised basis. The decrease
in 1998 was the result of lower than expected maintenance contract renewals.

  Service revenue

     Service revenue increased by  GBP 32.5m or 391% to  GBP 40.8m relative to
1998, having previously increased by  GBP 6.7m or 434% to  GBP 8.3m in 1998
relative to 1997, and represented 19% of total revenue in 1999 (1998: 9%; 1997:
2%). The significant growth in service revenue is attributable to the INTERSOLV
Acquisition in 1999 and of Millennium UK Ltd in 1998.

  Geographic revenue

     In 1999, 62% of revenue arose in the U.S.A., compared to 51% in 1998. U.K.
revenue increased to 14% of total revenue (1998: 12%). In the fifteen-month
period ended April 30, 1999, U.S. revenue increased by 171%, U.K. revenue by
154% and revenue from the rest of the world by 42%. Most of the 1999 increase
was the result of the INTERSOLV Acquisition combined with the additional three
months in 1999. The INTERSOLV Acquisition also changed the geographic mix of
the Company somewhat.

     There can be no assurance that the market for the Company's products will
grow in future periods at its historical rate of growth, that certain segments
will not decline, or that the Company will be able to increase or maintain its
market share in the future or achieve its historical revenue growth rates.

                                       60
<PAGE> 186

  Cost of revenue

     Cost of product revenue is comprised principally of the cost of product
materials (including the purchase of disks and CDs, transfer of data to
electronic media, and printing of manuals), packaging and distribution costs,
and royalties to third party software developers for the licencing of certain
add-on software products. Such costs increased by  GBP 2.4m or 34% to  GBP 9.4m
for the fifteen-month period ended April 30 1999, having previously increased
by GBP 0.6m or 9% to $7.0m in 1998 relative to 1997 and represented 8%, 12% and
15% of product revenue in 1999, 1998 and 1997 respectively. These percentage
reductions principally reflect savings in product materials arising from the
documentation being supplied on CD-ROM.

     Cost of maintenance revenue is comprised principally of remuneration for
technical support personnel. Such costs increased by  GBP 10.0m or 143% to
GBP 17.0m for the fifteen-month period ended April 30 1999, having previously
decreased by  GBP 3.7m or 35% to $7.0m in 1998 relative to 1997 and represented
30%, 25% and 36% of maintenance revenue in 1999, 1998 and 1997 respectively.

     Cost of service revenue is comprised principally of remuneration and
expenses of training and consulting personnel. Such costs increased by  GBP
20.4m or 230% to  GBP 29.2m for the fifteen-month period ended April 30 1999,
having previously increased by  GBP 7.7m or 645% to $8.9m in 1998 relative to
1997 and represented 72%, 107% and 77% of service revenue in 1999, 1998 and
1997 respectively.

  Gross profit

     Gross profit represented 74%, 76% and 75% of revenue in 1999, 1998 and
1997 respectively. The decrease in 1999 primarily reflects proportionately
higher maintenance and service revenues.

     The Company's gross margin can be affected by a number of factors,
including changes in product or distribution channel mix, the mix of product
and service revenue, and competitive pressures on pricing. Gross margin is also
dependent on discounts selectively provided to customers in competitive sales
situations. In addition, gross margin may be adversely affected by expansion of
the Company's consulting organisation and the ability to deploy its capacity to
revenue generating projects. As a result of the above factors, gross margin
fluctuations are difficult to predict, and gross margins may decline from
current levels in future periods.

  Research and development

     Research and development costs consist principally of remuneration for
software developers and related costs, less the proportion of those costs
capitalised, plus the charge for amortisation of previously capitalised costs.
The Company's high level of research and development spending supports the
development and enhancement of new and existing products and is consistent with
the Company's strategy of investing heavily to improve and expand its product
lines.

     In fiscal 1999 and 1998, research and development has been principally
directed towards improvement and enhancements to existing solution areas.
Efforts are generally focused in areas of most promise.

     Expenditure on internal software research and development increased by
GBP 14.6m or 74% to  GBP 34.3m for the fifteen-month period to April 30 1999,
having decreased by  GBP 4.6m or 19% to  GBP 19.7m in 1998 relative to 1997 and
represented 16%, 20% and 33% of revenue in 1999, 1998 and 1997 respectively.
Most of the 1999 increase was the result of the INTERSOLV acquisition combined
with the additional three months in 1999. The decrease in 1998 development
expenditure reflect a lower relative cost structure following the restructuring
of operations in fiscal 1997.

     In 1999  GBP 5.9m, representing 19% of these costs, were capitalised as
software product assets (1998: 32%, 1997: 27%). Provisions for amortisation
amounted to  GBP 9.7m (1998:  GBP 7.8m; 1997:  GBP 8.1m) resulting in a net
charge to profit and loss in 1999 of  GBP 3.8m (1998:  GBP 2.1m; 1997:  GBP
2.8m).

     The Company believes that ongoing development of new products and features
is required to maintain and enhance its competitive position. Accordingly,
while the Company will continue to control expenses where possible, the Company
anticipates that aggregate research and development expenses will increase over
time, and may not be directly related to the level of revenue realised in
future quarters.
                                       61
<PAGE> 187

  Sales and marketing

     Sales and marketing costs include remuneration, travel and facility costs
for sales, pre-sales and marketing personnel, and publicity costs such as
advertising and trade shows. Such costs increased by  GBP 53.7m or 151% to
GBP 89.2m for the fifteen-month period ended April 30 1999 relative to the year
ended January 31 1998, and by  GBP 5.3m or 18% to  GBP 35.5m in 1998 relative
to 1997 and represented 41% of revenue in 1999 (1998: 37%, 1997: 41%). Most of
the 1999 increase was the result of the INTERSOLV Acquisition combined with the
additional three months in 1999. In addition, fiscal 1999 includes costs
associated with the new corporate name.

     The Company believes that continued investments in sales, marketing,
customer support and promotional activities are essential to maintaining its
competitive position. The Company is expanding its sales and support staffs
and, accordingly, anticipates that sales and marketing expenses will be higher
in future periods, but as a function of revenue will decrease.

  General and administrative

     General and administrative costs include the Company's group management,
finance, legal and human resources operations. Such costs increased by  GBP
34.1m or 543% to  GBP 40.4m for the fifteen-month period ended April 30 1999
relative to the year ended January 31 1998, having decreased by  GBP 1.6m or
20% to  GBP 6.3m in 1998 relative to 1997 and represented 19% of revenue in
1999 (1998: 6%, 1997: 11%.)

     In the current period, the Company adopted Financial Reporting Standard 10
"Goodwill and Intangible Assets" (see under "New accounting standards" in note
1 to the financial statements on page 83). Accordingly, the Company has
capitalised goodwill totaling  GBP 144.4m in the current period, and
amortisation of this balance will be charged to general and administrative
costs over the estimated economic life of the goodwill acquired. Amortisation
charged in the current period amounted to  GBP 21.9m. Exclusive of that charge,
general and administrative costs increased by 194% and represent 9% of revenue.
Most of the 1999 increase was the result of the INTERSOLV Acquisition combined
with the additional three months in 1999.

     The total for 1997 included  GBP 1.9m of restructuring costs (see
Exceptional items, below). The underlying increase in 1998 reflected higher
bonus accruals and staff additions.

     The Company is investing to strengthen its infrastructure and anticipates
that general and administrative expenses will increase in future quarters, but
decrease as a percentage of revenue.

  Exceptional items

     During the current period the Company provided for costs of  GBP 11.9m in
connection with a fundamental restructuring of its operations. Following the
acquisition of INTERSOLV in September 1998, the senior management of the
Company realigned the Company to complete the integration of the combined
operations. As part of this realignment, the Company has incurred charges
consisting principally of the write-off of redundant or impaired assets and
severance costs. Because of the fundamental nature of this reorganisation, the
related costs have been disclosed as an exceptional item on the face of the
profit and loss account.

     In the year ended January 31 1997 the Company recorded a restructuring
charge of  GBP 5.2m, representing the costs associated with a workforce
reduction of approximately 65 people, facility closures and consolidations, and
asset write-downs. Due to the nature of the restructuring, the amounts booked
were charged against operating profit.

  Interest income

     Interest earned on cash and short-term investments increased by  GBP 1.9m
or 74% to  GBP 4.4m for the fifteen-month period ended April 30 1999 relative
to the year ended January 31 1998 and by  GBP 0.8m or 48% to  GBP 2.6m in 1998
relative to 1997 and represented 2% of revenue in 1999 (1998: 3%, 1997: 2%.)
The increase in 1999 represented the impact of higher cash balances. The
increase in 1998 reflected higher average cash balances

                                       62
<PAGE> 188

and also higher investment yields resulting from the investment of funds in
money market instruments instead of bank certificates of deposit.

     The Company has a hedging programme to minimise foreign exchange gains or
losses, where possible, from recorded foreign-currency denominated assets and
liabilities. This programme involves the use of borrowings and forward foreign
exchange contracts in certain European currencies, including the euro. No
hedging contracts were outstanding at the year end.

  Taxation

     The Company's effective tax rate in the current period is significantly
distorted by the impact of provisions for amortisation of goodwill, which is not
an allowable expense. (See "General and administrative costs", above) The
current period rate is also impacted by corporate profits and losses arising in
different tax jurisdictions. The Company's effective tax rate is expected to be
significantly impacted by provisions for amortisation of goodwill for the next
four years.

     In prior years the effective tax rate was distorted by the impact of
disallowable exceptional items, and losses incurred in the United States which
can only be offset against profits arising in the U.S. in future periods.

     The income tax returns of certain of the Company's U.S. subsidiary
undertakings for the years ended January 31, 1993 to 1997 are under examination
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. Any adjustments that may
result from this examination are not expected to have a material adverse impact
on the Company's consolidated operating results or its financial position.

     An analysis of the charge for income taxes is given in note 10 to the
financial statements on page 90.

  Acquisitions

     In the current financial year MERANT completed three acquisitions at a
total cost of  GBP 165,012,000.

     On May 15, 1998, the Company acquired all of the share capital of its
Italian distributor, Micro Focus Italia, s.r.l. ("MF Italia"), for total
consideration of approximately  GBP 2.6m. The Company made an initial cash
payment of  GBP 2.4m, with the balance payable in cash, dependent on future
results of MF Italia. MF Italia changed its name to MERANT s.r.l. on March 1,
1999.

     On August 13, 1998, the Company acquired all of the share capital of its
Australian distributor, Advanced Software Engineering Pty Ltd. ("ASE"), for
total consideration of approximately  GBP 1.5m. The Company made an initial cash
payment of  GBP 1.0m, with the balance payable in cash, dependent on future
results of ASE. ASE changed its name to MERANT Pty Ltd on February 16, 1999.

     On September 24, 1998, the Company completed the acquisition of INTERSOLV,
a U.S. public corporation based in Maryland, and listed on the Nasdaq National
Market. INTERSOLV was a provider of software solutions that facilitate the
development, delivery and deployment of business information systems.
INTERSOLV's products and services are focused primarily in the areas of
application development management, enterprise data connectivity and enterprise
application renewal.

     Under the terms of the agreement, each common share of INTERSOLV was
exchanged for 0.55 MERANT American Depositary Shares ("ADSs"). In addition, each
outstanding option or right to purchase or acquire shares of INTERSOLV common
stock was assumed by the Company and became an option or right to purchase or
acquire MERANT ADSs, with appropriate adjustments to the price and number of
shares based on the exchange ratio of 0.55 ADSs per INTERSOLV share. The merger
was structured as a tax-free reorganization under U.S. tax law. The Company
issued approximately 12.6 million new MERANT ADSs (representing approximately
63.1 million new MERANT ordinary shares) in exchange for INTERSOLV's common
stock and share equivalents outstanding, which at the time of the completion of
the transaction represented approximately 46% of MERANT's share capital on a
fully-diluted basis.

                                       63
<PAGE> 189

     Further information on these transactions is given in note 3 to the
financial statements on page 86.

     In the year ended January 31 1998 the Company completed two acquisitions.

     On April 30 1997 the Company acquired all of the share capital of
Millennium UK Limited ("Millennium"), a privately-held consulting firm, for a
consideration of  GBP 4.0m paid in a combination of  GBP 2.0m in cash and the
issue of 747,060 ordinary shares in the Company. Millennium was a consulting
and project management services company which brought to MERANT specialised
expertise in the estimating, planning and management of Year 2000 compliance
projects.

     On January 20 1998 the Company acquired all of the share capital of XDB
Systems, Inc ("XDB") in exchange for 1,891,975 ordinary shares in the Company,
which represented a value of  GBP 8.7m on the date of the acquisition. XDB, a
privately-held corporation based in Maryland, USA, was a provider of DB2
database development, maintenance and connectivity solutions.

  Year 2000 considerations

     The Year 2000 problem is the result of the widespread practice since the
early days of computing of using only two digits to refer to a year (such as
"98" for "1998") instead of four digits in computer systems. When the Year 2000
arrives or the computer system refers to dates after December 31, 1999, such
systems will interpret the two digits "00" as "1900" as opposed to "2000".
Failure to address this problem could cause results ranging from system failures
to erroneous calculations in date-dependent operations for dates falling after
December 31, 1999. The Company has instituted various projects to become Year
2000 ready. "Year 2000 ready" as used herein means that the performance or
functionality of the Company's internal systems will not be significantly
affected by the dates prior to, during and after the Year 2000.

  State of Readiness

     The Company has developed and implemented an enterprise-wide plan to
analyse and address potential Year 2000 issues affecting its internal systems,
its interaction with third party vendors and suppliers, and its products and
services.

     The Company has established a Year 2000 Project Team to implement a
comprehensive four-phase Year 2000 readiness plan addressing the Year 2000
readiness of the Company's internal systems. The Year 2000 readiness plan is
comprised of four phases (inventory, analysis, remediation and validation
phases). The inventory, analysis and remediation stages of the Year 2000
readiness plan have been substantially completed in all material respects with
respect to the Company's material internal systems, and the Company expects to
substantially complete the validation phase of the plan in all material respects
by August 31 1999. The Year 2000 readiness plan covers IT systems (desktop,
laptop, servers, routers, hubs, switches, and remote access systems, operating
systems, software and critical business systems), non-IT embedded systems
(telephone, voice messaging, teleconferencing, data services and equipment, fax,
copiers and similar equipment.), facilities (elevators, security systems, card
access systems and similar systems), and the Company's vendors and suppliers. As
part of the inventory phase, the Company sought confirmation from its material
suppliers on the current Year 2000 readiness of their systems and/or their
intended time schedule for achieving Year 2000 readiness. During the remainder
of calendar 1999, the Company will also be completing, reviewing and updating
its contingency and disaster recovery plans and preparing a detailed action plan
for the crossover of the Company into the next millennium.

     With respect to its software products, each of the Company's product
business units has completed a Year 2000 assessment of its currently offered
products. In preparing for the Year 2000 date change, the Company has adopted
the Year 2000 compliance standard published by the British Standards Institute
(BSI)--BSI DISC PD2000-1 "A Definition of Year 2000 Conformity Requirements." As
a result of this assessment, the Company believes that the vast majority of its
currently offered products are Year 2000 compliant, and expects virtually all of
its remaining currently offered products to become compliant during calendar
1999 through new releases. In any event, the Company expects that all the then
current versions of its offered products will be Year 2000 compliant before the
end of calendar 1999. Because Year 2000 compliance

                                       64
<PAGE> 190

is generally integrated into its normal product development activities, the
Company has not incurred and does not expect to incur any significant
incremental expenses in addressing this issue in its product lines. The Company
believes that a small number of customers who receive product support from the
Company are operating product versions that may not be Year 2000 compliant or
products that the Company has replaced or intends to replace with comparable
Year 2000 compliant products. The Company believes that the vast majority of
such customers are migrating and will continue to migrate to compliant versions
and products through new releases, which the Company is strongly encouraging. In
addition, certain former customers may be operating non-compliant versions of
products in respect of which the Company's agreed-upon product support and
warranty periods have expired. The Company has not undertaken, and does not plan
to undertake in the future, an assessment of whether these former customers are
taking appropriate steps to address any related Year 2000 issues.

     The Company does not expect customers who licence or migrate to Year 2000
compliant versions of its products to experience any material Year 2000 failures
caused by such products. In addition, the Company believes that its licences and
other agreements contain customary and appropriate limitations on the Company's
obligations with respect to any Year 2000 failures that may be caused by its
current or former products. However, there can be no assurance that the
Company's expectations and beliefs as to these matters will prove to be
accurate. Moreover, the Company's products are used in IT systems containing
third-party hardware and software, some of which may not be Year 2000 compliant.
Many of the Company's customers use legacy computer systems that are expected to
be particularly susceptible to Year 2000 compliance issues. Various commentators
have predicted that a significant amount of litigation may arise out of Year
2000 compliance issues. While the Company has not been subject to any Year 2000
product claims or lawsuits to date, there can be no assurance that customers or
former customers will not bring claims or lawsuits against the Company seeking
compensation for losses associated with Year 2000-related failures. A material
adverse outcome in a Year 2000 claim or lawsuit could have a material adverse
effect on the Company's business, financial condition and results of operations.

     A small number of the products the Company sells are licenced from third
parties. Although the current versions of these products have generally been
warranted to the Company as being Year 2000 compliant, these products have
generally not been subjected to the same extensive Company testing as those
products developed or acquired by the Company. The Company is therefore working
with these third party suppliers to obtain assurance of Year 2000 compliance.
The Company has designated its website as the Company's "Year 2000 Internet
Website" under the terms of the Year 2000 Information and Readiness Disclosure
Act (the "Act") (S.2392). The information provided on past and present pages on
this website regarding the Year 2000 compliance of Company products has been
designated as "Year 2000 Readiness Disclosures." The pages on this website have
been and will continue to be the Company's primary means for communicating to
customers regarding the Year 2000 compliance of its products.

  Demand for Year 2000 Remediation Products and Services

     The Company anticipates that demand in the Year 2000 product and service
market will decline, perhaps rapidly, in anticipation of or following the Year
2000, and the demand for the Company's Year 2000 compliance products and
services may also decline significantly as a result of new technologies,
competition or other factors. In the quarter ended October 31, 1998, the
Company's Year 2000 business was affected by customers moving to the later
stages of their remediation processes, for which the Company did not have the
appropriate products generally available until November, 1998. If these factors
were to continue, the Company's licence revenue and professional service fees
could be materially and adversely affected.

  Costs and Risks Associated with Year 2000 Issues; Contingency Plans

     The Company currently does not anticipate that it will incur material
operating expenses or be required to invest heavily in internal systems
improvements as a result of Year 2000 readiness issues. In addition, the Company
has not incurred and does not currently expect to incur any significant
incremental expenses in addressing this issue in its product and services. Total
expenditures, excluding personnel costs of existing staff, related to the Year
2000 readiness of the Company's internal systems is not expected to be material.
However,
                                       65
<PAGE> 191

there can be no assurance that the Company will not experience significant
additional expenses for unforeseen Year 2000 issues, including those out of the
reasonable control of the Company. Although the Company believes that its Year
2000 readiness efforts are designed to appropriately identify and address those
Year 2000 issues that are within the Company's control, there can be no
assurance that the Company's efforts will be fully effective or that Year 2000
issues will not have a material adverse effect on the Company's business,
financial condition or results of operations. The novelty and complexity of the
issues presented and the Company's dependence on the preparedness of third
parties are among the factors that could cause the Company's efforts to be less
than fully effective. Moreover, Year 2000 issues present many risks that are
simply beyond the Company's control, such as the potential effects of Year 2000
issues on the economy in general and on the Company's business partners and
customers in particular. The Company intends to continue to evaluate both
existing and newly identified Year 2000 risks and to develop and implement such
further responsive measures as it deems appropriate.

     The Company is developing a contingency plan and a disaster recovery plan,
as well as an action plan for the crossover of the Company into the next
millenium. Such plans seek to minimise the impact of the Year 2000 problem on
the Company's business, financial condition and results of operations. During
the remainder of calendar 1999, the Company will be reviewing and updating such
plans.

  Euro considerations

     With effect from January 1 1999 eleven of the fifteen member countries of
the European Union adopted the euro as their legal currency. From that date, the
participating countries established fixed euro conversion rates between their
existing sovereign currencies and the euro. The euro now trades on currency
exchanges and is available for non-cash transactions. With effect from May 1
1999 the Company's internal systems have the ability to price and invoice
customers in the euro. The Company is also engaging in foreign exchange and
hedging activities in the euro. The Company will continue to modify the internal
systems that will be affected by this conversion during fiscal 2000, and does
not expect the costs of further system modifications to be material. There can
be no assurance, however, that the Company will be able to complete such
modifications to comply with euro requirements, which could have a material
adverse effect on the Company's business, financial condition and results of
operations. The Company will continue to evaluate the impact of the introduction
of the euro on its foreign exchange and hedging activities, functional currency
designations, and pricing strategies in the new economic environment. In
addition, the Company faces risks to the extent that banks and vendors upon whom
the Company relies and their suppliers are unable to make appropriate
modifications to support the Company's operations with respect to euro
transactions. While the Company will continue to evaluate the impact of the
euro, management does not believe its introduction will have a material adverse
effect upon the Company's business, financial condition or results of
operations.

  Factors that may influence future operating results

     The following comments are included in both the U.S. and U.K. format of the
Management's Discussion and Analysis in this Annual Report in accordance with
the U.S. Private Securities Litigation Reform Act 1995. For more information on
U.S. Securities Law Matters see page 106.

     The Company operates in a rapidly changing environment that involves a
number of risks, some of which are beyond the Company's control. This section of
the discussion highlights some of these risks and the possible impact of these
factors on future results of operations.

     The factors set forth below as well as statements made elsewhere in the
Company's Annual Report and these financial statements contain certain
forward-looking statements that are based on the beliefs of the Company's
management, as well as assumptions made by, and information currently available
to, the Company's management. The Company's actual results, performance or
achievements in the remainder of fiscal 2000 and beyond could differ materially
from those expressed in, or implied by, any such forward-looking statements.
Factors that could cause or contribute to such material differences include, but
are not limited to, those discussed in this section below, as well as those
discussed elsewhere in the Company's Annual Report and these financial
statements. The Company undertakes no obligation to release publicly any updates

                                       66
<PAGE> 192

or revisions to any such forward-looking statements that may reflect events or
circumstances occurring after the date of the Company's Annual Report. For more
information regarding forward-looking statements, see Further Information for
Shareholders--Special Note on Forward-Looking Statements on page 106 of this
Report.

     Year 2000 Spending Policies.  Many of our customers and potential customers
could potentially implement policies that prohibit or strongly discourage making
changes or additions to their internal computer systems until after January 1,
2000. If companies implement such a policy, we could experience lower revenues
if potential customers who might otherwise purchase our products or services
delay purchases until after January 1, 2000 in an effort to stabilize their
internal computer systems in order to cope with the Year 2000 problem or because
their information technology budgets have been diverted to address Year 2000
issues. If our potential customers delay purchasing our products and services in
preparation for Year 2000 problem, our business could be seriously harmed.

     Integration of INTERSOLV; Synergies.  In September 1998, the Company
acquired all the share capital of INTERSOLV. The Company acquired INTERSOLV with
the expectation that the acquisition will result in long-term strategic
benefits. Realization of these anticipated benefits depends in part on whether
the operations and administration of the companies are fully integrated in an
efficient and effective manner. There can be no assurance that this will occur.
The combined company's integration efforts have yet to be fully completed and
are still ongoing. The successful integration of MERANT and INTERSOLV will
require, among other things, integration of the product offerings of the
companies, sales and marketing and research and development efforts, the
cooperation and coordination of the business managers of the two companies, and
the integration of globally dispersed operations. It is possible that this
integration will not be accomplished smoothly or successfully, and that efforts
to achieve integration may require more time, expense and management attention
than anticipated. The diversion of management's attention from day-to-day
operations and any difficulties encountered in the integration process could
have a material adverse effect on the Company's business, financial condition
and results of operations. If the integration of the Company's and INTERSOLV's
operations is not successful, if the combined companies do not achieve the
operational efficiencies and other business synergies that are anticipated or if
those synergies are not achieved as quickly as may be expected by financial
analysts or at the level expected by financial analysts, or if the effect of the
merger on earnings per share is not in line with the expectation of financial
analysts, the market price of the MERANT ordinary shares or the MERANT ADSs
could be significantly and adversely affected.

     Fluctuations in Operating Results; Absence of Significant Backlog.  The
Company's future operating results are subject to quarterly and annual
fluctuations due to a variety of factors, including demand for the Company's
products, the size and timing of customer orders and the lengthy sales cycle,
product life cycles, the ability of the Company to introduce and market new and
enhanced versions of the Company's products on a timely basis, the introduction
and acceptance of new products and product enhancements by the Company or its
competitors, customer order deferrals in anticipation of new or enhanced
products or technologies, the timing of product introductions or enhancements by
the Company or its competitors, technological changes in the software industry,
changes in the mix of distribution channels through which the Company's products
are offered, purchasing patterns of distributors and retailers, including
customer budgeting cycles, the quality of products sold, price and other
competitive conditions in the industry, changes in the Company's level of
operating expenses, changes in the Company's sales incentive plans, the
cancellation of licences during the warranty period, non-renewal of maintenance
agreements, the effects of extended payment terms (particularly for
international customers), economic conditions generally or in various geographic
areas, and other factors discussed in this section.

     A relatively high percentage of the Company's operating expenses is fixed
over the short term and if anticipated revenue for a fiscal quarter does not
occur or is delayed, the operating results for that quarter will be immediately
and adversely affected. The Company historically has operated with little
product backlog, because its products are generally shipped as orders are
received. As a result, revenue of the Company in any quarter will depend on the
volume and timing of, and the ability to fill, orders received in that quarter.
In addition, a substantial portion of the Company's revenue for most quarters is
booked and shipped in the last

                                       67
<PAGE> 193

month of the quarter such that the magnitude of the quarterly fluctuations may
not become evident until late in or even at the end of the particular quarter.

     Seasonality of Operating Results.  The Company's 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, the
Company has historically experienced lower revenue for the first quarter of a
fiscal year than in the fourth quarter of the prior fiscal year. The Company
typically has recognised a high proportion of its 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 the Company's expenses do not vary with revenue.
Due to all of the foregoing factors, it is possible that in some future quarters
the Company's operating results will be below the expectations of stock market
analysts and investors and that the Company's share price would be materially
adversely affected.

     Product Concentration.  A large portion of the Company's revenue is derived
from products and related services for mainframe application development in the
COBOL language and COBOL compilers running on workstations and personal
computers. The Company expects that a substantial portion of its revenue will be
derived from such products and services in the future. As a result, the
Company's future operating results depend upon continued market acceptance and
use of the COBOL language. Any decline in the demand for or market acceptance or
use of the COBOL language or mainframes as a result of competition,
technological change or other factors could have a material adverse effect on
the Company's business, financial condition and results of operations.

     Year 2000 Business and Compliance Issues.  Information concerning the
Company's state of Year 2000 readiness, the demand for its Year 2000 remediation
products and services, the costs associated with its Year 2000 issues and its
contingency plans, and the Company's state of euro readiness are incorporated
herein by reference to the information included above in these financial
statements under the captions entitled "Year 2000 considerations" and "Euro
considerations" in the "Management's Discussion and Analysis of Results of
Operations and Financial Condition" section.

     Rapid Technological Change; Dependence on New Products.  The Company is in
a market that is subject to rapid technological change. The Company must
continually adapt to that change by improving its products and introducing new
products, technologies and services. The growth and financial performance of the
Company will depend in part on its ability, on a timely and cost-effective
basis, to develop and introduce enhancements of existing products and new
products that accommodate the latest technological advances and standards,
customer requirements and market conditions. The Company's ability to develop
and market enhancements of existing products and new products depends in part on
its ability to attract and retain qualified employees. In the past, the Company
has experienced delays and increased expenses in developing certain new
products. Any failure by the Company to anticipate or respond adequately to
changes in technology and market conditions, to complete product development and
introduce new products on a timely basis and with an adequate level of
performance and functionality, or to attract and retain qualified employees,
could materially adversely affect the Company's business, financial condition
and results of operations. to new or emerging technologies, or devote greater
resources to the promotion and sale of their products than can the Company.
There can be no assurance that other companies will not develop competitive
products in the future. In addition, the software industry is characterised
generally by low barriers to entry, as a result of which new competitors
possessing technological, marketing or other competitive advantages may emerge
and rapidly acquire market share. Furthermore, there can be no assurance that
the Company will be able to compete effectively in the future in the
professional services market.

     Susceptibility to General Economic Conditions.  The Company's revenue and
results of operations are subject to fluctuations in the general economic
conditions in the various areas of the world in which it does business. The
risks inherent in conducting international business generally include exposure
to exchange rate fluctuations (see the section entitled "Exchange rate
fluctuations" below), longer payment cycles, greater difficulties in debt
collection and enforcing agreements, tariffs and other restrictions on foreign
trade, export requirements, economic and political instability, withholding and
other tax consequences, restrictions on

                                       68
<PAGE> 194

repatriation of earnings, and the burdens of complying with a wide variety of
foreign laws. In addition, the laws of certain countries in which the Company's
products may be marketed may not protect the Company's intellectual property
rights to the same extent, as do the laws of the United States and Europe. There
can be no assurance that the factors described above will not have an adverse
effect on the Company's future international revenue.

     Dependence on Key Personnel.  Several of the senior management personnel of
the Company are relatively new to the Company, including the Company's Chief
Executive Officer and Chief Financial Officer, and the Company's 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 there can be no assurance that the Company will be able to attract
and retain a sufficient number of qualified personnel to conduct its business in
the future. The Company's success depends to a significant degree upon the
continued contributions of its key management, marketing, product development,
professional services and operational personnel, including key personnel of
acquired companies. The Company will not have employment agreements with most of
its key personnel, nor does it maintain key person life insurance on any of
these persons.

     Management of Growth.  Both the Company and INTERSOLV have recently
experienced a period of rapid growth in revenue. This growth has placed a
significant strain on the financial, management, operational and other resources
of the combined companies, and if it continues is expected to continue to place
a significant strain on the Company's financial, management, operational and
other resources. There can be no assurance that the Company's management
personnel, systems, procedures and controls will be adequate to support the
Company's existing and future operations.

     Volatility of Stock Price.  The market price of the Company's securities
has experienced significant price volatility, particularly since the
announcement of the Company's proposed acquisition of INTERSOLV in June 1998,
and such volatility may occur in the future. Factors such as actual or
anticipated fluctuations in the Company's operating results, changes in
financial estimates by securities analysts, announcements of technological
innovations, new products or new contracts by the Company or its competitors,
developments with respect to patents, copyrights or proprietary rights,
conditions and trends in the software and other technology industries, adoption
of new accounting standards affecting the software industry, general market
conditions and other factors may have a significant impact on the market price
of the Company's securities. Furthermore, the stock market has 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 the Company's securities.

     Recent and Future Acquisitions.  The challenges of integrating the
organizations and operations of the Company and INTERSOLV have been compounded
by ongoing efforts associated with the integration of recent acquisitions by
both companies, including the acquisitions by the Company of Millennium UK
Limited in April 1997, XDB Systems, Inc. in January 1998, Micro Focus Italia
S.r.L. in May 1998 and Advanced Software Engineering Pty. Ltd. in August 1998
and the acquisition by INTERSOLV of SQL Software, Ltd. in March 1998. The
Company also acquired Essential Software, Inc. (trading as The Marathon Group)
in August 1999. The Company is still in the process of integrating the
operations acquired in these transactions with its own. There can be no
assurance that the anticipated benefits of recently concluded business
combinations will be realised. In addition, these acquisitions have required
significant additional management resources and attention. The Company expects
to continue growing its business through acquisitions. If the Company is
unsuccessful in integrating and managing the recently acquired businesses or
other businesses it may acquire in the future, the Company's business, financial
condition and results of operations could be adversely affected in future
periods.

     Enforceability of U.S. Judgments.  The Company is a public limited company
organised under the laws of England and Wales. Judgments of U.S. courts,
including judgments against the Company, predicated on the civil liability
provisions of the federal securities laws of the United States, may not be
enforceable in English courts.

                                       69
<PAGE> 195

  Derivatives and other financial instruments

     MERANT's principal financial instruments, other than derivatives, comprise
bank loans, cash and short-term deposits. The main purpose of these financial
instruments is to fund the operations of the business. The Company has various
other financial instruments, such as trade debtors and trade creditors, that
arise directly from its operations.

     MERANT also enters into derivative transactions (principally forward
currency contracts). The purpose is to manage the currency risks arising from
the group's operations and its sources of finance.

     It is, and has been throughout the period under review, the group's policy
that no trading in financial instruments shall be 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.

     Liquidity risk

     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.

     Foreign currency risk

     As a result of the significant investment in overseas operations, the
group's balance sheet can be significantly affected by movements in foreign
currency exchange rates. The group seeks to mitigate the effect of this
structural currency exposure by entering into foreign exchange hedges. In
managing its structural currency exposures, the group's objectives are to
maintain a low cost of borrowings and to retain some potential for
currency-related appreciation while partially hedging against currency
depreciation. No hedging contracts were outstanding at April 30, 1999.

     The group also has transactional currency exposures. Such exposures arise
from sales or purchases by an operating unit in currencies other than that
unit's functional currency. The group uses its multi-currency bank facility to
minimise such currency exposures.

  Exchange rate fluctuations

     MERANT prepares separate consolidated financial statements expressed in
U.S. dollars and G.B. pounds. Revenue, costs and expenses arising in currencies
other than the reporting currency are translated using average exchange rates.
Assets and liabilities denominated in currencies other than the reporting
currency are translated at exchange rates in effect at the balance sheet date.
The majority of the Company's revenue arises in U.S. dollars (approximately
two-thirds in 1999), whereas its costs are incurred approximately equally in
U.S. dollars and other currencies, predominately G.B. pounds. Consequently
fluctuations in exchange rates, particularly between the U.S. dollar and the
G.B. pound, may have a significant impact on the Company's operating results,
notably when expressed in G.B. pounds.

     In 1999, 1998 and 1997, fluctuations between the U.S. dollar and the G.B.
pound have not been significant, and net exchange rate gains or losses on
operational transactions have been immaterial.

  Liquidity and capital resources

     MERANT continues to fund its activities through cash from operating
activities. In 1999 cash provided by operating activities was  GBP 33.9m (1998:
GBP 17.8m).

     In 1999 MERANT invested  GBP 8.9m (1998:  GBP 8.3m) in computer equipment
and other tangible fixed assets and  GBP 5.9m (1998:  GBP 5.7m) in software
product assets.

                                       70
<PAGE> 196

     Investment in 1998 included  GBP 2.7m in connection with the relocation of
the Company to new U.S. facilities in Mountain View, California and Wayne,
Pennsylvania, and  GBP 3.2m for the installation and implementation of new
internal recording and reporting systems.

     Net of these expenditures, cash and short-term investments increased by
GBP 23.9m to  GBP 75.4m (1998: increased by  GBP 6.8m to  GBP 51.5m).

     The Company has in place a line of credit under the terms of which
unsecured financing of up to  GBP 5.0m is available until January 2001.

     At April 30 1999 borrowings totalling  GBP 1.7m had been made against this
line of credit (January 31 1998:  GBP 1.0m).

     MERANT believes it is important to maintain a conservative capital
structure and a strong cash position. Cash is primarily invested in liquid money
market investments. The Company's investment policy is designed to minimise risk
while maximizing return on cash given such levels of risk, and to keep
uninvested cash at a minimum. Cash management is centralised, although some cash
is held at various subsidiaries around the world to meet local operating
requirements. All cash is freely remittable.

     The Company believes that existing cash balances in combination with
internally generated funds and its available bank lines of credit will be more
than sufficient to meet cash requirements in 2000.

                                       71
<PAGE> 197

                                   MERANT PLC
                              FINANCIAL STATEMENTS
                       FIFTEEN MONTHS ENDED APRIL 30 1999
                      CONSOLIDATED PROFIT AND LOSS ACCOUNT
                                   UK FORMAT

<TABLE>
<CAPTION>
                                                    FIFTEEN MONTHS ENDED
                                                        APRIL 30 1999
                                             -----------------------------------   YEAR ENDED   YEAR ENDED
                                             CONTINUING   ACQUISITIONS             JANUARY 31   JANUARY 31
                                             OPERATIONS     (NOTE 3)      TOTAL       1998         1997
                                     NOTES     GBP'000       GBP'000     GBP'000    GBP'000      GBP'000
                                     -----   ----------   ------------   -------   ----------   ----------
<S>                                  <C>     <C>          <C>            <C>       <C>          <C>
REVENUE
  Product revenue..................            78,446        39,799      118,245     60,480       42,020
  Maintenance revenue..............            36,452        20,002       56,454     28,233       29,516
  Service revenue..................            17,670        23,104       40,774      8,302        1,553
                                              -------        ------      -------     ------       ------
     TOTAL REVENUE.................    2      132,568        82,905      215,473     97,015       73,089
                                              -------        ------      -------     ------       ------
COSTS OF REVENUE
  Cost of product revenue..........             6,302         3,063        9,365      6,990        6,406
  Cost of maintenance revenue......            10,940         6,058       16,998      6,984       10,703
  Cost of service revenue..........            12,353        16,894       29,247      8,861        1,189
                                              -------        ------      -------     ------       ------
     TOTAL COST OF REVENUE.........            29,595        26,015       55,610     22,835       18,298
                                              -------        ------      -------     ------       ------
GROSS PROFIT.......................           102,973        56,890      159,863     74,180       54,791
                                              -------        ------      -------     ------       ------
OPERATING EXPENSES
  Research and development.........    4       25,459         8,860       34,319     19,679       24,299
  Sales and marketing..............            55,735        33,426       89,161     35,477       30,146
  General and administrative.......    5       25,980        14,432       40,412      6,288        7,854
                                              -------        ------      -------     ------       ------
     TOTAL OPERATING EXPENSES......           107,174        56,718      163,892     61,444       62,299
                                              -------        ------      -------     ------       ------
OPERATING (LOSS)/PROFIT............    6       (4,201)          172       (4,029)    12,736       (7,508)
Exceptional item -- fundamental
  restructuring....................    8                                 (11,831)        --           --
                                                                         -------     ------       ------
(LOSS)/PROFIT AFTER EXCEPTIONAL
  ITEM.............................                                      (15,860)    12,736       (7,508)
Interest income....................                                        4,433      2,551        1,720
Interest expense...................    9                                    (145)       (70)         (21)
                                                                         -------     ------       ------
(LOSS)/PROFIT BEFORE TAXATION......                                      (11,572)    15,217       (5,809)
Taxation...........................   10                                  (3,707)    (4,791)      (1,472)
                                                                         -------     ------       ------
RETAINED (LOSS)/PROFIT FOR THE
  PERIOD...........................                                      (15,279)    10,426       (7,281)
                                                                         =======     ======       ======
(LOSS)/EARNINGS PER SHARE: BASIC...   11                                  (14.3p)     14.0p       (10.2p)
(LOSS)/EARNINGS PER SHARE: DILUTED.   11                                  (14.3p)     13.3p       (10.2p)
                                                                         -------     ------       ------
</TABLE>

- ---------------

NOTE:  Share and per share data for prior periods has been restated to comply
       with FRS 14 -- Earnings Per Share (see note 1 on page 82) and to reflect
       the 5-for-1 sub-division of the Company's ordinary shares, which took
       effect on March 13, 1998 (see note 25 on page 102).

     The notes on pages 79 to 102 form part of these financial statements.


                                       72
<PAGE>  198

                                   MERANT PLC
                              FINANCIAL STATEMENTS
                       FIFTEEN MONTHS ENDED APRIL 30 1999

                           CONSOLIDATED BALANCE SHEET
                                   UK FORMAT

<TABLE>
<CAPTION>
                                                                      APRIL 30   JANUARY 31
                                                                        1999        1998
                                                              NOTES   GBP'000     GBP'000
                                                              -----   --------   ----------
<S>                                                           <C>     <C>        <C>
FIXED ASSETS
  Intangible fixed assets...................................   12     133,976      12,394
  Tangible fixed assets.....................................   13      28,633      23,836
  Investments...............................................   14       4,691       4,886
                                                                      -------      ------
     TOTAL FIXED ASSETS.....................................          167,300      41,116
                                                                      -------      ------
CURRENT ASSETS
  Stocks....................................................   15       1,780         317
  Debtors...................................................   16      77,887      30,873
  Cash and bank deposits....................................           75,394      51,518
                                                                      -------      ------
     TOTAL CURRENT ASSETS...................................          155,061      82,708
                                                                      -------      ------
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR..............   17      92,691      46,513
                                                                      -------      ------
NET CURRENT ASSETS..........................................           62,370      36,195
                                                                      -------      ------
     TOTAL ASSETS LESS CURRENT LIABILITIES..................          229,670      77,311
CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR.....   18           6          12
PROVISIONS FOR LIABILITIES AND CHARGES......................   21      12,555       6,407
                                                                      -------      ------
NET ASSETS..................................................          217,109      70,892
                                                                      =======      ======
CAPITAL AND RESERVES
  Called up share capital...................................            2,873       1,588
  Share premium account.....................................          189,261      30,196
  Profit and loss account...................................           24,975      39,108
                                                                      -------      ------
     TOTAL SHAREHOLDERS' FUNDS..............................          217,109      70,892
                                                                      =======      ======
</TABLE>


The financial statements on pages 72 to 102 were approved by the Board of
directors on August 4 1999


Gary Greenfield                            J. Michael Gullard
Director                                   Director




     The notes on pages 79 to 102 form part of these financial statements.


                                       73
<PAGE> 199

                                   MERANT PLC
                              FINANCIAL STATEMENTS
                       FIFTEEN MONTHS ENDED APRIL 30 1999

                        CONSOLIDATED CASH FLOW STATEMENT
                                   UK FORMAT

<TABLE>
<CAPTION>
                                                                          YEAR ENDED   YEAR ENDED
                                                              APRIL 30    JANUARY 31   JANUARY 31
                                                                1999         1998         1997
                                                              GBP'000      GBP'000      GBP'000
                                                             ---------    ----------   ----------
<S>                                                           <C>         <C>          <C>
NET CASH INFLOW FROM OPERATING ACTIVITIES (NOTE I)..........    33,864      17,767       12,135
                                                               -------     -------       ------
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
  Interest received.........................................     4,433       2,519        1,803
  Interest paid.............................................      (145)        (70)         (21)
                                                               -------     -------       ------
NET CASH INFLOW FROM RETURNS ON INVESTMENTS AND SERVICING OF
  FINANCE...................................................     4,288       2,449        1,782
                                                               -------     -------       ------
TAXATION
  U.K. corporation tax refunded (paid)......................     1,297        (599)         (88)
  Overseas tax refunded/(paid)..............................      (582)       (262)          70
                                                               -------     -------       ------
TAX PAID....................................................       715        (861)         (18)
                                                               -------     -------       ------
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
  Purchase of tangible fixed assets.........................    (8,906)     (8,263)      (2,500)
  Capitalised software product assets.......................    (5,853)     (5,688)      (5,258)
  Investment in own shares..................................       195         748           --
  Disposal of tangible fixed assets.........................        --         447          546
                                                               -------     -------       ------
NET CASH OUTFLOW FROM CAPITAL EXPENDITURE AND FINANCIAL
  INVESTMENT................................................   (14,564)    (12,756)      (7,212)
                                                               -------     -------       ------
ACQUISITIONS AND DISPOSALS
  Investment in subsidiary undertakings.....................    16,048      (2,000)          --
  Net cash acquired with subsidiaries.......................   (17,928)        961           --
                                                               -------     -------       ------
NET CASH OUTFLOW FROM ACQUISITIONS AND DISPOSALS............    (1,880)     (1,039)          --
                                                               -------     -------       ------
CASH INFLOW BEFORE FINANCING................................    22,423       5,560        6,687
                                                               -------     -------       ------
FINANCING
  Issue of ordinary shares..................................     2,139       1,517          138
  Expenses attributable to issue of ordinary shares.........    (2,654)         --           --
  Capital element of finance lease obligations..............        (9)        (65)        (131)
  Bank loan.................................................       689       1,007           --
                                                               -------     -------       ------
NET CASH INFLOW FROM FINANCING..............................       165       2,459            7
                                                               -------     -------       ------
INCREASE IN CASH............................................    22,588       8,019        6,694
                                                               =======     =======       ======
</TABLE>

     The notes on pages 79 to 102 form part of these financial statements.


                                       74
<PAGE> 200

                                   MERANT PLC
                              FINANCIAL STATEMENTS
                       FIFTEEN MONTHS ENDED APRIL 30 1999

                   NOTES TO CONSOLIDATED CASH FLOW STATEMENT
                                   UK FORMAT

<TABLE>
<CAPTION>
                                                             FIFTEEN MONTHS
                                                                 ENDED        YEAR ENDED   YEAR ENDED
                                                                APRIL 30      JANUARY 31   JANUARY 31
                                                                  1999           1998         1997
                                                                GBP'000        GBP'000      GBP'000
                                                             --------------   ----------   ----------
<S>                                                          <C>              <C>          <C>
(i) RECONCILIATION OF OPERATING PROFIT TO "NET CASH INFLOW
  FROM OPERATING ACTIVITIES"
Operating (loss)/profit....................................      (4,029)        12,736       (7,508)
Depreciation charges.......................................       8,512          4,534        5,655
Amortisation charges.......................................      30,390          7,765        8,067
Loss on sale of tangible fixed assets......................       3,032             72          221
Exceptional item...........................................      (6,918)            --           --
(Increase)/decrease in stocks..............................      (1,419)           154        1,171
(Increase)/decrease in debtors.............................      (7,229)       (14,460)       8,012
Increase/(decrease) in creditors...........................      11,525          6,966       (3,483)
                                                                 ------        -------       ------
NET CASH INFLOW FROM OPERATING ACTIVITIES..................      33,864         17,767       12,135
                                                                 ------        -------       ------
(ii) RECONCILIATION TO NET FUNDS
Increase in cash in the period.............................      22,588          8,019        6,694
Cash inflow/(outflow) from increase/(decrease) in debt and
  lease financing..........................................        (680)          (942)         131
                                                                 ------        -------       ------
                                                                 21,908          7,077        6,825
Translation difference.....................................       1,288         (1,226)        (941)
                                                                 ------        -------       ------
                                                                 23,196          5,851        5,884
                                                                 ------        -------       ------
Net funds, beginning of period.............................      50,493         44,642       38,758
                                                                 ------        -------       ------
NET FUNDS, END OF PERIOD...................................      73,689         50,493       44,642
                                                                 ======        =======       ======
</TABLE>

<TABLE>
<CAPTION>
                                                         BALANCES                             BALANCES
                                                        AT JANUARY    CASH     EXCHANGE     AT APRIL 30,
                                                         31, 1998     FLOW    DIFFERENCES       1999
                                                        ----------   ------   -----------   ------------
<S>                                                     <C>          <C>      <C>           <C>
(iii) ANALYSIS OF NET FUNDS:
Cash..................................................    51,518     22,588      1,288         75,394
Short term loans......................................    (1,007)      (689)     --            (1,696)
Finance lease obligations.............................       (18)         9      --                (9)
                                                          ------     ------      -----         ------
                                                          50,493     21,908      1,288         73,689
                                                          ------     ------      -----         ------
</TABLE>

     The notes on pages 79 to 102 form part of these financial statements.


                                       75
<PAGE>   201

                                   MERANT PLC
                              FINANCIAL STATEMENTS
                       FIFTEEN MONTHS ENDED APRIL 30 1999

                             COMPANY BALANCE SHEET
                                   UK FORMAT

<TABLE>
<CAPTION>
                                                                      APRIL 30   JANUARY 31
                                                                        1999        1998
                                                              NOTES   GBP'000     GBP'000
                                                              -----   --------   ----------
<S>                                                           <C>     <C>        <C>
FIXED ASSETS
  Tangible fixed assets.....................................   13       2,945       2,971
  Investments...............................................   14     206,479      45,086
                                                                      -------      ------
     TOTAL FIXED ASSETS.....................................          209,424      48,057
                                                                      -------      ------
CURRENT ASSETS
  Amounts owed by subsidiary undertakings...................            9,353       8,989
  Other debtors.............................................               --          40
  Cash and bank deposits....................................               68         738
                                                                      -------      ------
     TOTAL CURRENT ASSETS...................................            9,421       9,767
                                                                      -------      ------
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
  Amounts owed to subsidiary undertakings...................            7,548       9,153
  Trade creditors...........................................                3          69
  Corporation tax...........................................               --          63
  Accrued expenses..........................................              580         206
                                                                      -------      ------
NET CURRENT ASSETS..........................................            1,290         276
                                                                      -------      ------
     TOTAL ASSETS LESS CURRENT LIABILITIES..................          210,714      48,333
PROVISIONS FOR LIABILITIES AND CHARGES......................   21          --          19
                                                                      -------      ------
NET ASSETS..................................................          210,714      48,314
                                                                      =======      ======
CAPITAL AND RESERVES
  Called up share capital...................................            2,873       1,588
  Share premium account.....................................          189,261      30,196
  Profit and loss account...................................           18,580      16,530
                                                                      -------      ------
     TOTAL SHAREHOLDERS' FUNDS..............................          210,714      48,314
                                                                      =======      ======
</TABLE>


The financial statements on pages 72 to 102 were approved by the Board of
directors on August 4 1999


Gary Greenfield                              J. Michael Gullard
Director                                     Director

This is the balance sheet of MERANT plc, the holding company of the MERANT group
of companies, which is presented in accordance with section 226 of the Companies
Act 1985 of Great Britain. No profit or loss account is presented for MERANT plc
as provided by section 230 of the same Act.

     The notes on pages 79 to 102 form part of these financial statements.


                                       76
<PAGE>   202

                                   MERANT PLC
                              FINANCIAL STATEMENTS
                       FIFTEEN MONTHS ENDED APRIL 30 1999

                 STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
                                   UK FORMAT

<TABLE>
<CAPTION>
                                                        FIFTEEN MONTHS ENDED   YEAR ENDED   YEAR ENDED
                                                              APRIL 30         JANUARY 31   JANUARY 31
                                                                1999              1998         1997
                                                              GBP'000           GBP'000      GBP'000
                                                        --------------------   ----------   ----------
<S>                                                     <C>                    <C>          <C>
(Loss)/profit for the period..........................        (15,279)           10,426       (7,281)
Currency translation adjustment.......................          1,146            (1,122)      (1,920)
                                                              -------            ------       ------
     TOTAL RECOGNISED GAINS AND LOSSES FOR THE
       PERIOD.........................................        (14,133)            9,304       (9,201)
</TABLE>

     The notes on pages 79 to 102 form part of these financial statements.


                                       77
<PAGE>   203

                                   MERANT PLC
                              FINANCIAL STATEMENTS
                       FIFTEEN MONTHS ENDED APRIL 30 1999

                        MOVEMENT IN SHAREHOLDERS' FUNDS
                                   UK FORMAT

<TABLE>
<CAPTION>
                                         ORDINARY SHARES OF 2P EACH:
                                        -----------------------------    SHARE    RETAINED
                                        AUTHORISED   ISSUED    AMOUNT   PREMIUM   EARNINGS    TOTAL
                                           '000       '000     GBP'000  GBP'000   GBP'000    GBP'000
                                        ----------   -------   ------   -------   --------   -------
<S>                                     <C>          <C>       <C>      <C>       <C>        <C>
BALANCE, JANUARY 31 1996..............    82,500      75,720   1,514     17,936    50,737     70,187
Increase in authorised share
  capital.............................    30,000          --      --         --        --         --
Share options exercised...............        --         120       3        135        --        138
(Loss) for the year...................        --          --      --         --    (7,281)    (7,281)
Currency translation adjustment.......        --          --      --         --    (1,920)    (1,920)
                                         -------     -------   -----    -------   -------    -------
BALANCE, JANUARY 31 1997..............   112,500      75,840   1,517     18,071    41,536     61,124
Issued on acquisitions................        --       2,635      52     10,627        --     10,679
Goodwill arising on acquisitions......        --          --      --         --   (11,732)   (11,732)
Share options exercised...............        --         940      19      1,498        --      1,517
Profit for the year...................        --          --      --         --    10,426     10,426
Currency translation adjustment.......        --          --      --         --    (1,122)    (1,122)
                                         -------     -------   -----    -------   -------    -------
BALANCE, JANUARY 31 1998..............   112,500      79,415   1,588     30,196    39,108     70,892
Increase in authorised share capital..    99,500          --      --         --        --         --
Issued on acquisitions................        --      63,084   1,262    159,603        --    160,865
Acquisition costs.....................        --          --      --     (2,654)       --     (2,654)
Share options exercised...............        --       1,174      23      2,116        --      2,139
(Loss) for the period.................        --          --      --         --   (15,279)   (15,279)
Currency translation adjustment.......        --          --      --         --     1,146      1,146
                                         -------     -------   -----    -------   -------    -------
BALANCE, APRIL 30 1999................   212,000     143,673   2,873    189,261    24,975    217,109
                                         -------     -------   -----    -------   -------    -------
</TABLE>

- ---------------
NOTES:  1. The authorised share capital was increased by  GBP 1,990,000 by the
           creation of 99,500,000 ordinary shares of 2p each

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

        3. 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).

        4. Share data for prior periods has been restated to reflect the 5-for-1
           sub-division of The Company's ordinary shares, which took effect on
           March 13, 1998 (see note 25 on page 102).

The cumulative value of goodwill written off on acquisitions between December 23
1989 and April 30 1999 was  GBP 11,732,000 (January 31 1998:  GBP 11,732,000).

     The notes on pages 79 to 102 form part of these financial statements.


                                       78
<PAGE>   204

                                   MERANT PLC
                              FINANCIAL STATEMENTS
                       FIFTEEN MONTHS ENDED APRIL 30 1999

                       NOTES TO THE FINANCIAL STATEMENTS
                                   UK FORMAT

     The statutory financial statements of MERANT plc ("the Company"), within
the meaning of section 240 of the Companies Act 1985 of Great Britain, for the
accounting period ended April 30 1999, are contained on pages 72 to 102.

     On November 30 1998, the Company announced a change of its financial year
end and accounting reference date to April 30 from January 31. Consequently, the
results shown in this report are for the fifteen-month period ended April 30
1999; comparative figures are for the twelve month periods ended January 31,
1998 and 1997.

     On February 16, 1999, the Company changed its corporate name from Micro
Focus Group Plc to MERANT plc.

NOTE 1  SIGNIFICANT ACCOUNTING POLICIES

  Basis of preparation

     The financial statements have been prepared under the historical cost
convention and in accordance with applicable U.K. Accounting Standards, which,
as applied by MERANT, differ in certain respects from U.K. GAAP, particularly as
to the treatment of acquisitions and goodwill and the presentation of certain
items in the financial statements.

     Certain reclassifications of data presented in the 1998 and 1997 financial
statements and related notes amounts have been made to conform with the 1999
presentation. Specifically, the presentation of revenue and cost of revenue in
the profit and loss account has been expanded to analyse service revenue and
related direct costs between maintenance and other services. The results of
operations of the Company are not affected by this changed presentation.

  Basis of consolidation

     The consolidated financial statements are those of MERANT plc and all of
its subsidiary undertakings (collectively "MERANT") for the accounting period
ended April 30 1999. All significant inter-company balances and transactions
have been eliminated on consolidation.

     Acquisitions are accounted for using the acquisition method of accounting.
Accordingly the profit and loss account and cash flow statement include the
results and cash flows for the period of ownership. The cost of acquisition
represents the cash value of the consideration and/or the market value of the
shares issued on the date the offer became unconditional, plus expenses. The
purchase consideration is allocated between the identifiable tangible assets and
liabilities on the basis of fair value at the date of acquisition. The excess is
attributed to goodwill and is amortised over its estimated economic life.

  Revenue recognition

     Product revenue: the Company's standard end user licence agreement for the
Company's products provides for an initial fee to use the product.

     The Company also enters into other types of licence agreement, typically
with major end user customers, which allow for the use of the Company's
products, usually restricted by the number of employees, the number of users, or
the licence term. Fees from licences are recognised as revenue upon product
shipment, provided a signed 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 recognised upon
shipment provided that the above criteria have been met and payment of the
licence fees is not dependent

                                       79
<PAGE>   205
                                   MERANT PLC
                              FINANCIAL STATEMENTS
                       FIFTEEN MONTHS ENDED APRIL 30 1999

                NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
                                   UK FORMAT

NOTE 1  SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

upon the performance of the consulting services. In instances where the
aforementioned criteria have not been met, both the licence and consulting fees
are recognised under the percentage of completion method of contract accounting.
The Company provides for sales returns based on historical rates of return.

     Maintenance revenue: maintenance agreements generally call for the Company
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. Payment for maintenance fees are
generally made in advance and are nonrefundable.

     Service revenue: The Company provides consulting and education services to
its customers. Revenue from such services is generally recognised as the
services are performed.

  Software product assets -- development costs

     Costs related to the initial development and design of new software
products prior to the establishment of technological feasibility are written off
as research and development costs. Once technological feasibility has been
reasonably established, either by the completion and successful testing of a
detailed program design, or by the creation and testing of an operative working
model, further development costs incurred are capitalised as software product
assets.

     Software purchased for inclusion in the MERANT product set, including
software acquired on acquisitions, is also included in software product assets.

     Software product assets are amortised using the straight line method over
the estimated economic life of the products, which in most cases is assumed to
be three or four years. Where a shortfall in future revenue from a product is
anticipated, amortisation is accelerated. Software product assets are reviewed
for impairment if events or circumstances indicate that the carrying value may
not be recoverable.

     Amortisation of software product assets is included in research and
development costs.

  Goodwill

     Goodwill is stated at cost, less accumulated amortisation. Cost represents
the excess of amounts paid on the acquisition of businesses over the aggregate
fair value of the net assets acquired. Amortisation is computed using the
straight-line method over the estimated economic life of the asset. The
estimated life will depend on the length of the future period expected to
benefit from the purchase. Present estimated economic lives are between three
and five years. Goodwill is reviewed for impairment if events or circumstances
indicate that the carrying value may not be recoverable.

     Prior to January 31 1998 goodwill was written off directly to reserves as
incurred.

     If a subsidiary or business is subsequently sold or closed, any goodwill
arising on acquisition that was written off directly to reserves or has not been
fully amortised through the profit and loss account is taken into account in
determining the profit or loss on the sale or closure.

                                       80
<PAGE>   206
                                   MERANT PLC
                              FINANCIAL STATEMENTS
                       FIFTEEN MONTHS ENDED APRIL 30 1999

                NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
                                   UK FORMAT

NOTE 1  SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

  Tangible fixed assets

     Tangible fixed assets are stated at cost less accumulated depreciation and
amortisation. Depreciation and amortisation is computed using the straight-line
method over estimated economic lives from the time the asset is put into use.
Present estimated economic lives are as follows:

<TABLE>
<S>                                                        <C>
Freehold office buildings................................             40 years
Leasehold improvements...................................  over the lease term
Computer equipment.......................................            3-5 years
Office equipment.........................................           7-11 years
Transportation equipment.................................            3-4 years
</TABLE>

  Leasing

     Leases which transfer substantially all the risks and rewards of ownership
of an asset to MERANT are capitalised as fixed assets. The amount capitalised is
the net present value of the future lease payments, this sum also being treated
as a liability. Depreciation on such leased assets is provided at rates
calculated to write off the capitalised cost over the shorter of the lease term
and the asset's economic life. Lease payments are apportioned between finance
charges (computed on the basis of implicit interest rates) and a reduction in
the original liability.

     Rentals paid under operating leases are charged to income on a
straight-line basis over the lease term.

  Deferred taxation

     Deferred taxation is provided on the liability method on all timing
differences to the extent that they are expected to reverse in the future
without being replaced, calculated at the rate at which it is anticipated the
timing differences will reverse.

  Stocks

     Stocks, consisting principally of diskettes and technical manuals, are
stated at the lower of cost and net realisable value, using the first-in,
first-out method. Contracts in progress, representing engineering costs
associated with non-cancellable licence agreements prior to delivery, are
included in stocks and charged to income when the related revenue is recognised.

  Cash and bank deposits

     Cash and bank deposits includes cash placed on deposit where the maturity
date is between three and twelve months from the initial date of deposit. All
such cash balances are repayable on demand and can be withdrawn at any time
without notice or penalty.

  Investments

     Investments are recorded at cost less any provision for impairment.

                                       81
<PAGE>   207
                                   MERANT PLC
                              FINANCIAL STATEMENTS
                       FIFTEEN MONTHS ENDED APRIL 30 1999

                NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
                                   UK FORMAT

NOTE 1  SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

  Derivative instruments

     MERANT uses forward foreign currency contracts to reduce exposure to
changes in foreign exchange rates. The criteria for forward foreign currency
contracts are:

     - the instrument must be related to a foreign currency asset or liability
       that is probable and whose characteristics have been identified

     - it must involve the same currency as the hedged item (except that euros
       may be used to hedge the currencies directly linked to the euro by fixed
       rates)

     - it must reduce the risk of foreign currency exchange movements on the
       group's operations.

     The rates under such contracts are used to record the hedge item. As a
result, gains and losses are offset against the foreign exchange gains and
losses on the related financial assets and liabilities.

  Translation of foreign currencies

     MERANT's policy on foreign currency translation complies with Statement of
Standard Accounting Practice No. 20 "Foreign Currency Translation".

     Assets and liabilities denominated in currencies other than G.B. pounds are
translated at exchange rates in effect at balance sheet date. Revenue, costs and
expenses are translated using average rates.

     Translation adjustments resulting from the process of translating financial
statements denominated in currencies other than G.B. pounds are dealt with
through reserves.

  Earnings/(loss) per share

     Basic earnings/(loss) per share is computed in accordance with Financial
Reporting Standard ("FRS") 14, and is computed as the profit/(loss) for the
period after taxation, divided by the weighted average number of ordinary shares
outstanding during the period, excluding shares held by the employee share
ownership trust (see note 14, below).

     Diluted earnings per share is computed based on basic earnings/(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.

  Pensions

     MERANT has entered into arrangements under which it makes defined
contributions to personal pension schemes operated by its employees.
Contributions, which are independently administered by insurance companies and
other financial institutions, are charged to income in the year in which they
become payable.

  New accounting standards

     During 1997 and 1998 the Accounting Standards Board has issued five new
accounting standards with which the Company is required to comply with effect
from this financial year.

                                       82
<PAGE>   208
                                   MERANT PLC
                              FINANCIAL STATEMENTS
                       FIFTEEN MONTHS ENDED APRIL 30 1999

                NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
                                   UK FORMAT

NOTE 1  SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

     FRS 10 "Goodwill and Intangible Assets" requires, inter alia, that goodwill
arising as part of a business acquisition, which previously could be written off
directly to reserves, is instead capitalised as an intangible fixed asset, and
amortised over its estimated useful life, such amortisation being charged
through the profit and loss account. As set out in note 3, below, the Company
has recorded goodwill on acquisitions made during the current period. The
amounts of goodwill capitalised are shown in note 12, below. The Company has
charged amortisation on such goodwill to general and administrative costs, as
shown in note 5, below.

     FRS 11 "Impairment of Fixed Assets and Goodwill" requires that where the
value of fixed assets or goodwill may have been impaired, such values should be
reviewed and any impairment losses written off in the profit and loss account.
The Company has not recorded any impairment losses in the current period.

     FRS 12 "Provisions and Contingencies" sets out detailed rules on the
recognition, measurement and disclosure of provisions and contingencies. The
provision for restructuring has been reclassified in accordance with this
standard.

     FRS 13 "Derivatives and Other Financial Instruments -- Disclosures"
requires narrative and numerical disclosures regarding a company's objectives,
policies and strategies in respect of financial instruments. The Company's
disclosures are set out in note 22, below.

     FRS 14 "Earnings per Share" introduces new computation, presentation and
disclosure requirements for earnings per share data. The disclosures required by
FRS 14 are set out in note 11, below; prior year data has been restated in
accordance with FRS 14.

     On February 18 1999 the Accounting Standards Board issued FRS 15 "Tangible
Fixed Assets", which deals with the cost, depreciation and valuation of tangible
fixed assets. Compliance with FRS 15, which the Company will adopt in 2000, is
not expected to have a significant impact on results of operations or financial
condition of the Company.

NOTE 2  SEGMENTAL INFORMATION

     MERANT operates in one business segment -- the development and licencing of
computer software products and related services. The following table analyses
revenue by geographical area, based on customer location:

<TABLE>
<CAPTION>
                                                                   YEAR         YEAR
                                         FIFTEEN MONTHS ENDED     ENDED        ENDED
                                               APRIL 30         JANUARY 31   JANUARY 31
                                                 1999              1998         1997
                                               GBP'000           GBP'000      GBP'000
                                         --------------------   ----------   ----------
<S>                                      <C>                    <C>          <C>
United Kingdom.........................         30,123            11,864        6,811
United States..........................        133,269            49,037       38,640
Europe (excluding U.K.)................         36,095            18,498       19,297
Japan..................................          6,371             3,964        3,519
Other..................................          9,615            13,652        4,822
                                               -------            ------       ------
                                               215,473            97,015       73,089
                                               -------            ------       ------
</TABLE>

                                       83
<PAGE>   209
                                   MERANT PLC
                              FINANCIAL STATEMENTS
                       FIFTEEN MONTHS ENDED APRIL 30 1999

                NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
                                   UK FORMAT

NOTE 2  SEGMENTAL INFORMATION -- (CONTINUED)

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

<TABLE>
<CAPTION>
                                                                   YEAR         YEAR
                                         FIFTEEN MONTHS ENDED     ENDED        ENDED
                                               APRIL 30         JANUARY 31   JANUARY 31
                                                 1999              1998         1997
                                               GBP'000           GBP'000       GBP'000
                                         --------------------   ----------   ----------
<S>                                      <C>                    <C>          <C>
Revenue:
  United Kingdom.......................         59,512            43,249       33,974
  United States........................        141,734            56,846       42,856
  Europe (excluding U.K.)..............         55,286            23,554       20,588
  Other................................         13,953             7,858        1,910
                                               -------           -------      -------
                                               270,485           131,507       99,328
                                               -------           -------      -------
Inter-segment revenue:
  United Kingdom.......................        (14,613)          (21,003)     (15,900)
  United States........................        (20,402)           (4,199)      (3,501)
  Europe (excluding U.K.)..............        (17,062)           (9,077)      (6,381)
  Other................................         (2,935)             (213)        (457)
                                               -------           -------      -------
                                               215,473            97,015       73,089
                                               -------           -------      -------
Operating profit/(loss):
  United Kingdom.......................        (24,308)            5,498       (2,960)
  United States........................            495             1,041       (4,699)
  Europe (excluding U.K.)..............         15,608               896         (220)
  Other................................          4,176             5,301          371
                                               -------           -------      -------
                                                (4,029)           12,736       (7,508)
                                               -------           -------      -------
Net operating assets/(liabilities):
  United Kingdom.......................        114,399            14,174       16,075
  United States........................         11,856             2,930       (8,199)
  Europe (excluding U.K.)..............          5,489            (4,112)       2,988
  Other................................          6,985             2,521          (16)
                                               -------           -------      -------
                                               138,729            15,513       10,848
                                               -------           -------      -------
</TABLE>

     Inter-segment revenue principally represents licence fees and charges for
research and development between locations. Operating profit/(loss) excludes
interest income and expense and, correspondingly, net

                                       84
<PAGE>   210
                                   MERANT PLC
                              FINANCIAL STATEMENTS
                       FIFTEEN MONTHS ENDED APRIL 30 1999

                NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
                                   UK FORMAT

NOTE 2  SEGMENTAL INFORMATION -- (CONTINUED)

operating assets/(liabilities) exclude interest-bearing assets and liabilities.
A reconciliation of the net operating assets/(liabilities) as shown above to net
assets as shown in the balance sheet is as follows:

<TABLE>
<CAPTION>
                                                 APRIL 30   JANUARY 31   JANUARY 31
                                                   1999        1998         1997
                                                 GBP'000     GBP'000       GBP'000
                                                 --------   ----------   ----------
<S>                                              <C>        <C>          <C>
Net operating assets...........................  138,729      15,513       10,848
Cash and bank deposits.........................   73,698      50,511       44,725
Investment in own shares.......................    4,691       4,886        5,634
Finance lease obligations......................       (9)        (18)         (83)
                                                 -------      ------       ------
Net assets.....................................  217,109      70,892       61,124
                                                 -------      ------       ------
</TABLE>

NOTE 3  ACQUISITIONS

     In the current financial year MERANT completed three acquisitions at a
total cost of  GBP 165,012,000.

     Each transaction has been accounted for as an acquisition, as set out in
note 1 on page 85. Accordingly, the results of operations and cash flows of the
acquired businesses have been combined with those of MERANT for the periods
subsequent to their acquisition, and the acquisition cost has been allocated
between the identifiable tangible assets and liabilities of the acquired
entities based on their respective fair values, with the difference allocated to
goodwill.

     On May 15 1998 the Company acquired all of the share capital of its Italian
distributor, Micro Focus Italia, s.r.l., ("MF Italia"), for a total
consideration estimated at  GBP 2,644,000. The Company made an initial cash
payment of  GBP 2,470,000, with the balance payable in cash dependent on future
results of MF Italia.

     The following table sets out the allocation of the estimated cost of
acquisition between the tangible assets and liabilities of MF Italia, and the
resultant goodwill.

<TABLE>
<CAPTION>
                                              NET ASSETS   FAIR VALUE    FAIR VALUES ON
                                               ACQUIRED    ADJUSTMENTS    ACQUISITION
                                                GBP'000      GBP'000        GBP'000
                                              ----------   -----------   --------------
<S>                                           <C>          <C>           <C>
Cash........................................        40                           40
Accounts receivable.........................     1,735         (376)          1,359
Other current assets........................       223                          223
Tangible fixed assets.......................       147                          147
Bank overdraft..............................      (172)                        (172)
Current liabilities.........................    (1,785)                      (1,785)
                                                ------        -----          ------
Total net liabilities.......................       188         (376)           (188)
                                                ------        -----
Goodwill arising............................                                  2,832
                                                                             ------
                                                                              2,644
                                                                             ------
Purchase consideration payable to vendors...                                  2,644
                                                                             ------
</TABLE>

     Fair value adjustments related to an increase in provisions for doubtful
accounts.

                                       85
<PAGE>   211
                                   MERANT PLC
                              FINANCIAL STATEMENTS
                       FIFTEEN MONTHS ENDED APRIL 30 1999

                NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
                                   UK FORMAT

NOTE 3  ACQUISITIONS -- (CONTINUED)

     MF Italia reported a profit after taxation of  GBP 482,000 in its financial
year ended December 31 1997. In the subsequent period to May 15 1998, the date
of its acquisition, MF Italia recorded a profit after taxation of  GBP 106,000.

     MF Italia changed its name to MERANT s.r.l. on March 1, 1999.

     On August 13 1998 the Company acquired all of the share capital of its
Australian distributor, Advanced Software Engineering Pty, Ltd ("ASE"), for a
total consideration estimated at  GBP 1,503,000. The Company made an initial
cash payment of  GBP 970,000, with the balance dependent on future results of
ASE.

     The following table sets out the allocation of the estimated cost of
acquisition between the tangible assets and liabilities of ASE, and the
resultant goodwill.

<TABLE>
<CAPTION>
                                              NET ASSETS   FAIR VALUE    FAIR VALUES ON
                                               ACQUIRED    ADJUSTMENTS    ACQUISITION
                                               GBP'000       GBP'000        GBP'000
                                              ----------   -----------   --------------
<S>                                           <C>          <C>           <C>
Cash........................................      270                          270
Accounts receivable.........................      213                          213
Other current assets........................      107                          107
Tangible fixed assets.......................      103                          103
Current liabilities.........................     (693)                        (693)
                                                 ----       --------         -----
Total net assets............................        0                            0
                                                 ----       --------         -----
Goodwill arising............................                                 1,503
                                                                             -----
Purchase consideration payable to vendors...                                 1,503
                                                                             -----
</TABLE>

     The Company made no fair value adjustments to the assets and liabilities
reported by ASE.

     ASE reported a profit after taxation of  GBP 46,000 in its financial year
ended June 30 1998. In the subsequent period to August 13 1998, the date of its
acquisition, ASE recorded a profit after taxation of  GBP 4,000.

     ASE changed its name to MERANT Pty Ltd on February 16, 1999.

     On September 24 1998 the Company acquired all of the share capital of
INTERSOLV, Inc ("INTERSOLV"), in exchange for 63,084,000 ordinary shares in the
Company, which represented a value of  GBP 160,865,000 on the date the
acquisition was completed. INTERSOLV, a publicly-held corporation based in
Maryland, USA, is a provider of database development, maintenance and
connectivity solutions.

                                       86
<PAGE>  212
                                   MERANT PLC
                              FINANCIAL STATEMENTS
                       FIFTEEN MONTHS ENDED APRIL 30 1999

                NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
                                   UK FORMAT

NOTE 3  ACQUISITIONS -- (CONTINUED)

     The following table sets out the allocation of the estimated cost of
acquisition between the tangible assets and liabilities of INTERSOLV, and the
resultant goodwill.

<TABLE>
<CAPTION>
                                              NET ASSETS   FAIR VALUE    FAIR VALUES ON
                                               ACQUIRED    ADJUSTMENTS    ACQUISITION
                                               GBP'000       GBP'000        GBP'000
                                              ----------   -----------   --------------
<S>                                           <C>          <C>           <C>
Cash........................................    17,567                       17,567
Accounts receivable.........................    29,632                       29,632
Other current assets........................     3,521                        3,521
Intangible fixed assets.....................       932                          932
Tangible fixed assets.......................     6,971                        6,971
Other assets................................     5,496                        5,496
Current liabilities.........................   (27,712)                     (27,712)
Deferred taxation...........................    (3,747)                      (3,747)
                                               -------          --          -------
Total net assets............................    32,660          0            32,660
                                               -------          --
Goodwill arising............................                                140,061
                                                                            -------
                                                                            172,721
                                                                            -------
Purchase consideration payable to vendors...                                160,865
Costs of acquisition -- cash paid...........                                 11,856
                                                                            -------
                                                                            172,721
                                                                            -------
</TABLE>

     The Company made no fair value adjustments to the assets and liabilities
reported by INTERSOLV.

     INTERSOLV reported a profit after taxation of  GBP 3,425,000 in its
financial year ended April 30 1998. For the subsequent period ended September
24 1998, the date of its acquisition, INTERSOLV's results are summarised as
follows:

<TABLE>
<CAPTION>
                                                             GBP'000
                                                             -------
<S>                                                           <C>
Summarised profit and loss account:
Revenue.....................................................  40,724
Operating profit............................................  (1,564)
Profit before taxation......................................  (1,356)
Taxation....................................................     501
Retained profit for the period..............................    (854)
                                                              ------
Statement of recognised gains and losses:
Retained profit for the period, as above....................    (854)
Foreign currency translation adjustment.....................    (271)
                                                              ------
          Total recognised gains and losses.................  (1,125)
                                                              ------
</TABLE>

     The information shown in the above statement has been prepared on the basis
of INTERSOLV's accounting policies prior to its acquisition.

     At the time of the acquisition, provision was made for costs amounting to
GBP 11,831,000 in connection with the fundamental reorganisation of the
businesses of the combined companies. These costs have been disclosed as an
exceptional item in the current period.

                                       87
<PAGE>  213
                                   MERANT PLC
                              FINANCIAL STATEMENTS
                       FIFTEEN MONTHS ENDED APRIL 30 1999

                NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
                                   UK FORMAT

NOTE 3  ACQUISITIONS -- (CONTINUED)

     As explained in note 1, the Company has applied the provisions of FRS 10 to
these acquisitions. Accordingly, goodwill arising on these acquisitions has been
capitalised as an intangible asset (see note 12).

NOTE 4  RESEARCH AND DEVELOPMENT COSTS

<TABLE>
<CAPTION>
                                                  APRIL 30   JANUARY 31   JANUARY 31
                                                    1999        1998         1997
                 PERIODS ENDED                    GBP'000     GBP'000      GBP'000
                 -------------                    -------    ----------   ----------
<S>                                               <C>        <C>          <C>
Research and development costs, before
  capitalisation................................   30,455      17,602       19,235
Costs capitalised as software product assets....   (5,853)     (5,688)      (5,258)
Amortisation of capitalised costs...............    9,717       7,765        8,067
Restructuring costs.............................       --          --        2,255
                                                   ------      ------       ------
                                                   34,319      19,679       24,299
                                                   ------      ------       ------
</TABLE>

NOTE 5  GENERAL AND ADMINISTRATIVE COSTS

     General and administrative costs includes provisions for amortisation of
the goodwill arising on acquisitions amounting to  GBP 21,915,000 (1998: GBPnil;
1997: GBPnil).

NOTE 6  OPERATING (LOSS)/PROFIT

     Operating (loss)/profit is stated after charging:

<TABLE>
<CAPTION>
                                                    APRIL 30   JANUARY   JANUARY 31
                                                      1999      1998        1997
                  PERIODS ENDED                     GBP'000    GBP'000    GBP'000
                  -------------                     --------   -------   ---------
<S>                                                 <C>        <C>       <C>
Auditors' remuneration: audit services: U.K.......      204       117        105
  audit services: overseas........................      333       110         93
  non-audit services: U.K.........................      740       230        181
  non-audit services: overseas....................      531       289        218
Operating lease rentals:
  equipment.......................................    2,639       756        743
  land and buildings..............................    3,799     1,780      1,811
Depreciation of tangible fixed assets:
  owned...........................................    8,512     4,495      5,616
  leased..........................................       --        39         39
Amortisation of intangible fixed assets...........   31,632     7,765      8,067
                                                     ------     -----      -----
</TABLE>

     The profit attributable to the ordinary shareholders of MERANT plc, dealt
with in the financial statements of MERANT, is  GBP 2,050,000 (1998:  GBP
805,000; 1997:  GBP 716,000). There were no other movements on reserves other
than the movement on share premium shown in the Movement in Shareholders' Funds
on page 78.

                                       88
<PAGE>   214
                                   MERANT PLC
                              FINANCIAL STATEMENTS
                       FIFTEEN MONTHS ENDED APRIL 30 1999

                NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
                                   UK FORMAT

NOTE 7  DIRECTORS AND EMPLOYEES

     An analysis of the directors' remuneration, pension entitlements and share
options and the relevant disclosures specified for audit by the London Stock
Exchange are set out under the headings "Directors' remuneration" and "Directors
share options" within the Remuneration Committee's Report on pages 12 to 15.

     The average monthly numbers of staff employed by MERANT was as follows:

<TABLE>
<CAPTION>
                                                  APRIL 30   JANUARY 31   JANUARY 31
                                                    1999        1998         1997
                 PERIODS ENDED                      NO.         NO.          NO.
                 -------------                    --------   ----------   ----------
<S>                                               <C>        <C>          <C>
U.K. ...........................................     393        252          255
U.S. ...........................................     785        355          310
Other...........................................     283        112           81
                                                   -----        ---          ---
                                                   1,461        719          646
                                                   -----        ---          ---
</TABLE>

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

<TABLE>
<CAPTION>
                                                  APRIL 30   JANUARY 31   JANUARY 31
                                                    1999        1998         1997
                 PERIODS ENDED                    GBP'000     GBP'000      GBP'000
                 -------------                    -------    ---------    ---------
<S>                                               <C>        <C>          <C>
U.K. ...........................................   21,707      10,324        9,173
U.S. ...........................................   45,371      22,803       16,758
Other...........................................   15,689       5,184        3,554
                                                   ------      ------       ------
                                                   82,767      38,311       29,485
Social security costs...........................    9,514       2,979        2,797
Other pension costs.............................    2,417         432          437
                                                   ------      ------       ------
                                                   94,698      41,722       32,719
                                                   ------      ------       ------
</TABLE>

     Other pension costs principally represent amounts paid by MERANT to
personal pension schemes operated by its employees. In the United Kingdom,
MERANT matches contributions made by participating employees up to certain
predetermined thresholds. Arrangements for employees in other countries have
been established on similar bases, subject to local regulations and practices in
the countries concerned.

NOTE 8  EXCEPTIONAL ITEMS

     During the current period the Company provided for costs of  GBP 11,831,000
in connection with a fundamental restructuring of its operations. Following the
acquisition of INTERSOLV, Inc in September 1998, the senior management of the
Company was changed, and the new team proposed to realign the Company's
operations into four business units, one of which closely aligns the
pre-acquisition operations of the Company. As part of this realignment, the
Company has incurred charges consisting principally of the write-off of
redundant or impaired assets and severance costs. Because of the fundamental
nature of this reorganisation, the related costs have been disclosed as an
exceptional item on the face of the profit and loss account. As at April 30
1999, outstanding amounts totalling  GBP 3,671,000 remained payable.

     In the year ended January 31 1997 the Company booked a restructuring charge
of $5,195,000, representing the costs associated with a reduction in the
Company's workforce of approximately 65 people, facility closures and
consolidations, and asset write-downs. Due to the nature of the restructuring,
the amounts booked were charged against operating profit.

                                       89
<PAGE>   215
                                   MERANT PLC
                              FINANCIAL STATEMENTS
                       FIFTEEN MONTHS ENDED APRIL 30 1999

                NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
                                   UK FORMAT

NOTE 9  INTEREST EXPENSE

<TABLE>
<CAPTION>
                                                  APRIL 30   JANUARY 31   JANUARY 31
                                                    1999        1998         1997
                 PERIODS ENDED                    GBP'000     GBP'000      GBP'000
                 -------------                    --------   ----------   ----------
<S>                                               <C>        <C>          <C>
On bank loans and overdrafts....................    123          65            3
On other loans..................................     21          --           --
Finance charges payable under finance leases....      1           5           18
                                                    ---          --           --
                                                    145          70           21
                                                    ---          --           --
</TABLE>

NOTE 10  TAXATION

     The taxation charge consists of the following:

<TABLE>
<CAPTION>
                                                  APRIL 30   JANUARY 31   JANUARY 31
                                                    1999        1998         1997
                 PERIODS ENDED                    GBP'000     GBP'000      GBP'000
                 -------------                    --------   ----------   ----------
<S>                                               <C>        <C>          <C>
U.K. corporation tax............................    2,645      3,244          237
Deferred taxation...............................   (1,198)       (71)         870
Double taxation relief..........................       --       (162)        (174)
Overseas taxation:
  US federal....................................    1,079        542            4
  US state......................................       63        128            1
Other...........................................    2,180        958          276
                                                   ------      -----        -----
                                                    4,769      4,639        1,214
Taxation (overprovided)/under-provided in
  previous years:
Corporation tax.................................   (1,062)        --          258
Deferred taxation...............................       --        152           --
                                                   ------      -----        -----
                                                    3,707      4,791        1,472
                                                   ------      -----        -----
Effective tax rates.............................      -32%        31%         -25%
                                                   ------      -----        -----
</TABLE>

     The Company's effective tax rate in the current period is significantly
distorted by the impact of provisions for amortisation of goodwill (see note 5)
for which there is no tax deduction. Excluding that charge, the tax rate in the
current period would be 36%. The current period rate is also impacted by
corporate profits and losses arising in different tax jurisdictions. The tax
effect of the exceptional items disclosed in the profit and loss account was not
significant.

     In prior years the effective tax rate was distorted by the impact of
disallowable exceptional items, and losses incurred in the United States which
can only be offset against profits arising in future periods.

     The Company's effective tax rate is expected to be significantly impacted
by provisions for amortisation of goodwill for the next four years.

     The corporation tax returns of certain U.S. subsidiary undertakings are
under examination by the U.S. Internal Revenue Service, which has proposed
certain adjustments. The Company believes that the outcome of the examination
will not give rise to any material adjustment to the financial statements.

                                       90
<PAGE>   216
                                   MERANT PLC
                              FINANCIAL STATEMENTS
                       FIFTEEN MONTHS ENDED APRIL 30 1999

                NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
                                   UK FORMAT

NOTE 11  (LOSS)/EARNINGS PER SHARE

     (Loss)/earnings per share is computed from the following data and in
accordance with the bases set out in note 1.

<TABLE>
<CAPTION>
                                                 APRIL 30   JANUARY 31   JANUARY 31
                                                   1999        1998         1997
                 PERIODS ENDED                   GBP'000     GBP'000      GBP'000
                 -------------                   --------   ----------   ----------
<S>                                              <C>        <C>          <C>
(Loss)/profit after taxation...................  (15,279)     10,426       (7,281)
                                                 -------      ------       ------
Weighted average number of ordinary shares:
  In issue.....................................  110,714      78,735       75,780
  Owned by employee share ownership trust
     (note 14).................................   (3,834)     (4,109)      (4,170)
                                                 -------      ------       ------
Used in computing basic (loss)/earnings
  per share....................................  106,880      74,626       71,610
Dilutive options...............................       --       3,900           --
                                                 -------      ------       ------
Used in computing diluted (loss)/earnings per
  share........................................  106,880      78,526       71,610
                                                 -------      ------       ------
(Loss)/earnings per share: basic...............   (14.3p)      14.0p       (10.2p)
(Loss)/earnings per share: diluted.............   (14.3p)      13.3p       (10.2p)
</TABLE>

     In 1999 and 1997 share options were anti-dilutive and are therefore
excluded from the computations.

NOTE 12  INTANGIBLE FIXED ASSETS

<TABLE>
<CAPTION>
                                              SOFTWARE PRODUCT
                                                   ASSETS        GOODWILL    TOTAL
                                                  GBP'000         GBP'000   GBP'000
                                              ----------------   --------   -------
<S>                                           <C>                <C>        <C>
COST:
At January 31 1998..........................       79,149             --     79,149
Currency fluctuations.......................           91             --         91
Arising on acquisitions.....................        4,935          1,125      6,060
Purchased goodwill and other additions......        5,853        144,396    150,249
                                                   ------        -------    -------
At April 30 1999............................       90,028        145,521    235,549
                                                   ------        -------    -------
DEPRECIATION:
At January 31 1998..........................       66,755             --     66,755
Currency fluctuations.......................           30             --         30
Arising on acquisitions.....................        2,963            193      3,156
Provision for the period....................        9,717         21,915     31,632
                                                   ------        -------    -------
At April 30 1999............................       79,465         22,108    101,573
                                                   ------        -------    -------
NET BOOK VALUES:
At January 31 1998..........................       12,394             --     12,394
                                                   ------        -------    -------
At April 30 1999............................       10,563        123,413    133,976
                                                   ------        -------    -------
</TABLE>

                                       91
<PAGE>   217
                                   MERANT PLC
                              FINANCIAL STATEMENTS
                       FIFTEEN MONTHS ENDED APRIL 30 1999

                NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
                                   UK FORMAT

NOTE 13  TANGIBLE FIXED ASSETS

(a) MERANT:

<TABLE>
<CAPTION>
                                                                       COMPUTER &
                                                                     COMMUNICATIONS
                          FREEHOLD LAND    LEASEHOLD      OFFICE      EQUIPMENT &     TRANSPORTATION
                          AND BUILDINGS   IMPROVEMENTS   EQUIPMENT      SOFTWARE        EQUIPMENT      TOTAL
                              GBP'000       GBP'000       GBP'000       GBP'000          GBP'000      GBP'000
                          -------------   ------------   ---------   --------------   --------------   ------
<S>                       <C>             <C>            <C>         <C>              <C>              <C>
Cost:
At January 31 1998......     13,828          2,575         4,651         27,822            126         49,002
Currency fluctuations...         --            107           120            532              3            762
Arising on
  acquisitions..........        150          3,214         2,946         11,401             28         17,739
Additions...............         --            294           859          7,641            112          8,906
Disposals...............       (150)            (1)         (261)        (3,393)           (31)        (3,836)
                             ------          -----         -----         ------            ---         ------
At April 30 1999........     13,828          6,189         8,315         44,003            238         72,573
                             ------          -----         -----         ------            ---         ------
Depreciation:
At January 31 1998......        659            817         2,698         20,922             70         25,166
Currency fluctuations...         --             43            72            432              1            548
Arising on
  acquisitions..........          7          1,354         1,752          7,394             11         10,518
Provision for the
  period................         27            744           914          6,802             25          8,512
Disposals...............         (7)            --           (98)          (691)            (8)          (804)
                             ------          -----         -----         ------            ---         ------
At April 30 1999........        686          2,958         5,338         34,859             99         43,940
                             ------          -----         -----         ------            ---         ------
Net book values:
At January 31 1998......     13,169          1,758         1,953          6,900             56         23,836
                             ------          -----         -----         ------            ---         ------
At April 30 1999........     13,142          3,231         2,977          9,144            139         28,633
                             ------          -----         -----         ------            ---         ------
</TABLE>

     The above figures include transportation equipment held under finance
leases as follows:

<TABLE>
<CAPTION>
                                                                               NET BOOK
                                            COST          DEPRECIATION          VALUE
                                           GBP'000           GBP'000           GBP'000
                                            -----         ------------         --------
<S>                                         <C>           <C>                  <C>
At January 31 1998.................          125               66                 59
Provision for the period
Disposals..........................         (125)             (66)               (59)
                                            ----              ---                ---
At April 30 1999...................           --               --                 --
                                            ----              ---                ---
</TABLE>

                                       92
<PAGE>   218
                                   MERANT PLC
                              FINANCIAL STATEMENTS
                       FIFTEEN MONTHS ENDED APRIL 30 1999

                NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
                                   UK FORMAT

NOTE 13  TANGIBLE FIXED ASSETS -- (CONTINUED)

(b) COMPANY:

     The Company's tangible fixed assets consist of freehold land and buildings,
valued at cost which includes capitalised interest amounting to  GBP 385,000.

<TABLE>
<CAPTION>
                                                                          NET BOOK
                                                   COST    DEPRECIATION    VALUE
                                                  GBP'000    GBP'000      GBP'000
                                                   -----   ------------   --------
<S>                                                <C>     <C>            <C>
At January 31 1998...............................  3,088       117         2,971
Provision for the period.........................     --        26           (26)
                                                   -----       ---         -----
At April 30 1999.................................  3,088       143         2,945
                                                   -----       ---         -----
</TABLE>

NOTE 14  INVESTMENTS

(a) GROUP:

     Investment in own shares represents the cost of shares acquired by MERANT
Trustees Limited on behalf of the Micro Focus Group Employee Benefit Trust 1994
("the Trust") (see note 24, below).

<TABLE>
<CAPTION>
                                                            APRIL 30   JANUARY 31
                                                              1999        1998
                                                             GBP'000    GBP'000
                                                            --------   ----------
<S>                                                         <C>        <C>
Beginning of period.......................................   4,886       5,634
Sold on exercise of options...............................    (195)       (748)
                                                             -----       -----
End of period.............................................   4,691       4,886
                                                             -----       -----
</TABLE>

     As at April 30 1999 the Trust owned 3,810,075 shares. The market value of
these shares was  GBP 5,620,000 (January 31 1998:  GBP 20,729,000); if they had
been sold at this value a liability to corporation tax of approximately  GBP
300,000 (January 31 1998:  GBP 4,500,000) would have arisen. The Trust has not
waived its right to dividends in respect of this shareholding. The assets and
liabilities of the Trust, as well as its operating costs, are included in
MERANT's consolidated financial statements.

(b) COMPANY:

<TABLE>
<CAPTION>
                                                          APRIL 30   JANUARY 31
                                                            1999        1998
                                                           GBP'000    GBP'000
                                                          --------   ----------
<S>                                                       <C>        <C>
Investments in subsidiary undertakings:
Beginning of period.....................................    40,200     27,175
Acquisitions............................................   170,573     12,679
Disposals...............................................  (185,207)        --
Additional investment...................................   176,222        309
Effect of exchange rate changes.........................        --         37
                                                          --------     ------
End of period...........................................   201,788     40,200
Investment in own shares (see (a) above)................     4,691      4,886
                                                          --------     ------
                                                           206,479     45,086
                                                          --------     ------
</TABLE>

                                       93
<PAGE>   219
                                   MERANT PLC
                              FINANCIAL STATEMENTS
                       FIFTEEN MONTHS ENDED APRIL 30 1999

                NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
                                   UK FORMAT

NOTE 14  INVESTMENTS -- (CONTINUED)

     The principal subsidiary undertakings, all of which are wholly-owned, are:

<TABLE>
<CAPTION>
                                                            COUNTRY OF INCORPORATION
                                                    NOTES        AND OPERATION
                                                    -----   ------------------------
<S>                                                 <C>     <C>
MERANT Holdings Limited...........................     1              U.K.
MERANT International Limited......................     1              U.K.
MERANT Asia Limited...............................     2              U.K.
MERANT Solutions, Inc.............................     2             U.S.A.
MERANT, Inc.......................................     2             U.S.A.
XDB Systems, Inc..................................     2             U.S.A.
MERANT Pty Limited................................     2           Australia
MERANT NV.........................................     2            Belgium
MERANT (Canada) Limited...........................     2             Canada
MERANT Solutions SARL.............................     2             France
MERANT SA.........................................     2             France
MERANT Gmbh.......................................     2            Germany
MERANT Solutions Gmbh.............................     2            Germany
MERANT Solutions Pvt Limited......................   2,4             India
MERANT s.r.l......................................     1             Italy
MERANT KK.........................................     2             Japan
MERANT Solutions KK...............................     2             Japan
MERANT Investments Limited........................   1,3             Jersey
MERANT BV.........................................     2          Netherlands
System Focus BV...................................     2          Netherlands
MERANT Solutions SA...............................     2             Spain
</TABLE>

- ---------------
(1) Held directly by the Company

(2) Held by a subsidiary undertaking

(3) Operating as a financing company. The activities of the other subsidiary
    undertakings are described in the Directors' Report.

(4) MERANT Solutions Pvt. Limited has a financial year-end of March 31, which
    corresponds with its permanent tax year-end.

NOTE 15  STOCKS

     The replacement value of stocks is not considered to be materially
different from its balance sheet value.

NOTE 16  DEBTORS

<TABLE>
<CAPTION>
                                                            APRIL 30   JANUARY 31
                                                              1999        1998
                                                             GBP'000    GBP'000
                                                            --------   ----------
<S>                                                         <C>        <C>
Trade debtors.............................................   70,682      29,145
Other debtors and prepaid expenses........................    7,205       1,728
                                                             ------      ------
                                                             77,887      30,873
                                                             ------      ------
</TABLE>

                                       94
<PAGE>   220
                                   MERANT PLC
                              FINANCIAL STATEMENTS
                       FIFTEEN MONTHS ENDED APRIL 30 1999

                NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
                                   UK FORMAT

NOTE 16  DEBTORS -- (CONTINUED)

     Trade debtors includes  GBP 1,784,000 (1998: GBP nil) which is due more
than twelve months from the balance sheet date. Other debtors and prepaid
expenses includes GBP nil (1998:  GBP 74,000) which is due more than twelve
months from the balance sheet date.

NOTE 17  CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

<TABLE>
<CAPTION>
                                                            APRIL 30   JANUARY 31
                                                              1999        1998
                                                             GBP'000    GBP'000
                                                            --------   ----------
<S>                                                         <C>        <C>
Bank loan (note 22).......................................    1,696       1,007
Obligations under finance leases (note 19)................        3           6
Trade creditors...........................................    7,546       4,241
Current corporation tax...................................   11,534       6,428
Other taxes and social security costs.....................    1,345       1,725
Product royalties and purchases...........................      776         845
Accrued employee compensation and commissions.............   15,126       7,481
Deferred revenue..........................................   42,954      20,030
Other accrued expenses....................................   11,711       4,750
                                                             ------      ------
                                                             92,691      46,513
                                                             ------      ------
</TABLE>

     Accrued expenses includes  GBP 161,000 (1998:  GBP 116,000) in respect of
an unfunded defined benefit scheme operated by a foreign subsidiary
undertaking, and other outstanding contributions payable by MERANT in
connection with employees' pension arrangements.

NOTE 18  CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR

     Creditors due after more than one year represent obligations under lease
commitments (see note 19).

NOTE 19  LEASE COMMITMENTS

     Financial commitments for future periods under lease agreements existing at
April 30 1999 are as follows:

FINANCE LEASES:

<TABLE>
<CAPTION>
                                                            APRIL 30   JANUARY 31
                                                              1999        1998
                                                             GBP'000    GBP'000
                                                            --------   ----------
<S>                                                         <C>        <C>
Amounts payable within one year...........................     3            6
Amounts payable from one to two years.....................     6           15
                                                              --           --
                                                               9           21
Less finance charges allocated to future periods..........    --           (3)
                                                              --           --
                                                               9           18
Finance leases are shown as:
Amounts due within one year (note 17).....................     3            6
Amounts due after more than one year......................     6           12
                                                               --          --
                                                               9           18
                                                               --          --
</TABLE>

                                       95
<PAGE>   221
                                   MERANT PLC
                              FINANCIAL STATEMENTS
                       FIFTEEN MONTHS ENDED APRIL 30 1999

                NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
                                   UK FORMAT

NOTE 19  LEASE COMMITMENTS -- (CONTINUED)

OPERATING LEASES:

<TABLE>
<CAPTION>
                                              LAND AND BUILDINGS
                                              -------------------                   OTHER
                                               1999         1998        1999        1998
                                              GBP'000     GBP'000      GBP'000     GBP'000
                                              ------       ------       -----       -----
<S>                                           <C>          <C>          <C>         <C>
Annual commitment under leases which
  expire:
  within one year......................         990          263        1,249          4
  in the second to fifth years
     inclusive.........................       3,389        1,576        1,566        541
  thereafter...........................       2,175          469           83         --
                                              -----        -----        -----        ---
                                              6,554        2,308        2,898        545
                                              -----        -----        -----        ---
</TABLE>

NOTE 20  CAPITAL COMMITMENTS

     At April 30 1999 and January 31 1998 MERANT had no material capital
expenditure commitments.

NOTE 21  PROVISIONS FOR LIABILITIES AND CHARGES

<TABLE>
<CAPTION>
                                                  RESTRUCTURING   DEFERRED
                                                    PROVISION     TAXATION   TOTAL
                                                      GBP'000     GBP'000   GBP'000
                                                  -------------   --------   ------
<S>                                               <C>             <C>        <C>
As at January 31, 1998..........................         --         6,407     6,407
Arising during the period.......................     11,831                  11,831
INTERSOLV balance...............................         --         3,675     3,675
Utilised........................................     (8,160)       (1,198)   (9,358)
                                                     ------        ------    ------
As at April 30, 1999............................      3,671         8,884    12,555
                                                     ------        ------    ------
</TABLE>

     The restructuring provision arose in respect of a fundamental restructuring
of the Company's operations, as described in note 8, above. It is expected that
the outstanding amounts will be settled during the current financial year.

     Deferred taxation has been fully provided as follows:

(a) MERANT:

<TABLE>
<CAPTION>
                                                            APRIL 30   JANUARY 31
                                                              1999        1998
                                                             GBP'000     GBP'000
                                                            --------   ----------
<S>                                                         <C>        <C>
Capital allowances in advance of depreciation and
  amortisation............................................     (96)         89
Other timing differences..................................   8,980       6,318
                                                             -----       -----
                                                             8,884       6,407
                                                             -----       -----
</TABLE>

                                       96
<PAGE>   222
                                   MERANT PLC
                              FINANCIAL STATEMENTS
                       FIFTEEN MONTHS ENDED APRIL 30 1999

                NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
                                   UK FORMAT

NOTE 21  PROVISIONS FOR LIABILITIES AND CHARGES -- (CONTINUED)

     The movement of deferred taxation during the period is as follows:

<TABLE>
<CAPTION>
                                                            APRIL 30   JANUARY 31
                                                              1999        1998
                                                             GBP'000    GBP'000
                                                            --------   ----------
<S>                                                         <C>        <C>
Balances, beginning of period.............................    6,407      6,239
Movement on capital allowances in advance of depreciation
  and amortisation........................................     (185)       (80)
Movement in other timing differences......................    2,662        248
                                                             ------      -----
Balances, end of period...................................    8,884      6,407
                                                             ------      -----
</TABLE>

(b) COMPANY:

<TABLE>
<CAPTION>
                                                            APRIL 30   JANUARY 31
                                                              1999        1998
                                                             GBP'000    GBP'000
                                                            --------   ----------
<S>                                                         <C>        <C>
Capital allowances in advance of depreciation and
  amortisation............................................     --          19
                                                               --          --
                                                               --          19
                                                               --          --
</TABLE>

NOTE 22  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 included in the Management's Discussion and Analysis on page
58. The disclosures below exclude short term debtors and creditors.

INTEREST RATE EXPOSURES:

     The interest rate risk profile of the Company's financial liabilities is as
follows:

<TABLE>
<CAPTION>
                                                            APRIL 30   JANUARY 31
                                                              1999        1998
                                                             GBP'000    GBP'000
                                                            --------   ----------
<S>                                                         <C>        <C>
Floating rate financial liabilities:
Euros.....................................................   1,696          --
French francs.............................................      --       1,007
Sterling..................................................       9          18
                                                             -----       -----
                                                             1,705       1,025
                                                             -----       -----
Weighted average interest rate:
Euros.....................................................     3.5%         --
French francs.............................................      --         3.6%
Sterling..................................................     N/A         n/a
                                                             -----       -----
                                                               3.5%        3.6%
                                                             -----       -----
</TABLE>

     The liabilities denominated in euros and French francs represent borrowings
against an unsecured revolving multi-currency facility, under the terms of which
financing of up to  GBP 5,000,000, or its equivalent in

                                       97
<PAGE>  223
                                   MERANT PLC
                              FINANCIAL STATEMENTS
                       FIFTEEN MONTHS ENDED APRIL 30 1999

                NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
                                   UK FORMAT

NOTE 22  FINANCIAL INSTRUMENTS -- (CONTINUED)

such other currency as the Company may determine, is available until January
2001. Borrowings under this facility bear interest at 0.75% above the London
Interbank Offered Rate ("LIBOR").

     The sterling liability represents outstanding finance lease obligations.

     The group's financial liabilities at April 30 1999 all mature within one
year, or on demand.

     The interest rate risk profile of the Company's financial assets is as
follows:

<TABLE>
<CAPTION>
                                                            APRIL 30   JANUARY 31
                                                              1999        1998
                                                             GBP'000    GBP'000
                                                            --------   ----------
<S>                                                         <C>        <C>
Floating rate financial assets:
U.S. dollars..............................................   44,890      42,297
Sterling..................................................   20,045       5,794
Deutschemarks.............................................    4,193         464
French francs.............................................    1,389         245
Australian dollars........................................    1,083          --
Indian rupees.............................................      839       1,102
Japanese yen..............................................      751         141
Spanish pesetas...........................................      695         741
Dutch florins.............................................      605          10
Italian lire..............................................      413          --
Canadian dollars..........................................      320         724
Belgian francs............................................      171          --
                                                             ------      ------
                                                             75,394      51,518
                                                             ------      ------
</TABLE>

     Floating rate financial assets comprise cash balances on current accounts
and money market deposits at call.

CURRENCY EXPOSURES:

     The group's objectives in managing currency exposures arising from its net
investments overseas are explained on page 70.

                                       98
<PAGE>   224
                                   MERANT PLC
                              FINANCIAL STATEMENTS
                       FIFTEEN MONTHS ENDED APRIL 30 1999

                NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
                                   UK FORMAT

NOTE 22  FINANCIAL INSTRUMENTS -- (CONTINUED)

     Net foreign currency monetary assets/liabilities held by the group's
sterling, U.S. dollar and other operations are as follows:

<TABLE>
<CAPTION>
          FUNCTIONAL CURRENCY OF            STERLING   U.S. DOLLAR   OTHER    TOTAL
               OPERATIONS:                   GBP'000     GBP'000    GBP'000  GBP'000
          ----------------------            --------   -----------   ------   ------
<S>                                         <C>        <C>           <C>      <C>
At April 30, 1999:
Sterling..................................   20,136          --          --   20,136
U.S. dollar...............................    4,325      40,490          --   44,815
Other.....................................      297          --      10,146   10,443
                                             ------      ------      ------   ------
Total.....................................   24,758      40,490      10,146   75,394
                                             ------      ------      ------   ------
At January 31, 1998:
Sterling..................................    6,612          --          --    6,612
U.S. dollar...............................    2,256      39,228          --   41,484
Other.....................................      342          --       3,080    3,422
                                             ------      ------      ------   ------
Total.....................................    9,210      39,228       3,080   51,518
                                             ------      ------      ------   ------
</TABLE>

     The amounts shown above take into account the effect of forward foreign
currency contracts entered into to manage these currency exposures.

FAIR VALUES:

     The fair values of all the group's financial assets and liabilities as set
out below equate to book value:

<TABLE>
<CAPTION>
                                                          BOOK VALUE   FAIR VALUE
                                                            GBP'000      GBP'000
                                                          ----------   ----------
<S>                                                       <C>          <C>
At April 30, 1999:
Primary financial instruments:
  Short term borrowings.................................    (1,705)      (1,705)
  Cash..................................................    75,394       75,394
Derivative financial instruments:
  Forward foreign exchange contracts....................        --           --
                                                            ------       ------
At January 31, 1998:
Primary financial instruments:
  Short term borrowings.................................    (1,025)      (1,025)
  Cash..................................................    51,518       51,518
Derivative financial instruments:
  Forward foreign exchange contracts....................    (4,800)      (4,800)
                                                            ------       ------
</TABLE>

     Fair values have been determined on the basis of market value.

NOTE 23  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

                                       99
<PAGE>   225
                                   MERANT PLC
                              FINANCIAL STATEMENTS
                       FIFTEEN MONTHS ENDED APRIL 30 1999

                NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
                                   UK FORMAT

NOTE 23  CONTINGENT LIABILITY -- (CONTINUED)

ordered the filing of a consolidated complaint, which was filed on June 9, 1999.
The lead plaintiffs seek to have the matter certified as a class action of
purchasers of the American Depository Shares of the Company during the period
from June 17, 1998 to November 12, 1998, including the former shareholders of
INTERSOLV, Inc who acquired American Depositary Shares in connection with the
merger involving the two companies. The consolidated complaint alleges various
violations of the federal securities laws and seeks unspecified compensatory
damages for alleged failure to disclose material nonpublic information
concerning the Company's business condition and prospects.

     The Company has filed a motion to transfer the matter to the Northern
District of California. The Company intends to defend all of its litigation
vigorously. However, due to the inherent uncertainties of litigation, the
Company cannot accurately predict the ultimate outcome of the litigation. Any
unfavourable outcome of litigation could have an adverse impact on the Company's
business, financial condition and results of operations.

NOTE 24  SHARE OPTION PLANS

     The Company's share option plans provide for the grant of options to
acquire shares to all persons who devote substantially all their working time to
MERANT and such other eligible persons as the Board may determine. 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 an optionholder 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 options over a maximum of 15,879,000 shares.
Such authority will expire on September 24, 2008. During the year 6,453,000
options were granted under this plan, of which 25% become exercisable one year
from the date of grant and the remaining 75% in equal monthly installments over
the following three years.

     Options are no longer issuable under any of the Company's previous share
option plans, but options granted under those plans continue to be exercisable
in accordance with the original grant rules.

     The 1996 Share Option Plan was approved by shareholders in June 1996 and
authorised the Company to grant options over a maximum of 3,786,845 shares
(representing 5% of the issued share capital of the Company at that time); this
authority expired on June 18 1999. During the current period 1,886,075 options
were granted under this plan, exercisable in annual installments over a
five-year period commencing one year from the date of grant. Prior to 1996,
authority to issue options under similar terms had been granted pursuant to the
1991 Share Option Plan; such authority expired in 1996.

     Options are also outstanding under share option plans adopted by MERANT as
a result of the acquisitions of INTERSOLV and XDB.

     Pursuant to the agreement to acquire INTERSOLV, the Company adopted
INTERSOLV's 1997 Employee Stock Option Plan, 1992 Stock Option Plan, 1982 Stock
Option Plan, and the option plans previously assumed by INTERSOLV from companies
which it had acquired. Under the agreement, each outstanding option or right to
purchase or acquire shares of INTERSOLV stock was assumed by the Company and
became an option or right to purchase or acquire ADS in the Company, with
appropriate

                                       100
<PAGE>   226
                                   MERANT PLC
                              FINANCIAL STATEMENTS
                       FIFTEEN MONTHS ENDED APRIL 30 1999

                NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
                                   UK FORMAT

NOTE 24  SHARE OPTION PLANS -- (CONTINUED)

adjustments to the price and number of shares based on the exchange ratio of
0.55 ADSs per INTERSOLV share.

     Pursuant to the agreement to acquire XDB in 1998, the Company adopted XDB's
1992 Share Option Plan and 1997 Share Option Plan. Under the agreement, XDB's
former option-holders are entitled to exercise their options in return for
shares in the Company.

     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 Micro Focus Group Employee Benefit
Trust 1994 ("the Trust"). The Trust was established to further the Company's
policy of encouraging share ownership by its employees. At April 30 1999 MTL
owned 3,810,075 shares. Options granted by MTL and outstanding at April 30 1999
totalled 2,938,800, and a further 110,000 shares were reserved for options
granted before MTL purchased the shares. The remaining 761,275 shares were
available for the grant of further options. The shares held by the Trust are
included in Investments (see note 14, above).

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

<TABLE>
<CAPTION>
                                                        NUMBER           OPTION PRICE
                                                      OF SHARES     PER SHARE IN GB POUNDS
                                                      ----------   -----------------------
<S>                                                   <C>                <C>
Outstanding, January 31 1996........................  10,293,845       GBP1.08-GBP5.77
Options granted.....................................  11,504,150       GBP1.17-GBP1.94
Options exercised...................................    (120,780)      GBP1.08-GBP1.93
Options cancelled...................................  (9,202,055)      GBP1.08-GBP5.77
                                                      ----------       ---------------
Outstanding, January 31 1997........................  12,475,160       GBP1.08-GBP4.32
Options granted.....................................   6,622,725       GBP0.97-GBP7.41
Options exercised...................................  (1,553,705)      GBP1.08-GBP3.70
Options cancelled...................................  (5,674,775)      GBP0.97-GBP4.52
                                                      ----------       ---------------
Outstanding, January 31 1998........................  11,869,405       GBP0.97-GBP7.41
Options obligations assumed.........................  11,424,537       GBP0.11-GBP3.61
Options granted.....................................  10,142,575       GBP1.06-GBP7.15
Options exercised...................................  (1,160,885)      GBP0.11-GBP3.70
Options cancelled...................................  (6,597,528)      GBP0.11-GBP4.52
                                                      ----------       ---------------
Outstanding, April 30 1999..........................  25,678,104       GBP0.11-GBP7.41
                                                      ----------       ---------------
</TABLE>

                                       101
<PAGE>   227
                                   MERANT PLC
                              FINANCIAL STATEMENTS
                       FIFTEEN MONTHS ENDED APRIL 30 1999

                NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
                                   UK FORMAT

NOTE 24  SHARE OPTION PLANS -- (CONTINUED)

     Options outstanding at April 30, 1999 were granted under the authorities
indicated below:

<TABLE>
<CAPTION>
                 AUTHORITY FOR                     NUMBER       OPTION PRICE PER
              ISSUANCE OF OPTIONS                OF SHARES    SHARE IN G.B. POUNDS
              -------------------                ----------   --------------------
<S>                                              <C>          <C>
1991 Share Option Plan.........................   2,215,429     GBP1.13-GBP3.49
1996 Share Option Plan.........................   2,978,640     GBP1.47-GBP7.15
1998 Share Option Plan.........................   6,453,000     GBP1.06-GBP1.49
XDB plans......................................      44,305     GBP5.39-GBP7.41
INTERSOLV plans................................  10,937,930     GBP0.11-GBP3.61
                                                 ----------     ---------------
                                                 22,629,304     GBP0.11-GBP7.41
The Trust......................................   3,048,800     GBP1.37-GBP4.85
                                                 ----------     ---------------
Outstanding, April 30 1999.....................  25,678,104     GBP0.11-GBP7.41
                                                 ----------     ---------------
</TABLE>

     The outstanding options are exercisable between 1999 and 2009. The proceeds
on exercise at April 30, 1999 would be  GBP 54,990,000 (January 31, 1998;
GBP 21,579,000).

     At April 30, 1999 options for 11,671,000 shares (January 31, 1998 1,270,000
shares) were currently exercisable at prices per shares of between  GBP 0.11 and
GBP 7.41; the proceeds of such options at April 30, 1999 would be  GBP
28,391,000 (January 31, 1998,  GBP 2,586,000).

NOTE 25  SUB-DIVISION OF ORDINARY SHARES

     On March 12 1998 shareholders approved a 5-for-1 sub-division of the
Company's ordinary shares. The sub-division became effective as at the close of
business on Friday, March 13 1998. The Company's American Depositary Shares
("ADSs") which are traded on the Nasdaq Stock Market in the U.S.A., did not
split, although the conversion rights of such ADSs were adjusted such that each
ADS now represents five ordinary shares.

NOTE 26  SUBSEQUENT EVENT

     On August 3 the Company completed the acquisition of Essential Software,
Inc. (trading as The Marathon Group), a privately-owned Internet professional
services firm based in Raleigh, North Carolina, U.S.A. for a total consideration
$15 million payable in cash.

                                       102
<PAGE>   228

                                   MERANT PLC
                              FINANCIAL STATEMENTS
                       FIFTEEN MONTHS ENDED APRIL 30 1999

             STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF
                            THE FINANCIAL STATEMENTS
                                   UK FORMAT

     Company law requires the directors to prepare financial statements for each
financial year which give a true and fair view of the state of affairs of the
Company and of the group and of the profit or loss of the group for that period.
In preparing those financial statements the directors are required to:

          (a) select suitable accounting policies and then apply them
     consistently;

          (b) make judgments and estimates that are reasonable and prudent; and

          (c) state whether applicable accounting standards have been followed,
     subject to any material departures disclosed and explained in the financial
     statements.

     The directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
group and to enable them to ensure that the financial statements comply with the
U.K. Companies Act 1985. They are also responsible for safeguarding the assets
of the group and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.

                                       103
<PAGE>   229

                                   MERANT PLC
                              FINANCIAL STATEMENTS
                       FIFTEEN MONTHS ENDED APRIL 30 1999

                             REPORT OF THE AUDITORS
                                   UK FORMAT

To the members of MERANT plc

     We have audited the financial statements on pages 72 to 102, which have
been prepared under the historical cost convention and on the basis of the
accounting policies set out in note 1 to the financial statements on pages 79 to
83.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS

     The directors are responsible for preparing the Annual Report including, as
described above, the financial statements. Our responsibilities, as independent
auditors, are established by statute, the Auditing Practices Board, the Listing
Rules of the London Stock Exchange and by our profession's ethical guidance.

     We report to you our opinion as to whether the financial statements give a
true and fair view and are properly prepared in accordance with the Companies
Act. We also report to you if, in our opinion, the directors' report is not
consistent with the financial statements, if the Company has not kept proper
accounting records, if we have not received all the information and explanations
we require for our audit, or if the information specified by law or the Listing
Rules regarding directors' remuneration and transactions with the Company is not
disclosed.

     We read the other information contained in the Annual Report and consider
whether it is consistent with the audited financial statements. We consider the
implications for our report if we become aware of any apparent misstatements or
material inconsistencies with the financial statements.

     We review whether the statement on page 10 reflects the Company's
compliance with those provisions of the Combined Code specified for our review
by the Stock Exchange, and we report if it does not. We are not required to form
an opinion on the effectiveness of either the Company's corporate governance
procedures or its internal controls.

BASIS OF AUDIT OPINION

     We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements. It
also includes an assessment of the significant estimates and judgments made by
the directors in the preparation of the financial statements, and of whether the
accounting policies are appropriate to the group's circumstances, consistently
applied and adequately disclosed.

     We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material mis-statement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.

                                       104
<PAGE> 230

OPINION

     In our opinion the financial statements give a true and fair view of the
state of affairs of the Company and of the group as at April 30 1999 and of the
loss of the group for the period then ended and have been properly prepared in
accordance with the U.K. Companies Act 1985.

Ernst & Young
Registered Auditor
Reading
August 4 1999

                                       105

<PAGE> 231

EXHIBIT 23.01


                 CONSENT OF ERNST & YOUNG, INDEPENDENT AUDITORS


     We consent to the  incorporation  by reference  in the Annual  Report (Form
20-F) of MERANT  plc of our  report  dated  August 4, 1999 with  respect  to the
consolidated  financial  statements  of MERANT plc for the year ended  April 30,
1999 in respect of the U.S. format financial statements.

     We also  consent to the  incorporation  by  reference  in the  registration
statements (Form S-8 Nos. 333-24867,  333-45701 and 333-65027) pertaining to the
employee  share plans  named on the facing  sheets  thereof of our report  dated
August 4, 1999, with respect to the consolidated  financial statements of MERANT
plc  incorporated  by  reference  in the Annual  Report (Form 20-F) for the year
ended April 30, 1999 in respect of the U.S. format  financial  statements and of
our  report  dated  August 4, 1999 with  respect to the  consolidated  financial
statements of MERANT plc included  herein for the fifteen months ended April 30,
1999 in respect of the U.K. format financial statements.

     Our audits also  included the financial  statement  schedules of MERANT plc
listed  in Item  19(a).  These  schedules  are the  responsibility  of  MERANT's
management.  Our responsibility is to express an opinion based on our audits. In
our opinion,  based on our audits, the financial statement schedules referred to
above, when considered in relation to the basic financial  statements taken as a
whole,  present  fairly  in all  material  respects  the  information  set forth
therein.


/s/ Ernst & Young

Ernst & Young
October 29, 1999
Reading, England


<PAGE> 232

EXHIBIT 23.02


                       CONSENT OF INDEPENDENT ACCOUNTANTS


We  hereby  consent  to the  incorporation  by  reference  in  the  Registration
Statement on Form S-8 (Nos. 333-24867,  333-45701 and 333-65027) of MERANT plc
 of our
report dated June 17, 1998  relating to the  financial  statements of Intersolv,
Inc., which appears in this Form 20-F.



/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

McLean, Virginia
October 29, 1999