##### Table of Contents









SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


Form 20-F


|    |  |                                                                                                   
|--- |  | --------------------------------------------------------------------------------------------------
|o   |  | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b)
    OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
|   
|OR 
|   
|þ   |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934          
|   
|    |  | For the fiscal year ended April 24, 2005                                                          
|   
|AND
|   
|þ   |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934      
|   
|    |  | For the transition period from April 25, 2005 to
    April 30, 2005                               
|o   |  | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934   
|   
|    |  | Date of event requiring this shell company report                                                 

Commission file number: 0-49984


MITEL NETWORKS CORPORATION/


CORPORATION MITEL NETWORKS


(Exact name of Registrant as specified in its charter)


MITEL NETWORKS CORPORATION


(Translation of Registrants name into English)


Canada


(Jurisdiction of incorporation or organization)


350 Legget Drive


Ottawa, Ontario, Canada K2K 2W7


(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:


Common Shares, Without Par Value


Securities for which there is a reporting obligation pursuant
to Section 15(d) of the Act:


None




þ o


o þ


o þ










---



##### Table of Contents





| |                      
| | ---------------------
| | Basis of Presentation





| |                            
| | ---------------------------
| | Forward Looking Information





| |   |                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------
| |  | expectations for future performance, revenue, income, projected
    capital expenditures, cost benefits to end users, expenses and
    profitability;
|
| |  | Mitels ability to successfully execute its business model
    and business strategy;                                                                
|
| |  | the future development and expected growth of Mitels
    business and the communications industry;                                                  
|
| |  | trends in government regulation; and                                                                                                                 
|
| |  | the effects of operating in a competitive environment.                                                                                               





| |   |                                                   
| | - | --------------------------------------------------
| |  | general economic conditions;                      
|
| |  | interest rate levels;                             
|
| |  | inflation and currency exchange rate developments;
|
| |  | changes in laws and regulations; and              
|
| |  | general competitive factors.                      





i



---



##### Table of Contents










TABLE OF CONTENTS


|                                                                  |                                                                |  |    |    | 
|----------------------------------------------------------------- | -------------------------------------------------------------- |  | -- | -- | 
|PART I                                                            |                                                                |  | 1  |   
|Item 1. Identity of Directors,
    Senior Management and Advisors |                                                                |  | 1  |   
|Item 2. Offer Statistics and
    Expected Timetable               |                                                                |  | 1  |   
|Item 3. Key Information                                           |                                                                |  | 1  |   
|                                                                  | A. Selected Financial Data                                     |  |    | 1  | 
|                                                                  | B. Capitalization and Indebtedness                             |  |    | 3  | 
|                                                                  | C. Reasons for the Offer and Use of
    Proceeds               |  |    | 3  | 
|                                                                  | D. Risk Factors                                                |  |    | 3  | 
|Item 4. Information on Mitel                                      |                                                                |  | 10 |   
|                                                                  | A. History and Development of Mitel                            |  |    | 10 | 
|                                                                  | B. Business Overview                                           |  |    | 11 | 
|                                                                  | C. Organizational Structure                                    |  |    | 17 | 
|                                                                  | D. Property, Plant and Equipment                               |  |    | 18 | 
|Item 5. Operating and Financial
    Review and Prospects          |                                                                |  | 19 |   
|                                                                  | A. Operating Results                                           |  |    | 24 | 
|                                                                  | B. Liquidity and Capital Resources                             |  |    | 33 | 
|                                                                  | C. Research and Development, Patents and
    Licenses, etc     |  |    | 37 | 
|                                                                  | D. Trend Information                                           |  |    | 37 | 
|                                                                  | E. Off-balance Sheet Arrangements                              |  |    | 38 | 
|                                                                  | F. Tabular Disclosure of Contractual
    Obligations           |  |    | 39 | 
|                                                                  | G. Safe Harbor                                                 |  |    | 40 | 
|Item 6. Directors, Senior
    Management and Employees            |                                                                |  | 40 |   
|                                                                  | A. Directors and Senior Management                             |  |    | 40 | 
|                                                                  | B. Compensation                                                |  |    | 44 | 
|                                                                  | C. Board Practices                                             |  |    | 47 | 
|                                                                  | D. Employees                                                   |  |    | 48 | 
|                                                                  | E. Share Ownership                                             |  |    | 48 | 
|Item 7. Major Shareholders and
    Related Party Transactions     |                                                                |  | 51 |   
|                                                                  | A. Major Shareholders                                          |  |    | 51 | 
|                                                                  | B. Related Party Transactions                                  |  |    | 52 | 
|                                                                  | C. Interests of Experts and Counsel                            |  |    | 54 | 
|Item 8. Financial
    Information                                 |                                                                |  | 54 |   
|                                                                  | A. Consolidated Statements and Other
    Financial Information |  |    | 54 | 
|                                                                  | B. Significant Changes                                         |  |    | 55 | 
|Item 9. The Offer and
    Listing                                 |                                                                |  | 55 |   
|                                                                  | A. Offer and Listing Details                                   |  |    | 55 | 
|                                                                  | B. Plan of Distribution                                        |  |    | 55 | 
|                                                                  | C. Markets                                                     |  |    | 55 | 
|                                                                  | D. Selling Shareholders                                        |  |    | 55 | 
|                                                                  | E. Dilution                                                    |  |    | 55 | 
|                                                                  | F. Expenses of the Issue                                       |  |    | 56 | 
|Item 10. Additional
    Information                               |                                                                |  | 56 |   
|                                                                  | A. Share Capital                                               |  |    | 56 | 
|                                                                  | B. Memorandum and Articles of
    Incorporation                |  |    | 56 | 

ii



---



##### Table of Contents



|                                                                                          |                                                                               |  |    |    | 
|----------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------- |  | -- | -- | 
|                                                                                          | C. Material Contracts                                                         |  |    | 59 | 
|                                                                                          | D. Exchange Controls                                                          |  |    | 68 | 
|                                                                                          | E. Taxation                                                                   |  |    | 68 | 
|                                                                                          | F. Dividends and Paying Agents                                                |  |    | 72 | 
|                                                                                          | G. Statement by Experts                                                       |  |    | 72 | 
|                                                                                          | H. Documents on Display                                                       |  |    | 72 | 
|                                                                                          | I. Subsidiary Information                                                     |  |    | 72 | 
|Item 11. Quantitative and
    Qualitative Disclosures About Market Risk                   |                                                                               |  | 72 |   
|Item 12. Description of Securities
    Other than Equity Securities                       |                                                                               |  | 74 |   
|PART II                                                                                   |                                                                               |  | 74 |   
|Item 13. Defaults, Dividend
    Arrearages and Delinquencies                              |                                                                               |  | 74 |   
|Item 14. Material Modifications to
    the Rights of Security Holders and Use of Proceeds |                                                                               |  | 74 |   
|Item 15. Controls and
    Procedures                                                      |                                                                               |  | 74 |   
|Item 16. [Reserved]                                                                       |                                                                               |  | 74 |   
|                                                                                          | A. Audit Committee Financial Expert                                           |  |    | 74 | 
|                                                                                          | B. Code of Ethics                                                             |  |    | 74 | 
|                                                                                          | C. Principal Accountant Fees and
    Services                                 |  |    | 75 | 
|                                                                                          | D. Exemptions from the Listing Standards
    for Audit Committees             |  |    | 75 | 
|                                                                                          | E. Purchases of Equity Securities by the
    Issuer and Affiliated Purchasers |  |    | 75 | 
|PART III                                                                                  |                                                                               |  | 76 |   
|Item 17. Financial
    Statements                                                         |                                                                               |  | 76 |   
|Item 18. Financial
    Statements                                                         |                                                                               |  | 76 |   
|Item 19. Exhibits                                                                         |                                                                               |  | 77 |   
|SECURITIES PURCHASE AGREEMENT                                                            
|GENERAL SECURITY AGREEMENT                                                               
|GUARANTY AND SECURITY AGREEMENT                                                          
|PLEDGE AGREEMENT                                                                         
|CHARGE OVER BOOK DEBTS AND CASH AT BANK                                                  
|GUARANTEE AND INDEMNITY                                                                  
|MORTGAGE DEBENTURE                                                                       
|GUARANTEE AND SECURITY AGREEMENT                                                         
|DEED OF GUARANTEE AND SUBORDINATION                                                      
|DEED OF GUARANTEE AND SUBORDINATION                                                      
|INTELLECTUAL PROPERTY SECURITY AGREEMENT                                                 
|CAP/FLOOR COLLAR TRANSACTION                                                             
|ISDA MASTER AGREEMENT                                                                    
|CONTRACT FOR THE SALE OF LAND AND BUILDING                                               
|REGISTRATION RIGHTS AGREEMENT                                                            
|UNION AGREEMENT                                                                          
|DEFERRED SHARE UNIT PLAN FOR EXECUTIVES                                                  
|AMENDED AND RESTATED CREDIT AGREEMENT                                                    
|STRATEGIC ALLIANCE AGREEMENT                                                             
|INTEGRATED COMMUNICATIONS SOLTUIONS                                                      
|SUBSIDIARIES                                                                             
|CERTIFICATION                                                                            
|CERTIFICATION                                                                            
|CERTIFICATION                                                                            
|CERTIFICATION                                                                            



iii



---



##### Table of Contents






PART I







|        |                                                          
|------- | ---------------------------------------------------------
|Item 1. | Identity of Directors, Senior Management and
    Advisors








|        |                                        
|------- | ---------------------------------------
|Item 2. | Offer Statistics and Expected Timetable








|        |                
|------- | ---------------
|Item 3. | Key Information






|   |                        
|-- | -----------------------
|A. | Selected Financial Data



1



---



##### Table of Contents



STATEMENT OF OPERATIONS DATA


|                                                                       |  |                                                                |       |             |            |   |       |           |  |   |           |             |  |           |             |   |           |   |        |          |  |   |       |   |  |   |       |  
|---------------------------------------------------------------------- |  | -------------------------------------------------------------- | ----- | ----------- | ---------- | - | ----- | --------- |  | - | --------- | ----------- |  | --------- | ----------- | - | --------- | - | ------ | -------- |  | - | ----- | - |  | - | ----- | -
|                                                                       |  |                                                                |       | Predecessor |           
|                                                                       |  | Mitel                                                          |       |             | Business   |  
|                                                                       |  |                                                                |       |             |            |  
|                                                                       |  |                                                                |       |             |            |   |       | Forty-six | 
|                                                                       |  | Six Days                                                       |       |             | Year Ended |   |       | Ten Weeks |  |   | Weeks     |            
|                                                                       |  | Ended                                                          |       |             |            |   |       | Ended     |  |   | Ended     |            
|                                                                       |  | April 30,                                                      |       |             | April 24,  |   |       | April 25, |  |   | April 27, |             |  | April 28, |             |   | April 27, |   |        | Feb. 16, | 
|                                                                       |  | 2005                                                           |       |             | 2005       |   |       | 2004      |  |   | 2003      |             |  | 2002      |             |   | 2001      |   |        | 2001     | 
|                                                                       |  |                                                                |       |             |            |   |       |           |  |   |           |             |  |           |             |   |           |   |        |          | 
|                                                                       |  |                                                                |       |             |            |   |       |           |  |   |           | (unaudited) |  |           | (unaudited) |  
|                                                                       |  | (In millions of U.S. dollars, except share and per share data) |      
|Revenue                                                                |  | $                                                              | 3.2   |             |            | $ | 342.2 |           |  | $ | 340.7     |             |  | $         | 352.2       |   |           | $ | 358.0  |          |  | $ | 78.3  |   |  | $ | 343.9 |  
|Cost of revenue                                                        |  |                                                                | 2.4   |             |            |   | 213.2 |           |  |   | 202.9     |             |  |           | 225.4       |   |           |   | 215.5  |          |  |   | 41.6  |   |  |   | 194.3 |  
|                                                                       |  |                                                                |       |             |            |   |       |           |  |   |           |             |  |           |             |   |           |   |        |          | 
|Gross margin                                                           |  |                                                                | 0.8   |             |            |   | 129.0 |           |  |   | 137.8     |             |  |           | 126.8       |   |           |   | 142.5  |          |  |   | 36.7  |   |  |   | 149.6 |  
|Research and development                                               |  |                                                                | 0.7   |             |            |   | 41.4  |           |  |   | 36.2      |             |  |           | 41.2        |   |           |   | 59.1   |          |  |   | 12.9  |   |  |   | 49.5  |  
|Selling, general and administrative                                    |  |                                                                | 1.8   |             |            |   | 114.9 |           |  |   | 111.4     |             |  |           | 114.9       |   |           |   | 141.9  |          |  |   | 30.2  |   |  |   | 135.0 |  
|Purchased in-process R&D                                               |  |                                                                |      |             |            |   |      |           |  |   |          |             |  |           |            |   |           |   |       |          |  |   | 13.5  |   |  |   |      |  
|Special charges                                                        |  |                                                                |      |             |            |   | 10.6  |           |  |   | 11.7      |             |  |           | 13.7        |   |           |   | 7.4    |          |  |   |      |   |  |   | 9.9   |  
|Loss on disposal of business                                           |  |                                                                |      |             |            |   | 3.4   |           |  |   | 0.6       |             |  |           |            |   |           |   | 1.5    |          |  |   |      |   |  |   |      |  
|Amortization of acquired intangibles                                   |  |                                                                |      |             |            |   |      |           |  |   | 0.2       |             |  |           | 29.1        |   |           |   | 43.8   |          |  |   | 8.2   |   |  |   | 1.9   |  
|                                                                       |  |                                                                |       |             |            |   |       |           |  |   |           |             |  |           |             |   |           |   |        |          | 
|Operating loss                                                         |  |                                                                | (1.7  | )           |            |   | (41.3 | )         |  |   | (22.3     | )           |  |           | (72.1       | ) |           |   | (111.2 | )        |  |   | (28.1 | ) |  |   | (46.7 | )
|Other (income) expense, net                                            |  |                                                                | (0.1  | )           |            |   | 7.5   |           |  |   | 8.0       |             |  |           | 0.9         |   |           |   | 3.4    |          |  |   | 0.4   |   |  |   | N/A   |  
|Income tax (recovery) expense                                          |  |                                                                |      |             |            |   | 0.8   |           |  |   | 0.3       |             |  |           | (2.9        | ) |           |   | 0.1    |          |  |   | 0.6   |   |  |   | N/A   |  
|                                                                       |  |                                                                |       |             |            |   |       |           |  |   |           |             |  |           |             |   |           |   |        |          | 
|Net loss                                                               |  | $                                                              | (1.6  | )           |            | $ | (49.6 | )         |  | $ | (30.6     | )           |  | $         | (70.1       | ) |           | $ | (114.7 | )        |  | $ | (29.1 | ) |  |   | N/A   |  
|                                                                       |  |                                                                |       |             |            |   |       |           |  |   |           |             |  |           |             |   |           |   |        |          | 
|Net loss per common share                                              |  |                                                                |       |             |            |   |       |           |  |   |           |             |  |           |             |   |           |   |        |          |  |   |       |   |  |   |       |  
|Basic and diluted                                                      |  | $                                                              | (0.02 | )           |            | $ | (0.49 | )         |  | $ | (0.26     | )           |  | $         | (0.63       | ) |           | $ | (1.10  | )        |  | $ | (0.29 | ) |  |   | N/A   |  
|                                                                       |  |                                                                |       |             |            |   |       |           |  |   |           |             |  |           |             |   |           |   |        |          | 
|Weighted average number of common shares outstanding (in
    millions) |  |                                                                | 113.8 |             |            |   | 113.8 |           |  |   | 127.8     |             |  |           | 113.1       |   |           |   | 106.8  |          |  |   | 100.0 |   |  |   | N/A   |  
|                                                                       |  |                                                                |       |             |            |   |       |           |  |   |           |             |  |           |             |   |           |   |        |          | 

BALANCE SHEET DATA


|                                           |  |                               |        |   |           |   |        |           |  |   |           |   |  |           |        |   |  |   |        |  
|------------------------------------------ |  | ----------------------------- | ------ | - | --------- | - | ------ | --------- |  | - | --------- | - |  | --------- | ------ | - |  | - | ------ | -
|                                           |  | As at                         |        |   | As at     |   |        | As at     |  |   | As at     |   |  | As at     |       
|                                           |  | April 30,                     |        |   | April 24, |   |        | April 25, |  |   | April 27, |   |  | April 28, |       
|                                           |  | 2005                          |        |   | 2005      |   |        | 2004      |  |   | 2003      |   |  | 2002      |       
|                                           |  |                               |        |   |           |   |        |           |  |   |           |   |  |           |       
|                                           |  | (In millions of U.S. dollars) |       
|Cash and cash equivalents                  |  | $                             | 46.6   |   |           | $ | 9.7    |           |  | $ | 26.7      |   |  | $         | 22.3   |   |  | $ | 3.6    |  
|Other current assets                       |  |                               | 115.8  |   |           |   | 117.5  |           |  |   | 115.0     |   |  |           | 120.6  |   |  |   | 132.4  |  
|Property and equipment                     |  |                               | 20.6   |   |           |   | 20.9   |           |  |   | 20.3      |   |  |           | 25.3   |   |  |   | 29.7   |  
|Other assets                               |  |                               | 12.3   |   |           |   | 8.5    |           |  |   | 7.4       |   |  |           | 7.3    |   |  |   | 42.4   |  
|                                           |  |                               |        |   |           |   |        |           |  |   |           |   |  |           |       
|Total assets                               |  | $                             | 195.3  |   |           | $ | 156.6  |           |  | $ | 169.4     |   |  | $         | 175.5  |   |  | $ | 208.1  |  
|                                           |  |                               |        |   |           |   |        |           |  |   |           |   |  |           |       
|Current liabilities                        |  | $                             | 101.9  |   |           | $ | 115.8  |           |  | $ | 103.2     |   |  | $         | 135.8  |   |  | $ | 138.9  |  
|Other liabilities                          |  |                               | 129.2  |   |           |   | 83.6   |           |  |   | 69.5      |   |  |           | 47.7   |   |  |   | 21.7   |  
|Redeemable shares                          |  |                               | 57.3   |   |           |   | 57.2   |           |  |   | 51.3      |   |  |           | 29.0   |   |  |   | 27.9   |  
|Capital stock                              |  |                               | 187.6  |   |           |   | 187.6  |           |  |   | 184.8     |   |  |           | 183.4  |   |  |   | 167.5  |  
|Other capital accounts                     |  |                               | 23.3   |   |           |   | 14.7   |           |  |   | 7.7       |   |  |           | (2.2   | ) |  |   | (0.9   | )
|Accumulated deficit                        |  |                               | (304.0 | ) |           |   | (302.3 | )         |  |   | (247.1    | ) |  |           | (218.2 | ) |  |   | (147.0 | )
|                                           |  |                               |        |   |           |   |        |           |  |   |           |   |  |           |       
|Total liabilities and shareholders equity |  | $                             | 195.3  |   |           | $ | 156.6  |           |  | $ | 169.4     |   |  | $         | 175.5  |   |  | $ | 208.1  |  
|                                           |  |                               |        |   |           |   |        |           |  |   |           |   |  |           |       

2



---



##### Table of Contents








|   |                                
|-- | -------------------------------
|B. | Capitalization and Indebtedness








|   |                                          
|-- | -----------------------------------------
|C. | Reasons for the offer and use of proceeds








|   |             
|-- | ------------
|D. | Risk Factors





| |                                                                                                               
| | --------------------------------------------------------------------------------------------------------------
| | Mitel has incurred net losses from operations since its
    inception and may not be profitable in the future.





| |                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------
| | Mitel may fail to achieve and sustain market acceptance of
    its products and technologies in broader industry
    segments.





| |                                                                                                                                                                                                                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The occurrence of design defects, errors, failures or
    bugs in Mitels products could result in damage
    to Mitels brand image and reputation, lost revenue, and
    the loss of, or delay in achieving, market acceptance of
    Mitels products, and adversely affect Mitels ability
    to attract new customers or retain existing customers.



3



---



##### Table of Contents







| |                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The failure of Mitels products to keep pace with
    rapidly changing technology and evolving industry standards
    could have an adverse effect on future sales.





| |                                                                                                     
| | ----------------------------------------------------------------------------------------------------
| | Mitel may not be able to compete effectively in the highly
    competitive high technology industry.





| |                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Because Mitel depends upon a small number of outside
    contract manufacturers to manufacture the Companys
    products, Mitels operations could be delayed or
    interrupted if the Company encounters problems with any of these
    contractors.







| |                                                                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Mitel depends on sole source and limited source suppliers
    for key components. If Mitel is unable to buy these components
    on a timely basis, the Company will not be able to deliver its
    products to its customers.



4



---



##### Table of Contents







| |                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------
| | Third party software could adversely affect Mitels
    ability to develop and deliver its products on a timely and
    reliable basis.





| |                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In the past Mitels revenue from operations has not
    been sufficient to cover its operating expenses and Mitel may
    require additional equity or debt financing in the
    future.





| |                                                                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The outstanding senior convertible debt instruments,
    preferred shares and certain warrants could adversely affect the
    market value of Mitels common shares as well as the
    ability of Mitel to complete any future equity financing.





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 20,000,000 Class A Convertible Preferred Shares,
    Series 1 (the Series A Shares) and
    67,789,300 Class B Convertible Preferred Shares,
    Series 1 (the Series B Shares), each of
    which is convertible into common shares (on a one-for-one basis
    and, in certain circumstances on a greater than one-for-one
    basis) of the Company at the option of the holders and upon
    certain triggering events (collectively, the Preferred
    Shares);
|
| |  | Stock options to acquire 18,456,249 common shares;                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | Warrants to acquire up to an additional 49,349,911 common
    shares, plus a warrant (granted to the lead investor in its
    April 2004 financing) to acquire certain additional common
    shares upon the occurrence of certain events, such number of
    common shares to be determined in accordance with the formula
    set forth in this warrant; and                                                                                                            

5



---



##### Table of Contents





| |   |                                                                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $55,000,000 (plus accrued interest) in senior secured
    convertible notes (the Convertible Notes) which may
    be converted into common shares on or after consummation of a
    qualified initial public offering (Qualified IPO)
    and upon certain triggering events.







| |                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The exercise of put rights by certain shareholders, and
    the exercise of redemption and certain conversion rights by one
    or more of the Convertible Noteholders, would have a material
    adverse effect on Mitels cash flow and financial
    position.







| |                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The quarterly and annual revenue and operating results of
    Mitel have fluctuated historically. Therefore, the results of
    one period may not provide a reliable indicator of Mitels
    future performance.



6



---



##### Table of Contents







| |                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Mitel is exposed to risks inherent in its defined benefit
    pension plan which may have a material adverse effect on its
    business, cash flow requirements, financial condition and
    results of operations.





| |                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Mitels competitive position may be affected by
    fluctuations in exchange rates and its current currency hedging
    strategy may not be sufficient to counter such
    fluctuations.





| |                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Mitels loss of key personnel or an inappropriate
    allocation of human resources within the business could hinder
    Mitels ability to achieve its objectives.





| |                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Mitels inability to effectively manage significant
    growth in the number of its employees or the scope of its
    operations could have a material adverse effect on Mitels
    business and future success.





| |   |                                            
| | - | -------------------------------------------
| |  | Broadening its management team;            
|
| |  | Attracting and retaining skilled employees;

7



---



##### Table of Contents





| |   |                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------
| |  | Developing and managing a larger, more complex international
    organization;                                                        
|
| |  | Expanding Mitels treasury and accounting functions and
    information systems to meet the demands imposed by Mitels
    growth; and
|
| |  | Strengthening Mitels financial and management controls in
    a manner appropriate for a larger enterprise.                          



| |                                                                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If Mitel fails to modify its products to comply with new
    regulatory requirements, or to obtain or maintain the necessary
    regulatory approvals for its products, sales of existing and
    future Mitel products could be adversely effected.





| |                                                                                         
| | ----------------------------------------------------------------------------------------
| | Mitels business may suffer if the Companys
    strategic alliances are not successful.





| |                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Mitels success is dependent on its intellectual
    property. The inability of, or any failure by, Mitel to protect
    its intellectual property could seriously harm Mitels
    ability to compete and its financial success.





| |                                                                                                          
| | ---------------------------------------------------------------------------------------------------------
| | Mitels business may be harmed if it is found to have
    infringed intellectual rights of third parties.



8



---



##### Table of Contents









| |                                                                                                           
| | ----------------------------------------------------------------------------------------------------------
| | Recently enacted and proposed changes in securities laws
    and regulations are increasing Mitels costs.

Sarbanes-Oxley Act




| |                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Dr. Terence H. Matthews is a significant shareholder
    of Mitel and he has the potential to exercise significant
    influence over matters requiring approval by shareholders of the
    Company.





| |                                                                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | There are significant restrictions on the resale of
    Mitels securities and there can be no assurance as to when
    such restrictions will cease to apply, if ever.

Securities Act of 1933


9



---



##### Table of Contents










|        |                     
|------- | --------------------
|Item 4. | Information on Mitel






|   |                                 
|-- | --------------------------------
|A. | History and Development of Mitel

Canada Business
Corporations Act Securities
Act






| |                                                                                             
| | --------------------------------------------------------------------------------------------
| | Significant developments subsequent to and during the
    Transition Period and Fiscal 2005:











10



---



##### Table of Contents












B.     Business Overview












11



---



##### Table of Contents











| |                               
| | ------------------------------
| | Enterprise Business Portfolio:











| |                                       
| | --------------------------------------
| | Small and Medium Enterprise Portfolio:





12



---



##### Table of Contents





| |                                             
| | --------------------------------------------
| | Branch Offices and Remote Working Solutions:







| |                             
| | ----------------------------
| | Contact Center Applications:





| |                    
| | -------------------
| | Wireless Telephony:





| |                    
| | -------------------
| | Video Applications:





| |                      
| | ---------------------
| | Desktop Applications:



13



---



##### Table of Contents





| |                                                            
| | -----------------------------------------------------------
| | Unified Messaging, Integrated Messaging and Voice
    Mail:





| |             
| | ------------
| | Teleworking:





| |                   
| | ------------------
| | Desktop Portfolio:







| |                 
| | ----------------
| | Client Services:



14



---



##### Table of Contents



Business Segments and Principal Markets






|                    |  |                               |     |      |                |  |     |                |      |  |                |  |  |         |     |   |         |  |       |         |  |  |         |   |  |  |       |  |  |  |     |  
|------------------- |  | ----------------------------- | --- | ---- | -------------- |  | --- | -------------- | ---- |  | -------------- |  |  | ------- | --- | - | ------- |  | ----- | ------- |  |  | ------- | - |  |  | ----- |  |  |  | --- | -
|                    |  | Six Days Ended                |     |      | Year Ended     |  |     |                |      | 
|                    |  | April 30, 2005                |     |      | April 24, 2005 |  |     | April 25, 2004 |      |  | April 27, 2003 | 
|                    |  |                               |     |      |                |  |     |                |      |  |                | 
|                    |  |                               |     | % of |                |  |     |                | % of |  |                |  |  | % of    |     |   |         |  | % of  |        
|                    |  | Revenue                       |     |      | Revenue        |  |     | Revenue        |      |  | Revenue        |  |  | Revenue |     |   | Revenue |  |       | Revenue |  |  | Revenue |  
|                    |  |                               |     |      |                |  |     |                |      |  |                |  |  |         |     |   |         |  |       |         |  |  |         |  
|                    |  | (In millions of U.S. dollars) |    
|Business Segments:  |  |                               |     |      |                |  |     |                |      |  |                |  |  |         |     |   |         |  |       |         |  |  |         |   |  |  |       |  |  |  |     |  
|Solutions           |  |                               | 1.6 |      |                |  | 50  | %              |      |  | 180.9          |  |  |         | 53  | % |         |  | 174.9 |         |  |  | 51      | % |  |  | 164.8 |  |  |  | 47  | %
|Services            |  |                               | 1.6 |      |                |  | 50  | %              |      |  | 161.3          |  |  |         | 47  | % |         |  | 165.8 |         |  |  | 49      | % |  |  | 187.4 |  |  |  | 53  | %
|                    |  |                               |     |      |                |  |     |                |      |  |                |  |  |         |     |   |         |  |       |         |  |  |         |  
|                    |  |                               | 3.2 |      |                |  | 100 | %              |      |  | 342.2          |  |  |         | 100 | % |         |  | 340.7 |         |  |  | 100     | % |  |  | 352.2 |  |  |  | 100 | %
|                    |  |                               |     |      |                |  |     |                |      |  |                |  |  |         |     |   |         |  |       |         |  |  |         |  
|Geographic Markets: |  |                               |     |      |                |  |     |                |      |  |                |  |  |         |     |   |         |  |       |         |  |  |         |   |  |  |       |  |  |  |     |  
|Canada              |  |                               | 0.3 |      |                |  | 10  | %              |      |  | 26.5           |  |  |         | 8   | % |         |  | 25.2  |         |  |  | 7       | % |  |  | 25.1  |  |  |  | 7   | %
|United States       |  |                               | 1.8 |      |                |  | 56  | %              |      |  | 155.3          |  |  |         | 45  | % |         |  | 162.8 |         |  |  | 48      | % |  |  | 173.3 |  |  |  | 49  | %
|United Kingdom      |  |                               | 1.0 |      |                |  | 31  | %              |      |  | 127.3          |  |  |         | 37  | % |         |  | 124.2 |         |  |  | 37      | % |  |  | 126.0 |  |  |  | 36  | %
|Other               |  |                               | 0.1 |      |                |  | 3   | %              |      |  | 33.1           |  |  |         | 10  | % |         |  | 28.5  |         |  |  | 8       | % |  |  | 27.8  |  |  |  | 8   | %
|                    |  |                               |     |      |                |  |     |                |      |  |                |  |  |         |     |   |         |  |       |         |  |  |         |  
|                    |  |                               | 3.2 |      |                |  | 100 | %              |      |  | 342.2          |  |  |         | 100 | % |         |  | 340.7 |         |  |  | 100     | % |  |  | 352.2 |  |  |  | 100 | %
|                    |  |                               |     |      |                |  |     |                |      |  |                |  |  |         |     |   |         |  |       |         |  |  |         |  

Sales, Marketing and Distribution








Growth Strategy






| |   |                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Increase and broaden distribution channels within its core
    markets;                                                                                                                
|
| |  | Expand geographic penetration into new markets;                                                                                                                                        
|
| |  | Expand the breadth of its customer base by introducing products
    that address the needs of small businesses and that scale to
    satisfy the requirements of large enterprises; and

15



---



##### Table of Contents





| |   |                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------
| |  | Migrate customers from legacy PBX systems to converged voice,
    video and data communications in an evolutionary manner.





Competition




Intellectual Property






| |                                      
| | -------------------------------------
| | Description of Intellectual Property:









16



---



##### Table of Contents



Government Regulations











|   |                         
|-- | ------------------------
|C. | Organizational Structure








17



---



##### Table of Contents








|   |                              
|-- | -----------------------------
|D. | Property, Plant and Equipment



| |                   
| | ------------------
| | Leased Facilities:





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | From leased facilities (approximately 512,391 square feet)
    at its worldwide headquarters located in Ottawa, Ontario, Canada;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | From leased facilities (approximately 46,000 square feet)
    at its UK and EMEA regional headquarters at the Caldicot
    Property in Caldicot, Wales, U.K.; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | Mitel also supports a number of regional sales offices
    throughout the world from leased facilities totaling, in the
    aggregate, approximately 756,637 square feet, including
    offices: throughout the United States (including New York City,
    Herndon (Virginia), Atlanta, Chicago, Boston, California,
    Florida, and Wisconsin); throughout Canada (including Toronto,
    Montreal, Calgary, Winnipeg, Burnaby (British Columbia) and
    Halifax); the U.K (including, London and Scotland); throughout
    Europe and the Middle East (including France, Germany, the
    Netherlands, Italy, Saudi Arabia and Dubai); Asia-Pacific
    (including Hong Kong, and Beijing China, and Sydney, Australia),
    and in Mexico (Mexico City).

The Ottawa (Worldwide) Headquarters






The Caldicot Property




| |   |                                                                                                                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | On February 2, 2001, with a wholly-owned subsidiary of
    Zarlink, pursuant to which the Zarlink subsidiary leased
    49,500 square feet at the Caldicot Property from MNL, on
    terms reflecting prevailing market conditions (the Zarlink
    UK Sublease). The term of the Zarlink UK Sublease was for
    five (5) years; and
|
| |  | On August 31, 2001, with BreconRidge for certain office and
    manufacturing facilities at the Caldicot Property totaling
    94,161 square feet (the BreconRidge UK
    Sublease).                                                                                                                                                 







18



---



##### Table of Contents








|        |                                             
|------- | --------------------------------------------
|Item 5. | Operating and Financial Review and Prospects

Managements Discussion and Analysis of Financial
Condition and Results of Operations




Foreign Currency Translation


Overview






| |                   
| | ------------------
| | Business Segments:







| |                       
| | ----------------------
| | Restructuring Actions:



19



---



##### Table of Contents





| |                            
| | ---------------------------
| | Related Party Transactions:





| |                                         
| | ----------------------------------------
| | Outsourcing of Manufacturing Operations:







| |                                       
| | --------------------------------------
| | Research and Development Arrangements:



Critical Accounting Policies:




20



---



##### Table of Contents





















Goodwill and Other
Intangible Assets




21



---



##### Table of Contents











Accounting for
Derivative Instruments and Hedging Activities


Recent Accounting Pronouncements:


Accounting Changes and Error Corrections  a
replacement of APB Opinion No. 20 and FASB Statement
No. 3. SFAS 154 replaces APB Opinion No. 20,
Accounting Changes Reporting Accounting Changes in Interim Financial
Statements


22



---



##### Table of Contents





Share-Based Payment ,


Inventory Costs




23



---



##### Table of Contents








|   |                  
|-- | -----------------
|A. | Operating Results



|                                                        |  |                               |      |      |                |  |       |                |      |   |                |   |  |         |       |   |         |   |       |         |  |  |         |   |  |   |       |   |  |  |       |  
|------------------------------------------------------- |  | ----------------------------- | ---- | ---- | -------------- |  | ----- | -------------- | ---- | - | -------------- | - |  | ------- | ----- | - | ------- | - | ----- | ------- |  |  | ------- | - |  | - | ----- | - |  |  | ----- | -
|                                                        |  | Six Days Ended                |      |      | Year Ended     | 
|                                                        |  |                               |      |      |                | 
|                                                        |  | April 30, 2005                |      |      | April 24, 2005 |  |       | April 25, 2004 |      |   | April 27, 2003 |  
|                                                        |  |                               |      |      |                |  |       |                |      |   |                |  
|                                                        |  |                               |      | % of |                |  |       |                | % of |   |                |   |  | % of    |       |   |         |   | % of  |        
|                                                        |  | Amounts                       |      |      | Revenue        |  |       | Amounts        |      |   | Revenue        |   |  | Amounts |       |   | Revenue |   |       | Amounts |  |  | Revenue |  
|                                                        |  |                               |      |      |                |  |       |                |      |   |                |   |  |         |       |   |         |   |       |         |  |  |         |  
|                                                        |  | (In millions of U.S. dollars) |     
|Revenue                                                 |  | $                             | 3.2  |      |                |  | 100.0 |                |      | $ | 342.2          |   |  |         | 100.0 |   |         | $ | 340.7 |         |  |  | 100.0   |   |  | $ | 352.2 |   |  |  | 100.0 |  
|Cost of revenue                                         |  |                               | 2.4  |      |                |  | 75.0  |                |      |   | 213.2          |   |  |         | 62.3  |   |         |   | 202.9 |         |  |  | 59.6    |   |  |   | 225.4 |   |  |  | 64.0  |  
|                                                        |  |                               |      |      |                |  |       |                |      |   |                |   |  |         |       |   |         |   |       |         |  |  |         |  
|Gross margin                                            |  |                               | 0.8  |      |                |  | 25.0  |                |      |   | 129.0          |   |  |         | 37.7  |   |         |   | 137.8 |         |  |  | 40.4    |   |  |   | 126.8 |   |  |  | 36.0  |  
|Research and development                                |  |                               | 0.7  |      |                |  | 21.9  |                |      |   | 41.4           |   |  |         | 12.1  |   |         |   | 36.2  |         |  |  | 10.6    |   |  |   | 41.2  |   |  |  | 11.7  |  
|Selling, general and administrative                     |  |                               | 1.8  |      |                |  | 56.3  |                |      |   | 114.9          |   |  |         | 33.6  |   |         |   | 111.4 |         |  |  | 32.7    |   |  |   | 114.9 |   |  |  | 32.6  |  
|Special charges                                         |  |                               |     |      |                |  |      |                |      |   | 10.6           |   |  |         | 3.1   |   |         |   | 11.7  |         |  |  | 3.4     |   |  |   | 13.7  |   |  |  | 3.9   |  
|Loss on sale of manufacturing operations                |  |                               |     |      |                |  |      |                |      |   | 3.4            |   |  |         | 1.0   |   |         |   | 0.6   |         |  |  | 0.2     |   |  |   |      |   |  |  |      |  
|Amortization of acquired intangibles                    |  |                               |     |      |                |  |      |                |      |   |               |   |  |         |      |   |         |   | 0.2   |         |  |  | 0.1     |   |  |   | 29.1  |   |  |  | 8.3   |  
|                                                        |  |                               |      |      |                |  |       |                |      |   |                |   |  |         |       |   |         |   |       |         |  |  |         |  
|Operating loss                                          |  | $                             | (1.7 | )    |                |  | (53.2 | )              |      | $ | (41.3          | ) |  |         | (12.1 | ) |         | $ | (22.3 | )       |  |  | (6.6    | ) |  | $ | (72.1 | ) |  |  | (20.5 | )
|Interest expense                                        |  |                               |     |      |                |  |      |                |      |   | 2.6            |   |  |         | 0.8   |   |         |   | 4.3   |         |  |  | 1.3     |   |  |   | 4.2   |   |  |  | 1.2   |  
|Beneficial conversion feature on convertible debentures |  |                               | 0.1  |      |                |  | 3.1   |                |      |   | 5.3            |   |  |         | 1.5   |   |         |   | 3.1   |         |  |  | 0.9     |   |  |   |      |   |  |  |      |  
|Other (income) expense, net                             |  |                               | (0.2 | )    |                |  | (6.3  | )              |      |   | (0.4           | ) |  |         | (0.1  | ) |         |   | 0.6   |         |  |  | 0.2     |   |  |   | (3.3  | ) |  |  | (0.9  | )
|Income tax (recovery) expense                           |  |                               |     |      |                |  |      |                |      |   | 0.8            |   |  |         | 0.2   |   |         |   | 0.3   |         |  |  | 0.1     |   |  |   | (2.9  | ) |  |  | (0.8  | )
|                                                        |  |                               |      |      |                |  |       |                |      |   |                |   |  |         |       |   |         |   |       |         |  |  |         |  
|Net loss                                                |  | $                             | (1.6 | )    |                |  | (50.0 | )              |      | $ | (49.6          | ) |  |         | (14.5 | ) |         | $ | (30.6 | )       |  |  | (9.1    | ) |  | $ | (70.1 | ) |  |  | (20.0 | )
|                                                        |  |                               |      |      |                |  |       |                |      |   |                |   |  |         |       |   |         |   |       |         |  |  |         |  

Fiscal 2005 compared to Fiscal 2004 and the Transition
Period


REVENUE:




|          |  |                               |     |      |                |  |      |                |      |  |               |  |  |         |      |  |         |  |       |         |  |  |         |  |  |  |       |  |  |  |      | 
|--------- |  | ----------------------------- | --- | ---- | -------------- |  | ---- | -------------- | ---- |  | ------------- |  |  | ------- | ---- |  | ------- |  | ----- | ------- |  |  | ------- |  |  |  | ----- |  |  |  | ---- | 
|          |  | Six Days Ended                |     |      | Year Ended     | 
|          |  |                               |     |      |                | 
|          |  | April 30, 2005                |     |      | April 24, 2005 |  |      | April 25, 2004 |      |  | April 27 2003 | 
|          |  |                               |     |      |                |  |      |                |      |  |               | 
|          |  |                               |     | % of |                |  |      |                | % of |  |               |  |  | % of    |      |  |         |  | % of  |        
|          |  | Revenue                       |     |      | Revenue        |  |      | Revenue        |      |  | Revenue       |  |  | Revenue |      |  | Revenue |  |       | Revenue |  |  | Revenue | 
|          |  |                               |     |      |                |  |      |                |      |  |               |  |  |         |      |  |         |  |       |         |  |  |         | 
|          |  | (In millions of U.S. dollars) |    
|Solutions |  |                               | 1.6 |      |                |  | 50%  |                |      |  | 180.9         |  |  |         | 53%  |  |         |  | 174.9 |         |  |  | 51%     |  |  |  | 164.8 |  |  |  | 47%  | 
|Services  |  |                               | 1.6 |      |                |  | 50%  |                |      |  | 161.3         |  |  |         | 47%  |  |         |  | 165.8 |         |  |  | 49%     |  |  |  | 187.4 |  |  |  | 53%  | 
|          |  |                               |     |      |                |  |      |                |      |  |               |  |  |         |      |  |         |  |       |         |  |  |         | 
|          |  |                               | 3.2 |      |                |  | 100% |                |      |  | 342.2         |  |  |         | 100% |  |         |  | 340.7 |         |  |  | 100%    |  |  |  | 352.2 |  |  |  | 100% | 
|          |  |                               |     |      |                |  |      |                |      |  |               |  |  |         |      |  |         |  |       |         |  |  |         | 



24



---



##### Table of Contents









|                                 |  |                               |     |      |                |            |      |                |      |  |                |  |  |         |      |  |         |  |       |         |  |  |         |  |  |  |       |  |  |  |      | 
|-------------------------------- |  | ----------------------------- | --- | ---- | -------------- | ---------- | ---- | -------------- | ---- |  | -------------- |  |  | ------- | ---- |  | ------- |  | ----- | ------- |  |  | ------- |  |  |  | ----- |  |  |  | ---- | 
|                                 |  |                               |     |      |                | Year Ended |     
|                                 |  |                               |     |      |               
|                                 |  | Six Days Ended                |     |      |                |            |      |                |     
|                                 |  | April 30, 2005                |     |      | April 24, 2005 |            |      | April 25, 2004 |      |  | April 27, 2003 | 
|                                 |  |                               |     |      |                |            |      |                |      |  |                | 
|                                 |  |                               |     | % of |                |            |      |                | % of |  |                |  |  | % of    |      |  |         |  | % of  |        
|                                 |  | Revenue                       |     |      | Revenue        |            |      | Revenue        |      |  | Revenue        |  |  | Revenue |      |  | Revenue |  |       | Revenue |  |  | Revenue | 
|                                 |  |                               |     |      |                |            |      |                |      |  |                |  |  |         |      |  |         |  |       |         |  |  |         | 
|                                 |  | (In millions of U.S. dollars) |    
|Products:                        |  |                               |     |      |                |            |      |                |      |  |                |  |  |         |      |  |         |  |       |         |  |  |         |  |  |  |       |  |  |  |      | 
|Platforms and desktop appliances |  |                               | 1.4 |      |                |            | 44%  |                |      |  | 189.8          |  |  |         | 55%  |  |         |  | 191.9 |         |  |  | 56%     |  |  |  | 191.1 |  |  |  | 54%  | 
|Software applications            |  |                               | 0.3 |      |                |            | 9%   |                |      |  | 23.5           |  |  |         | 7%   |  |         |  | 23.9  |         |  |  | 7%      |  |  |  | 29.6  |  |  |  | 8%   | 
|Other                            |  |                               | 0.1 |      |                |            | 3%   |                |      |  | 19.2           |  |  |         | 6%   |  |         |  | 15.1  |         |  |  | 5%      |  |  |  | 36.1  |  |  |  | 10%  | 
|                                 |  |                               |     |      |                |            |      |                |      |  |                |  |  |         |      |  |         |  |       |         |  |  |         | 
|                                 |  |                               | 1.8 |      |                |            | 56%  |                |      |  | 232.5          |  |  |         | 68%  |  |         |  | 230.9 |         |  |  | 68%     |  |  |  | 256.8 |  |  |  | 72%  | 
|                                 |  |                               |     |      |                |            |      |                |      |  |                |  |  |         |      |  |         |  |       |         |  |  |         | 
|Services:                        |  |                               |     |      |                |            |      |                |      |  |                |  |  |         |      |  |         |  |       |         |  |  |         |  |  |  |       |  |  |  |      | 
|Maintenance and support          |  |                               | 1.2 |      |                |            | 38%  |                |      |  | 95.0           |  |  |         | 28%  |  |         |  | 94.5  |         |  |  | 28%     |  |  |  | 83.4  |  |  |  | 24%  | 
|Managed services                 |  |                               | 0.2 |      |                |            | 6%   |                |      |  | 10.9           |  |  |         | 3%   |  |         |  | 10.6  |         |  |  | 3%      |  |  |  | 9.7   |  |  |  | 3%   | 
|Professional services            |  |                               |    |      |                |            | 0%   |                |      |  | 3.8            |  |  |         | 1%   |  |         |  | 4.7   |         |  |  | 1%      |  |  |  | 2.3   |  |  |  | 1%   | 
|                                 |  |                               |     |      |                |            |      |                |      |  |                |  |  |         |      |  |         |  |       |         |  |  |         | 
|                                 |  |                               | 1.4 |      |                |            | 44%  |                |      |  | 109.7          |  |  |         | 32%  |  |         |  | 109.8 |         |  |  | 32%     |  |  |  | 95.4  |  |  |  | 28%  | 
|                                 |  |                               |     |      |                |            |      |                |      |  |                |  |  |         |      |  |         |  |       |         |  |  |         | 
|                                 |  |                               | 3.2 |      |                |            | 100% |                |      |  | 342.2          |  |  |         | 100% |  |         |  | 340.7 |         |  |  | 100%    |  |  |  | 352.2 |  |  |  | 100% | 
|                                 |  |                               |     |      |                |            |      |                |      |  |                |  |  |         |      |  |         |  |       |         |  |  |         | 



| |               
| | --------------
| | Product Sales:







| |                
| | ---------------
| | Services Sales:



25



---



##### Table of Contents







|               |  |                               |     |      |                |            |      |                |      |  |                |  |  |         |      |  |         |  |       |         |  |  |         |  |  |  |       |  |  |  |      | 
|-------------- |  | ----------------------------- | --- | ---- | -------------- | ---------- | ---- | -------------- | ---- |  | -------------- |  |  | ------- | ---- |  | ------- |  | ----- | ------- |  |  | ------- |  |  |  | ----- |  |  |  | ---- | 
|               |  |                               |     |      |                | Year Ended |     
|               |  |                               |     |      |               
|               |  | Six Days Ended                |     |      |                |            |      |                |     
|               |  | April 30, 2005                |     |      | April 24, 2005 |            |      | April 25, 2004 |      |  | April 27, 2003 | 
|               |  |                               |     |      |                |            |      |                |      |  |                | 
|               |  |                               |     | % of |                |            |      |                | % of |  |                |  |  | % of    |      |  |         |  | % of  |        
|               |  | Revenue                       |     |      | Revenue        |            |      | Revenue        |      |  | Revenue        |  |  | Revenue |      |  | Revenue |  |       | Revenue |  |  | Revenue | 
|               |  |                               |     |      |                |            |      |                |      |  |                |  |  |         |      |  |         |  |       |         |  |  |         | 
|               |  | (In millions of U.S. dollars) |    
|Canada         |  |                               | 0.3 |      |                |            | 10%  |                |      |  | 26.5           |  |  |         | 8%   |  |         |  | 25.2  |         |  |  | 7%      |  |  |  | 25.1  |  |  |  | 7%   | 
|United States  |  |                               | 1.8 |      |                |            | 56%  |                |      |  | 155.3          |  |  |         | 45%  |  |         |  | 162.8 |         |  |  | 48%     |  |  |  | 173.3 |  |  |  | 49%  | 
|United Kingdom |  |                               | 1.0 |      |                |            | 31%  |                |      |  | 127.3          |  |  |         | 37%  |  |         |  | 124.2 |         |  |  | 37%     |  |  |  | 126.0 |  |  |  | 36%  | 
|Other          |  |                               | 0.1 |      |                |            | 3%   |                |      |  | 33.1           |  |  |         | 10%  |  |         |  | 28.5  |         |  |  | 8%      |  |  |  | 27.8  |  |  |  | 8%   | 
|               |  |                               |     |      |                |            |      |                |      |  |                |  |  |         |      |  |         |  |       |         |  |  |         | 
|               |  |                               | 3.2 |      |                |            | 100% |                |      |  | 342.2          |  |  |         | 100% |  |         |  | 340.7 |         |  |  | 100%    |  |  |  | 352.2 |  |  |  | 100% | 
|               |  |                               |     |      |                |            |      |                |      |  |                |  |  |         |      |  |         |  |       |         |  |  |         | 







| |         
| | --------
| | Backlog:



GROSS MARGIN:








| |                   
| | ------------------
| | Solutions Segment:



26



---



##### Table of Contents







| |   |                                                                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Shift in communication platform sales mix whereby total
    communication platform sales contained a higher proportion of
    lower margin small and medium business platforms in Fiscal 2005
    versus Fiscal 2004;
|
| |  | Increased price competition on a number of the Companys
    desktop appliances resulted in price reductions which
    contributed in reducing overall Solutions segment margins;                                    
|
| |  | Higher inventory obsolescence provisions recorded in Fiscal 2005
    compared to Fiscal 2004 due to the end of life of the Mitel
    3100ICP product; and                                                            
|
| |  | Increased freight and distribution costs compared to Fiscal 2004.                                                                                                                                                    





| |                  
| | -----------------
| | Services Segment:





OPERATING EXPENSES:




| |     
| | ----
| | R&D:







| |                                                  
| | -------------------------------------------------
| | Selling, General and Administrative
    (SG&A):



27



---



##### Table of Contents









| |                 
| | ----------------
| | Special Charges:











| |                                          
| | -----------------------------------------
| | Loss on Disposal of Manufacturing Assets:







| |                                      
| | -------------------------------------
| | Amortization of Acquired Intangibles:



28



---



##### Table of Contents





| |                  
| | -----------------
| | Interest Expense:





| |                             
| | ----------------------------
| | Other (Income) Expense, Net:







| |                                          
| | -----------------------------------------
| | Mark to Market Adjustment on Derivatives:











| |                            
| | ---------------------------
| | Provision for Income Taxes:



Fiscal 2004 compared to Fiscal 2003:


REVENUE:




29



---



##### Table of Contents





| |               
| | --------------
| | Product Sales:





| |                
| | ---------------
| | Services Sales:





| |                    
| | -------------------
| | Geographical Sales:



GROSS MARGIN:






| |                   
| | ------------------
| | Solutions Segment:









| |                  
| | -----------------
| | Services Segment:





30



---



##### Table of Contents





OPERATING EXPENSES




| |     
| | ----
| | R&D:





| |      
| | -----
| | SG&A:





| |                 
| | ----------------
| | Special Charges:









| |                                          
| | -----------------------------------------
| | Loss on Disposal of Manufacturing Assets:





31



---



##### Table of Contents







| |                                      
| | -------------------------------------
| | Amortization of Acquired Intangibles:





| |                  
| | -----------------
| | Interest Expense:





| |                             
| | ----------------------------
| | Other (Income) Expense, Net:





| |                                                             
| | ------------------------------------------------------------
| | Beneficial Conversion Feature on Convertible
    Debentures:





| |                            
| | ---------------------------
| | Provision for Income Taxes:





32



---



##### Table of Contents








|   |                                
|-- | -------------------------------
|B. | Liquidity and Capital Resources

|                               |                      |                               |      |      |           |   |      |           |   |   |      |      |  
|------------------------------ | -------------------- | ----------------------------- | ---- | ---- | --------- | - | ---- | --------- | - | - | ---- | ---- | -
|                               |                      | April 30,                     |      |      | April 24, |   |      | April 25, |  
|                               |                      | 2005                          |      |      | 2005      |   |      | 2004      |  
|                               |                      |                               |      |      |           |   |      |           |  
|                               |                      | (In millions of U.S. dollars, |     
|                               |                      | except DSO)                   |     
|Cash and cash equivalents      |                      | $                             | 46.6 |      |           | $ | 9.7  |           |   | $ | 26.7 |     
|Working capital                |                      |                               | 60.5 |      |           |   | 11.4 |           |   |   | 38.5 |     
|Net cash provided by (used in) |                      |                               |      |      |           |   |      |           |   |   |      |     
|                               | Operating activities |                               |      | (1.2 | )         |   |      | (31.8     | ) |   |      | 10.8 |  
|                               | Investing activities |                               |      | (1.1 | )         |   |      | (5.8      | ) |   |      | (6.3 | )
|                               | Financing activities |                               |      | 39.3 |           |   |      | 20.1      |   |   |      | (2.0 | )
|                               |                      |                               |      |      |           |   |      |           |  
|Days sales outstanding (DSO)   |                      |                               | N/A  |      |           |   | 71   |           |   |   | 82   |     
|                               |                      |                               |      |      |           |   |      |           |  



| |                           
| | --------------------------
| | Cash and Cash Equivalents:





| |                 
| | ----------------
| | Working Capital:







| |                                   
| | ----------------------------------
| | Cash Used by Operating Activities:





| |                                   
| | ----------------------------------
| | Cash Used in Investing Activities:





| |                                       
| | --------------------------------------
| | Cash Provided by Financing Activities:



33



---



##### Table of Contents















34



---



##### Table of Contents











| |            
| | -----------
| | Borrowings:

Mitel  BMO Credit Facility:


MNL  U.K. Banking Facilities:




35



---



##### Table of Contents









| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | October 22, 2001 First Mortgage. During Fiscal 2005 the
    remaining principal of the first mortgage loan, which amounted
    to $1.6 million (£0.9 million) as at the end of
    Fiscal 2004, bearing interest at 7.7%, payable in monthly
    installments until October 2004 and secured by certain equipment
    of the subsidiary, was repaid in full and the mortgage
    subsequently discharged.                                                                                                                                                                                                                                                                                                           
|
| |  | December 13, 2001 Second Mortgage. The remaining principal
    of the second mortgage loan in favor of Barclays, which
    amounted to $10.8 million (£5.7 million) as at
    the end of the Transition Period and Fiscal 2005, was repaid in
    full and discharged on August 31, 2005, when the Caldicot
    Property was sold. The second mortgage bore interest at 7.4%
    until December 2006, and had an option to continue using the
    fixed rate or select a variable rate at LIBOR plus 1.75%
    thereafter, was payable in quarterly installments of
    $0.5 million (£0.3 million) with the balance due
    in December 2011, and was secured by the real estate properties
    of the subsidiary.
|
| |  | April 25, 2003 Third Mortgage. The remaining principal of
    the third mortgage loan in favor of Barclays amounted to
    $0.6 million (£0.3 million) as at the end of the
    Transition Period and Fiscal 2005 and bears interest at 6.3%,
    payable in monthly installments until April 2006 and secured by
    certain equipment of the subsidiary. Pursuant to the terms of
    these mortgages, MNL must comply with a financial covenant. MNL
    was in compliance with such financial covenant as at the end of
    the Transition Period and Fiscal 2005 and expects to remain
    compliant for the respective terms of the loan agreements.                                                         





General:






36



---



##### Table of Contents










|   |                                                     
|-- | ----------------------------------------------------
|C. | Research and Development, Patents and Licenses, etc.








|   |                  
|-- | -----------------
|D. | Trend Information







| |   |                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Even though market indicators anticipate growth, particularly in
    IP Communications, Mitels performance could be
    impacted by the Companys existing and prospective
    customers willingness to invest in new communications
    solutions;                                                                                                                                                                     
|
| |  | Mitels shipments of IP Communications products have
    continued to grow strongly throughout Fiscal 2005 due primarily
    to the cost saving and business process benefits an
    IP Communications solution can deliver to a customer.
    Management believes that an enterprise with multiple networked
    locations or employees who work remote can benefit significantly
    from an IP Communications solution;
|
| |  | Customers are now realizing the benefits of aligning the
    value-added benefits of IP Communications with business
    process improvements;                                                                                                                                                                                                                                                                            
|
| |  | As the depreciation cycles of TDM solutions installed prior to
    the year 2000 mature, there is willingness to transition to an
    IP Communications based solution. Mitel believes that this
    replacement trend will continue;                                                                                                                                                                                     
|
| |  | The market in which Mitel operates is extremely competitive, and
    there is significant pressure to remain price competitive. Mitel
    believes that the programs in place to reduce costs of
    manufacturing will continue to offset pricing pressures; and                                                                                                                                                         
|
| |  | During the course of Fiscal 2005, there have been significant
    movements in currency exchange around the world. The continued
    uncertainty in world markets could have an adverse impact on
    revenue and cash balances.                                                                                                                                                                                          



37



---



##### Table of Contents








|   |                               
|-- | ------------------------------
|E. | Off-Balance Sheet Arrangements





| |                                                   
| | --------------------------------------------------
| | Intellectual Property Indemnification Obligations:





| |                                   
| | ----------------------------------
| | Bid and Performance Related Bonds:





| |                   
| | ------------------
| | Letters of Credit:





| |                                             
| | --------------------------------------------
| | Securitization of Trade Accounts Receivable:







38



---



##### Table of Contents








|   |                                              
|-- | ---------------------------------------------
|F. | Tabular Disclosure of Contractual Obligations



|                                                                      |  |                               |      |           |        |   |      |       |  |     |       |  |         |       |      |  |  |   |      | 
|--------------------------------------------------------------------- |  | ----------------------------- | ---- | --------- | ------ | - | ---- | ----- |  | --- | ----- |  | ------- | ----- | ---- |  |  | - | ---- | 
|                                                                      |  | Payments Due by Period        |     
|                                                                      |  |                               |     
|                                                                      |  |                               |      | Less than |        |   | 1-3  |       |  | 4-5 |       |  | After 5 |      
|Contractual Obligations                                               |  | Total                         |      |           | 1 Year |   |      | Years |  |     | Years |  |         | Years |     
|                                                                      |  |                               |      |           |        |   |      |       |  |     |       |  |         |       |     
|                                                                      |  | (In millions of U.S. dollars) |     
|Long-term debt obligations(1)                                         |  | $                             | 14.4 |           |        | $ | 2.6  |       |  | $   | 4.0   |  |         | $     | 4.2  |  |  | $ | 3.6  | 
|Capital lease obligations(1)                                          |  |                               | 3.7  |           |        |   | 1.1  |       |  |     | 2.1   |  |         |       | 0.5  |  |  |   |     | 
|Operating lease obligations(2)                                        |  |                               | 66.3 |           |        |   | 13.5 |       |  |     | 22.4  |  |         |       | 18.0 |  |  |   | 12.4 | 
|Purchase obligations(3)                                               |  |                               | 0.1  |           |        |   | 0.1  |       |  |     |      |  |         |       |     |  |  |   |     | 
|Defined benefit pension plan contributions(4)                         |  |                               | 3.4  |           |        |   | 3.4  |       |  |     |      |  |         |       |     |  |  |   |     | 
|Other long-term liabilities reflected on Mitels balance
    sheet(5) |  |                               |     |           |        |   |     |       |  |     |      |  |         |       |     |  |  |   |     | 
|                                                                      |  |                               |      |           |        |   |      |       |  |     |       |  |         |       |     
|Total contractual cash obligations                                    |  | $                             | 87.9 |           |        | $ | 20.7 |       |  | $   | 28.5  |  |         | $     | 22.7 |  |  | $ | 16.0 | 
|                                                                      |  |                               |      |           |        |   |      |       |  |     |       |  |         |       |     






|    |                                                                                                                                                                                                                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Represents the principal and interest payments for the loans.
    Interest on these loans ranges from 5.6% to 11.8%, as described
    in Mitel consolidated financial statements contained herein.                                                                                                                        
|   
|(2) | Operating lease obligations exclude payments to be received by
    Mitel under sublease arrangements.                                                                                                                                                                                                                     
|   
|(3) | Represents primarily Mitels obligation to acquire capital
    equipment from BreconRidge pursuant to the supply agreement
    between BreconRidge and Mitel dated August 31, 2001, which
    is further described in Part I, Item 10.C
    Material Contracts to this annual report.                                   
|   
|(4) | Represents the estimated contribution to Mitels defined
    benefit pension plan for Fiscal 2006 (£1.8 million)
    based on an independent actuarial valuation, in compliance with
    U.K. pension regulations with respect to contributions to and
    funding levels of the pension plan.                            
|   
|(5) | Not included in the above are liabilities arising from
    Mitels defined benefit pension plan and potential cash
    payments the Company may be required to make upon redemption of
    its redeemable Preferred Shares or the exercise of contractual
    put rights by holders of certain common or Preferred Shares.









39



---



##### Table of Contents








|   |            
|-- | -----------
|G. | Safe Harbor








|        |                                           
|------- | ------------------------------------------
|Item 6. | Directors, Senior Management and Employees






|   |                                
|-- | -------------------------------
|A. | Directors and Senior Management









|                                             |  |                   |                |  |                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-------------------------------------------- |  | ----------------- | -------------- |  | -------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                             |  | Date              |                |  |                     
|Name and Title                               |  | Elected/Appointed |                |  | Principal Occupation
|                                             |  |                   |                |  |                     
|Dr. Terence H. MatthewsChairman and Director |  |                   | February, 2001 |  |                      | Current: Chairman of the Board of Mitel; Chairman of the Board
    of March Networks since June 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                             |  |                   |                |  |                      | Other Principal Directorships: BreconRidge Manufacturing
    Solutions Corporation, Bridgewater Systems Corporation, Celtic
    Tech Jet Limited, DragonWave Inc., Encore Networks Inc., Kanata
    Research Park Corporation, KRP Construction Inc., KRP
    Developments Inc., KRP Management Services Inc., KRP Residential
    Inc., Mitel Research Park Corporation, MKC Networks Corporation,
    Newheights Software Corporation, Newport Networks Limited,
    Newport Networks Systems Corporation, Wesley Clover
    International Corporation.
|                                             |  |                   |                |  |                      | Previously: Chief Executive Officer of March Networks from June
    2000 to March 2004; prior thereto Chairman of the Board of
    Newbridge Networks Corporation (now Alcatel Canada Inc.) from
    June 1985 until June 2000.                                                                                                                                                                                                                                                                                                                          

40



---



##### Table of Contents



|                                                       |  |                   |                |  |                      |                                                                                                                                                                                                                                                                                                                                  
|------------------------------------------------------ |  | ----------------- | -------------- |  | -------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                       |  | Date              |                |  |                     
|Name and Title                                         |  | Elected/Appointed |                |  | Principal Occupation
|                                                       |  |                   |                |  |                     
|Donald W. SmithChief Executive Officer and Director    |  |                   | April, 2001    |  |                      | Current: Director and Chief Executive Officer of Mitel.                                                                                                                                                                                                                                                                          
|                                                       |  |                   |                |  |                      | Previously: President Optical Internet of Nortel Networks
    Corporation from January 2000 to April 2001; Vice
    President & General Manager Optical Solutions of Nortel
    Networks Corporation from December 1998 to January 2000; Chief
    Executive Officer of Cambrian Systems from December 1996 to
    December 1998.
|Paul A.N. ButcherPresident and Chief Operating Officer |  |                   | February, 2001 |  |                      | Current: Director, President & Chief Operating Officer
    of Mitel.                                                                                                                                                                                                                                                             
|                                                       |  |                   |                |  |                      | Other Principal Directorships: Mitel Networks, Inc., Mitel
    Networks International Limited, Mitel Networks Overseas Limited,
    Mitel Networks Limited, Mitel Networks Italia SRL, Mitel Telecom
    Limited, Mitel Mexico, Versatel Networks Inc., Natural
    Convergence Inc.                                             
|                                                       |  |                   |                |  |                      | Previously: Senior Vice President & General Manager,
    Communications Systems Business of Mitel Corporation (now
    Zarlink) from 1999 to 2001.                                                                                                                                                                               
|Peter D. CharbonneauDirector                           |  |                   | February, 2001 |  |                      | Current: General Partner of Skypoint Capital Corporation since
    November 2000.                                                                                                                                                                                                                                                
|                                                       |  |                   |                |  |                      | Other Principal Directorships: March Networks Corporation,
    Galazar Corporation, Meriton Networks Inc., TrueContext
    Corporation, BreconRidge Manufacturing Solutions Inc.                                                                                                                                                 
|                                                       |  |                   |                |  |                      | Previously: Executive Vice President of March Networks from June
    2000 to November 2000; prior thereto held several senior
    executive positions, the last of which was Vice Chairman of
    Newbridge Networks Corporation (now Alcatel Canada Inc.) from
    December 1986 to June 2000.                                  
|Kirk K. MandyDirector                                  |  |                   | July, 2002     |  |                      | Current: Chief Executive Officer of Zarlink since January 2005.                                                                                                                                                                                                                                                                  
|                                                       |  |                   |                |  |                      | Other Principal Directorships: Zarlink Semiconductor Inc.,
    Epocal Inc., Armstrong Monitoring Corporation.                                                                                                                                                                                                                    
|                                                       |  |                   |                |  |                      | Previously: Independent Management Consultant since May 2001;
    Vice Chairman of Zarlink and Chairman of several privately held
    companies; prior to May 2001 held several senior executive
    positions, the last of which was President & CEO, of
    Mitel Corporation (now Zarlink) from 1998 to 2001.                 

41



---



##### Table of Contents



|                                                   |  |                   |                |  |                      |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-------------------------------------------------- |  | ----------------- | -------------- |  | -------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                   |  | Date              |                |  |                     
|Name and Title                                     |  | Elected/Appointed |                |  | Principal Occupation
|                                                   |  |                   |                |  |                     
|Sir David S. Rowe BeddoeDirector                   |  |                   | July, 2002     |  |                      | Current: Chairman of the Board of Victoria Capital (UK) Ltd.
    since 2004 and Chairman of the Board of GFTA Analytics Ltd.
    since 2005 and Chairman of the Board of the Wales Millennium
    Centre since 2001.                                                                                                                                                                                                             
|                                                   |  |                   |                |  |                      | Other Principal Directorships: Newport Networks Inc., Royal
    Welsh College of Music & Drama, Toye & Co plc.                                                                                                                                                                                                                                                                                                                   
|                                                   |  |                   |                |  |                      | Previously: Chairman of the Welsh Development Agency from 1993
    to 2001.                                                                                                                                                                                                                                                                                                                                                      
|Gilbert S. PalterDirector                          |  |                   | April, 2004    |  |                      | Current: Chief Operating Officer and Managing Partner of
    EdgeStone Capital Partners since May 1999.                                                                                                                                                                                                                                                                                                                          
|                                                   |  |                   |                |  |                      | Other Principal Directorships: BreconRidge Manufacturing
    Solutions Inc., Center for Diagnostic Imaging Inc., Daxbourne
    Intl. Ltd., Eladdan Capital Partners Inc., EGADS Enterprises
    Inc., EMI Acquisition Inc., Eurospect Manufacturing Inc., ETP
    Holdings Inc., Royal Advertising & Marketing, Inc.,
    SC Corporation, SC Licensing Corp., SC Publishing,
    Inc., SCE Holdings Inc., Specialty Catalog Corp.
|Guthrie S. StewartDirector                         |  |                   | April, 2004    |  |                      | Current: Partner of EdgeStone Capital Partners since 2001;
    Chairman of the Board of BreconRidge since February 2003.                                                                                                                                                                                                                                                                                                         
|                                                   |  |                   |                |  |                      | Other Principal Directorships: MRRM Inc., The GBC North American
    Fund Growth Fund Inc.                                                                                                                                                                                                                                                                                                                                       
|                                                   |  |                   |                |  |                      | Previously: 1992 to 2000 Executive Vice President Teleglobe Inc.                                                                                                                                                                                                                                                                                                                                                                 
|Steven SpoonerChief Financial Officer              |  |                   | June, 2003     |  |                      | Current: Chief Financial Officer of Mitel.
    Other Principal Directorships: Mitel Networks Asia Pacific
    Limited, Mitel Networks, Inc., Mitel Networks Holdings Limited.                                                                                                                                                                                                                                                    
|                                                   |  |                   |                |  |                      | Previously: Chief Operating Officer of Wysdom Inc. from January
    to June 2003; prior thereto was a management consultant from
    March to December 2002; prior to that President and Chief
    Executive Officer of Stream Intelligent Networks Corporation
    from March 2000 to February 2002.                                                                                                                            
|Douglas McCarthyTreasurer and Director of Taxation |  |                   | November, 2003 |  |                      | Current: Treasurer and Director of Taxation for Mitel.                                                                                                                                                                                                                                                                                                                                                                           
|                                                   |  |                   |                |  |                      | Other Principal Directorships: n/a.                                                                                                                                                                                                                                                                                                                                                                                              
|                                                   |  |                   |                |  |                      | Previously: Vice President Finance and Treasurer of Alcatel
    Canada Inc. (formerly Newbridge Networks Corporation) since 1987.                                                                                                                                                                                                                                                                                                

42



---



##### Table of Contents



|                                                         |  |                              |                |                                                                                                                     |                      |                                                                                                                                                                                                                                                                                                     
|-------------------------------------------------------- |  | ---------------------------- | -------------- | ------------------------------------------------------------------------------------------------------------------- | -------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                         |  | Date                         |                |                                                                                                                     |                     
|Name and Title                                           |  | Elected/Appointed            |                |                                                                                                                     | Principal Occupation
|                                                         |  |                              |                |                                                                                                                     |                     
|Kent H.E. PlumleyGeneral Counsel and Corporate Secretary |  |                              | December, 2003 |                                                                                                                     |                      | Current: Partner in the law firm Osler, Hoskin &
    Harcourt LLP.                                                                                                                                                                                                                                  
|                                                         |  |                              |                |                                                                                                                     |                      | Other Principal Directorships: Bridgewater Systems Inc., Genesys
    Capital Partners Inc., New General Equity Fund, New Generation
    Biotech Fund, Stem Cell Network.                                                                                                                            
|Ron WellardVice President, Product Development           |  |                              | December, 2004 |                                                                                                                     |                      | Current: Vice President Product Development of Mitel.                                                                                                                                                                                                                                               
|                                                         |  |                              |                |                                                                                                                     |                      | Other Principal Directorships: n/a.                                                                                                                                                                                                                                                                 
|                                                         |  |                              |                |                                                                                                                     |                      | Previously: Vice President R&D since December 2003; prior to
    that Vice President R&D at Nortel Networks Corporation from
    June 2001 to July 2003; prior to that held various roles with
    R&D and Product Line Management at Nortel Networks
    Corporation.                              
|Simon GwatkinVice President, Strategic Marketing         |  |                              | July, 2001     |                                                                                                                     |                      | Current: Vice President, Strategic Marketing of Mitel.                                                                                                                                                                                                                                              
|                                                         |  |                              |                |                                                                                                                     |                      | Other Principal Directorships: n/a.                                                                                                                                                                                                                                                                 
|                                                         |  |                              |                |                                                                                                                     |                      | Previously: Head of the IP Business Unit of the Predecessor
    Business from July 2000 to July 2001.                                                                                                                                                                                               
|Steven DavisVice President, Global Marketing             |  | May, 2004 to September, 2005 |                | Vice President Global Marketing for Mitel from May 2004 until
    his departure from the Company in September 2005.
|                                                         |  |                              |                |                                                                                                                     |                      | Other Principal Directorships: (until September 2005) Mitel
    Networks Limited, Mitel Networks Italia SRL, Mitel Financial
    Services Limited.                                                                                                                                                  
|                                                         |  |                              |                |                                                                                                                     |                      | Previously: Head of Global Marketing for the Company from
    September 2003; prior to that Head of Marketing for the MNL UK
    and Europe since 2002; prior to that Head of Indirect Sales for
    the UK for the Predecessor Business since 1999 and added
    responsibility for Europe in 2000.
|Kevin BowyerPresident, Mitel Networks, Inc.              |  |                              | March, 2005    |                                                                                                                     |                      | Current: President of the US subsidiary of Mitel (MNI).                                                                                                                                                                                                                                             
|                                                         |  |                              |                |                                                                                                                     |                      | Other Principal Directorships: Mitel Networks, Inc.                                                                                                                                                                                                                                                 
|                                                         |  |                              |                |                                                                                                                     |                      | Previously: Founder of Cogent Global Services, a global
    outsourcing company from 2002 to 2005; prior to that held
    progressive executive sales positions with Nortel Networks
    Corporation from 1984.                                                                                     

43



---



##### Table of Contents



|                                                                                                |  |                   |                |  |                      |                                                                                                                                                                                                                                                           
|----------------------------------------------------------------------------------------------- |  | ----------------- | -------------- |  | -------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                |  | Date              |                |  |                     
|Name and Title                                                                                  |  | Elected/Appointed |                |  | Principal Occupation
|                                                                                                |  |                   |                |  |                     
|Graham BevingtonVice President and Managing Director, Europe, Middle East
    and Africa Region |  |                   | February, 2001 |  |                      | Current: Vice President and Managing Director EMEA for Mitel and
    held the same position for the Predecessor Business since
    January 2000.                                                                                                          
|                                                                                                |  |                   |                |  |                      | Other Principal Directorships: Mitel Networks Holdings Limited,
    Mitel Networks Limited, Mitel Telecom Limited, Mitel Financial
    Services Limited, Mitel Networks SARL.                                                                             
|Roger FungVice President and Managing Director, Asia Pacific                                    |  |                   | January, 2002  |  |                      | Current: Vice President and Managing Director, Asia Pacific for
    Mitel.                                                                                                                                                                                
|                                                                                                |  |                   |                |  |                      | Other Principal Directorships: Mitel Networks Asia Pacific
    Limited, Tianchi Mitel Telecommunications Corporation,
    BreconRidge Manufacturing Solutions (Asia) Ltd., Mart Asia Ltd.,
    March Networks Asia Pacific Ltd., Vodatel Networks Limited.
|                                                                                                |  |                   |                |  |                      | Previously: Vice President and Managing Director, Asia Pacific
    for March Networks from 2001 to 2002; prior to that President
    Asia Pacific for Newbridge Networks Asia Ltd. from 1987 to 2000.                                                     
|Kathy EnrightVice President, Global Human Resources                                             |  |                   | January, 2004  |  |                      | Current: Vice President Global Human Resources for Mitel.                                                                                                                                                                                                 
|                                                                                                |  |                   |                |  |                      | Other Principal Directorships: n/a.                                                                                                                                                                                                                       
|                                                                                                |  |                   |                |  |                      | Previously: Head of Human Resources for Mitel from February 2001
    to January 2004; prior to that Director of Human Resources,
    North America for the Predecessor Business from 1990.                                                                






B.     Compensation






44



---



##### Table of Contents









|                                                  |           
|------------------------------------------------- | ----------
|  Annual Service on the Board (other than Chair) | CAD$10,000



|                                        |           
|--------------------------------------- | ----------
|  Annual Service as Chair of the Board | CAD$60,000



|                                                                      |          
|--------------------------------------------------------------------- | ---------
|  Annual Service as member of the Audit Committee (other than Chair) | CAD$5,000



|                                                  |           
|------------------------------------------------- | ----------
|  Annual Service as Chair of the Audit Committee | CAD$15,000



|                                                         |          
|-------------------------------------------------------- | ---------
|  Annual Service as member of other standing committees | CAD$2,500



|                                                        |          
|------------------------------------------------------- | ---------
|  Annual Service as Chair of other standing committees | CAD$7,500



|                |          
|--------------- | ---------
|  Meeting fees | CAD$1,000







| |                      
| | ---------------------
| | Employment Contracts:





| |                                                                          
| | -------------------------------------------------------------------------
| | Indebtedness of Directors, Officers and Members of Senior
    Management:





| |    |                                                                                                                                                                                                                                                                                                              
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | Graham Bevington, Vice-President and Managing Director, Europe,
    Middle East and Africa Region. In February 2002,
    Mr. Bevington was provided with an interest free loan from
    Mitel. The loan was provided through an employee share purchase
    plan with MNL, made available to all employees of

45



---



##### Table of Contents



| |    |                                                                                                                                                                                                                                                                                                                                                                 
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    | MNL, to purchase shares in Mitel (the UK Share Purchase
    Plan). The balance owing on the loan as at the end of the
    Transition Period and Fiscal 2005 was £3811.38.                                                                                                                                                                                     
|
| | 2. | Steven Davis, former Vice-President, Global Marketing. In
    February 2002, Mr. Davis was provided with an interest free
    loan from Mitel. The loan was provided to Mr. Davis through
    the UK Share Purchase Plan to purchase shares in Mitel. The
    balance owing on the loan as at the end of the Transition Period
    and Fiscal 2005 was £5717.13.



| |                              
| | -----------------------------
| | Pension and Retirement Plans:











| |                                         
| | ----------------------------------------
| | Deferred Share Unit Plan for Executives:







46



---



##### Table of Contents
















|   |                
|-- | ---------------
|C. | Board Practices







| |                  
| | -----------------
| | Board Committees:







47



---



##### Table of Contents





| |                  
| | -----------------
| | Other Committees:








|   |          
|-- | ---------
|D. | Employees












|   |                
|-- | ---------------
|E. | Share Ownership









| |                            
| | ---------------------------
| | Employee Stock Option Plan:



48



---



##### Table of Contents









|               |  |               |           |  |                   |  |           | 
|-------------- |  | ------------- | --------- |  | ----------------- |  | --------- | 
|               |  | Total Options |           |  | Total Exercisable | 
|Exercise Price |  | Outstanding   |           |  | Options           | 
|               |  |               |           |  |                   | 
|CAD$2.75       |  |               | 222,000   |  |                   |  | 132,000   | 
|CAD$1.00       |  |               | 6,928,353 |  |                   |  | 1,228,747 | 
|               |  |               |           |  |                   | 
|               |  |               | 7,150,353 |  |                   |  | 1,360,747 | 
|               |  |               |           |  |                   | 







| |                                      
| | -------------------------------------
| | Friends and Family Investment Rounds:



49



---



##### Table of Contents









Securities Act of 1933










50



---



##### Table of Contents








|        |                                                  
|------- | -------------------------------------------------
|Item 7. | Major Shareholders and Related Party Transactions






|   |                   
|-- | ------------------
|A. | Major Shareholders



|                              |  |                                          |  |            |             |         |               |  |               |          |  |  |    |  
|----------------------------- |  | ---------------------------------------- |  | ---------- | ----------- | ------- | ------------- |  | ------------- | -------- |  |  | -- | -
|                              |  |                                          |  | Beneficial |             |         |               |  | Percentage of |         
|                              |  | Identity of Person                       |  | Amount     |             |         | Percentage of |  |               | Voting   | 
|Class of Shares               |  | or Group                                 |  | Owned(1)   |             |         | Class         |  |               | Power(4) | 
|                              |  |                                          |  |            |             |         |               |  |               |          | 
|Series B Shares               |  | Dr. Matthews                             |  |            | 40,897,750  |         |               |  | 60            | %        |  |  | 16 | %
|Common Shares                 |  | Wesley Clover                            |  |            | 90,000,000  | (2)     |               |  | 55            | %        |  |  | 36 | %
|                              |  | Total shares owned                       |  |            | 135,506,902 | (2),(3) |               |  | N/A           |          |  |  | 54 | %
|                              |  | by Dr. Matthews                          |  |            |             |         |               |  |               |          |  |  |    |  
|Series A Shares               |  | EdgeStone                                |  |            | 20,000,000  |         |               |  | 100           | %        |  |  | 8  | %
|Common Shares                 |  | EdgeStone                                |  |            | 5,015,110   |         |               |  | 3             | %        |  |  | 2  | %
|                              |  | Total shares owned by EdgeStone          |  |            | 25,015,110  |         |               |  | N/A           |          |  |  | 10 | %
|Series B Shares               |  | PTIC                                     |  |            | 16,000,000  |         |               |  | 24            | %        |  |  | 6  | %
|Common Shares (warrants only) |  | Her Majesty the Queen in Right of Canada |  |            | 35,785,410  |         |               |  | 22            | %        |  |  | 14 | %
|Common Shares                 |  | Zarlink                                  |  |            | 10,000,000  |         |               |  | 6             | %        |  |  | 4  | %






|    |                                                                                                                                                                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Beneficial Amount Owned includes warrants, options or other
    convertible securities held by the person or group, which are
    exercisable or convertible within 60 days into shares of
    the Company.                                                                                                                                             
|   
|(2) | Excludes the impact of vested options granted by Wesley Clover
    to Donald Smith, Paul Butcher and Peter Charbonneau to acquire
    up to 4,900,000 common shares in the aggregate from the holdings
    of Wesley Clover.                                                                                                                            
|   
|(3) | Includes the 90,000,000 common shares owned by Wesley Clover and
    the 4,555,169 common shares owned by Celtic Tech Jet Corporation
    and 53,983 stock options that are currently exercisable.                                                                                                                                                      
|   
|(4) | Percentage of Voting Power is calculated based on the beneficial
    amount owned divided by total shares outstanding including
    warrants, options or other convertible securities which are
    exercisable or convertible within 60 days into shares of
    the Company.                                                                           
|   
|(5) | The parties to the Shareholders Agreement agreed, among other
    matters, to act and vote from time to time so that on any
    election of directors by the shareholders of the Company, the
    EdgeStone nominees are elected. See Part I, Item 10.C
    Material Contracts to this annual report for
    discussion of the Shareholders Agreement.





51



---



##### Table of Contents





| |                            
| | ---------------------------
| | United States Shareholders:








|   |                           
|-- | --------------------------
|B. | Related Party Transactions





| |                             
| | ----------------------------
| | Agreements with BreconRidge:



Leased
Property








Outsourcing
of Manufacturing and Repair Operations




52



---



##### Table of Contents











Management
Services




| |                 
| | ----------------
| | Leased Property:





| |                               
| | ------------------------------
| | Agreement with March Networks:





| |                    
| | -------------------
| | Other Transactions:



53



---



##### Table of Contents


















|   |                                 
|-- | --------------------------------
|C. | Interests of Experts and Counsel








|        |                      
|------- | ---------------------
|Item 8. | Financial Information






|   |                                                        
|-- | -------------------------------------------------------
|A. | Consolidated Statements and Other Financial Information





| |                  
| | -----------------
| | Legal Proceedings





54



---



##### Table of Contents





| |                
| | ---------------
| | Dividend Policy








|   |                    
|-- | -------------------
|B. | Significant Changes








|        |                      
|------- | ---------------------
|Item 9. | The Offer and Listing






|   |                          
|-- | -------------------------
|A. | Offer and Listing Details








|   |                     
|-- | --------------------
|B. | Plan of distribution








|   |        
|-- | -------
|C. | Markets








|   |                     
|-- | --------------------
|D. | Selling shareholders








|   |         
|-- | --------
|E. | Dilution



55



---



##### Table of Contents








|   |                      
|-- | ---------------------
|F. | Expenses of the issue








|         |                       
|-------- | ----------------------
|Item 10. | Additional Information






|   |              
|-- | -------------
|A. | Share Capital








|   |                                         
|-- | ----------------------------------------
|B. | Memorandum and Articles of Incorporation











| |                          
| | -------------------------
| | Meetings of Shareholders:











56



---



##### Table of Contents







| |           
| | ----------
| | Directors:









57



---



##### Table of Contents





| |               
| | --------------
| | Capital Stock:















| |                 
| | ----------------
| | Series A Shares:

Liquidation Preference






| |   |                                                                                                                                                                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | If Series A Participation Amount per share would be equal
    to or greater than the sum of two times the original issue price
    of the Series A Shares plus declared but unpaid dividends,
    the holders of Series A Shares will not be entitled to
    receive the Series A Liquidation Amount and will only
    receive the Series A Participation Amount; and                     
|
| |  | If Series A Participation Amount per share is less than the
    sum of two times the original issue price of the Series A
    Shares plus declared but unpaid dividends, then the maximum
    amount per Series A Share that the holders are entitled to
    receive shall be the sum of two times the original issue price
    of the Series A Shares plus declared but unpaid dividends.

Voting


Conversion


58



---



##### Table of Contents







Anti-Dilution Protection


Redemption




| |                 
| | ----------------
| | Series B Shares:








|   |                   
|-- | ------------------
|C. | Material Contracts





| |                           
| | --------------------------
| | Sale of Caldicot Property:





59



---



##### Table of Contents







| |                                  
| | ---------------------------------
| | Senior Secured Convertible Notes:





Convertible Notes








60



---



##### Table of Contents







| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | On the consummation of a Qualified IPO, calculated on the basis
    of a formula that is 110% of the lower of (a) the price per
    common share in the Qualified IPO, and (b) the higher of
    (i) the average 10 day trading price of the
    Companys common shares on the NYSE or Nasdaq National
    Market immediately following the date of expiry of any lock-up
    restrictions entered into by a Convertible Noteholder in
    connection with the Qualified IPO, and (ii) 80% of the
    price per common share in the Qualified IPO.
|
| |  | In connection with a Fundamental Change and prior to the
    consummation of a Qualified IPO calculated on the basis of
    $1.50 per common share.                                                                                                                                                                                                                                                                                                                                                                                                





| |   |                                                                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 125% of the principal of the Convertible Notes to be repurchased
    plus accrued interest, for any Fundamental Change that occurs
    during the 18 months after the issuance date of the
    Convertible Notes but prior to the consummation of a Qualified
    IPO.
|
| |  | 120% of the principal of the Convertible Notes to be repurchased
    plus accrued interest, for any Fundamental Change occurring
    following the 18 months after issuance date of the
    Convertible Notes but prior to the consummation of a Qualified
    IPO.   
|
| |  | 100% of the principal of the Convertible Notes to be repurchased
    plus accrued interest, for any Fundamental Change occurring
    following the consummation of a Qualified IPO.                                                                                   

Convertible Noteholder Warrants:












61



---



##### Table of Contents







| |                     
| | --------------------
| | Edgestone Financing:







| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Issued and sold to Edgestone 20,000,000 Series A Shares at
    a purchase price of CAD$1.00 per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | Issued and sold to Edgestone, for the aggregate price of
    CAD$1.00, a warrant (the Series 1 Warrant) to
    purchase up to 5,000,000 common shares at an exercise price of
    CAD$1.25 per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | Issued and sold to Edgestone, for the aggregate price of
    CAD$1.00, a warrant (the Series 2 Warrant) to
    purchase certain common shares (the Series 2 Warrant
    Shares), in order to provide certain anti-dilution
    protection to the holder of the Series 2 Warrant upon the
    occurrence of certain events relating to the exercise of put
    rights under the Shareholders Agreement. Upon the exercise of
    certain of such put rights whereby Mitel is required to
    repurchase a certain number of common shares and Preferred
    Shares (the Repurchased Securities), the
    Series 2 Warrant will be exercisable for a number of common
    shares, determined by multiplying the Series 2 Warrant
    holders proportionate share of the then outstanding common
    shares of the Company by the number of shares determined in
    accordance with the following formula: by dividing (a) the
    amount by which the aggregate purchase price of the Repurchased
    Securities exceeds the greater of (i) the fair market value
    of the Repurchased Securities or (ii) the number of
    Repurchased Securities multiplied by CAD$1.00; by (b) the
    then applicable fair market value of a common share.
|
| |  | Granted to EdgeStone or its permitted assignees an option (the
    EdgeStone Purchase Option), exercisable at any time
    until August 31, 2004 (which was subsequently extended to
    December 14, 2004), to purchase up to an additional
    5,000,000 Series A Shares (the Purchase Option
    Shares) at a price of CAD$1.00 per share and
    otherwise in accordance with the Subscription Agreement. The
    Edgestone Purchase Warrant expired without having been
    exercised, on December 14, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 







| |   |                                                                                                                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 20,448,875 common shares held by Wesley Clover, which had been
    issued by Mitel Networks in October 2003 upon the conversion of
    certain promissory notes previously issued by Mitel in favor of
    Wesley Clover, were exchanged on a one-to-two basis for an
    aggregate of 40,897,750 Series B Shares;
|
| |  | 4,000,000 common shares held by PTIC were exchanged on a
    one-to-four basis for 16,000,000 Series B Shares; and                                                                                                                                                                                                
|
| |  | 5,445,775 common shares, issued in October 2003 upon the
    conversion of mandatory convertible debentures previously issued
    by Mitel in favor of certain existing investors, were exchanged
    on a one-to-two basis for 10,163,238 Series B Shares.                                                       



62



---



##### Table of Contents











| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | If Mitel has not completed an initial public offering by
    September 1, 2006, Zarlink shall have the right,
    exercisable for 90 days after September 1, 2006, to
    require Mitel to repurchase all or any portion of the 10,000,000
    common shares held by Zarlink (subject to appropriate adjustment
    for events such as stock splits) at a purchase price of
    CAD$2.85 per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  | If Mitel has not completed an initial public offering by
    September 1, 2006, PTIC shall have the right, exercisable
    for 90 days after September 1, 2006, to require Mitel
    to repurchase all or any portion of the 16,000,000 Series B
    Shares (subject to appropriate adjustment for events such as
    stock splits) held by it on the date of the Shareholders
    Agreement (or the common shares issued on the conversion
    thereof). The purchase price shall be with respect to each
    Series B Shares, CAD$1.00 per share (subject to
    appropriate adjustments) and, with respect to each common share
    issued on the conversion of a Series B Share, equal to
    CAD$1.00 divided by the number of common shares issued upon
    conversion of such Series B Share, in either case together
    with an amount equal to the interest on the aggregate amount
    payable for such shares at a rate of 7% per annum
    commencing August 31, 2001 and compounded semi-annually.                                                                                                                         
|
| |  | If either of Zarlink or PTIC exercises its put rights as
    described above, EdgeStone shall also have the right to require
    the Company to repurchase all but not less than all of the
    Series A Shares then held by EdgeStone, for a purchase
    price equal to the sum of (i) CAD$1.00 per share
    (subject to appropriate adjustment for events such as stock
    splits) plus an amount equal to any declared but unpaid
    dividends on such shares; plus (ii) the issuance of that
    number of common shares equal to the number of common shares
    then issuable on the conversion of the Series A Shares then
    held by EdgeStone. Following the purchase of such Series A
    Shares from EdgeStone by Mitel upon the exercise of such put
    rights by EdgeStone, EdgeStone shall also have the right, upon
    certain sale events or after five years plus one day after the
    date of the Financing, to require the Company to repurchase all
    or any of its common shares or convertible securities then held,
    for a purchase price based on the then fair market value of such
    securities.
|
| |  | Where EdgeStone and one or more of the other shareholders
    exercises their put rights, EdgeStone shall have priority, such
    that the Company will be required to repurchase all of
    EdgeStones securities which are the subject of the
    exercise of its put right, before any payments are made to
    Zarlink and/or PTIC. Thereafter, where both Zarlink and PTIC
    have exercised their put rights, their put rights shall rank
    pari passu.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        



63



---



##### Table of Contents









| |                         
| | ------------------------
| | Securitization Facility:









| |                               
| | ------------------------------
| | Banking and Credit Facilities:















64



---



##### Table of Contents



Borrowings




| |                             
| | ----------------------------
| | Agreements with BreconRidge:





















| |                                                      
| | -----------------------------------------------------
| | Agreements with Other Affiliates of
    Dr. Matthews:









65



---



##### Table of Contents







| |                         
| | ------------------------
| | Agreements with Zarlink:





















66



---



##### Table of Contents









| |                               
| | ------------------------------
| | Agreements with Key Employees:















| |                        
| | -----------------------
| | Agreements with Others:





67



---



##### Table of Contents
























|   |                  
|-- | -----------------
|D. | Exchange Controls



Investment Canada Act Investment Canada Act







|   |         
|-- | --------
|E. | Taxation



68



---



##### Table of Contents





CANADIAN FEDERAL INCOME TAX CONSEQUENCES


Income Tax Act Income Tax Act


Income Tax Act




| |           
| | ----------
| | Dividends:

Income Tax Act


Income Tax Act






| |                       
| | ----------------------
| | Disposition of Shares:

Income Tax Act Income Tax Act


Income Tax
Act


UNITED STATES FEDERAL INCOME TAX CONSEQUENCES


U.S. Internal
Revenue Code of 1986


69



---



##### Table of Contents







| |             
| | ------------
| | U.S. Holder:





| |           
| | ----------
| | Dividends:



70



---



##### Table of Contents







| |                    
| | -------------------
| | Foreign Tax Credit:







| |                       
| | ----------------------
| | Disposition of Shares:





| |                                                   
| | --------------------------------------------------
| | Passive Foreign Investment Company Considerations:



71



---



##### Table of Contents








|   |                            
|-- | ---------------------------
|F. | Dividends and Paying Agents








|   |                     
|-- | --------------------
|G. | Statement by Experts






H.     Documents on Display


United States Securities Exchange Act of 1934




United States Securities Exchange Act of 1934







I.     Subsidiary Information









|         |                                                               
|-------- | --------------------------------------------------------------
|Item 11. | Quantitative and Qualitative Disclosures about Market
    Risk





| |                   
| | ------------------
| | Equity Price Risk:



72



---



##### Table of Contents







| |                       
| | ----------------------
| | Foreign Currency Risk:





| |                    
| | -------------------
| | Interest Rate Risk:









73



---



##### Table of Contents










|         |                                                           
|-------- | ----------------------------------------------------------
|Item 12. | Description of Securities Other than Equity
    Securities






PART II







|         |                                                
|-------- | -----------------------------------------------
|Item 13. | Defaults, Dividend Arrearages and Delinquencies








|         |                                                                                 
|-------- | --------------------------------------------------------------------------------
|Item 14. | Material Modifications to the Rights of Security Holders
    and Use of Proceeds








|         |                        
|-------- | -----------------------
|Item 15. | Controls and Procedures

United States Securities Exchange
Act of 1934


Exchange Act





Item 16.[Reserved]







|   |                                 
|-- | --------------------------------
|A. | Audit Committee Financial Expert








|   |               
|-- | --------------
|B. | Code of Ethics



74



---



##### Table of Contents








|   |                              
|-- | -----------------------------
|C. | Principal Accountant and Fees



|                   |  |             |         |  |             |  |         | 
|------------------ |  | ----------- | ------- |  | ----------- |  | ------- | 
|                   |  | Fiscal 2005 |         |  | Fiscal 2004 | 
|                   |  | $           |         |  | $           | 
|                   |  |             |         |  |             | 
|Audit Fees         |  |             | 323,907 |  |             |  | 268,429 | 
|Audit-Related Fees |  |             | 71,637  |  |             |  | 116,819 | 
|Tax Fees           |  |             | 107,407 |  |             |  | 112,590 | 
|All Other Fees     |  |             | 8,129   |  |             |  | 45,804  | 
|                   |  |             |         |  |             | 
|Total              |  |             | 511,080 |  |             |  | 543,642 | 
|                   |  |             |         |  |             | 











| |                                      
| | -------------------------------------
| | Audit committee pre-approval process:










|   |                                                           
|-- | ----------------------------------------------------------
|D. | Exemptions from the Listing Standards for Audit Committees








|   |                                                                           
|-- | --------------------------------------------------------------------------
|E. | Purchases of Equity Securities by the Issuer and Affiliated
    Purchasers



75



---



##### Table of Contents





|                                  |  |            |     |  |             |      |                  |                      |  |                        |                              |  |  |  |   | 
|--------------------------------- |  | ---------- | --- |  | ----------- | ---- | ---------------- | -------------------- |  | ---------------------- | ---------------------------- |  |  |  | - | 
|                                  |  | (a) Total  |     |  |             |      | (c) Total Number |                      |  | (d) Maximum Number (or |                             
|                                  |  | Number     |     |  | (b) Average |      |                  | of Shares (or Units) |  |                        | Approximate Dollar Value) of | 
|                                  |  | of Shares  |     |  | Price Paid  |      |                  | Purchased as Part of |  |                        | Shares (or Units) that may   | 
|                                  |  | (or Units) |     |  | per Share   |      |                  | Publicly Announced   |  |                        | yet be Purchased Under the   | 
|Period                            |  | Purchased  |     |  | (or Units)  |      |                  | Plans or Programs    |  |                        | Plans or Programs            | 
|                                  |  |            |     |  |             |      |                  |                      |  |                        |                              | 
|May 1 to May 31, 2004             |  |            |    |  |             |      |                 |                      |  |                        |                             |  |  |  |  | 
|June 1 to June 30, 2004           |  |            |    |  |             |      |                 |                      |  |                        |                             |  |  |  |  | 
|July 1 to July 31, 2004           |  |            |    |  |             |      |                 |                      |  |                        |                             |  |  |  |  | 
|August 1 to August 31, 2004       |  |            |    |  |             |      |                 |                      |  |                        |                             |  |  |  |  | 
|September 1 to September 30, 2004 |  |            | 347 |  |             | CAD$ | 4.00             |                      |  |                        |                             |  |  |  |  | 
|October 1 to October 31, 2004     |  |            |    |  |             |      |                 |                      |  |                        |                             |  |  |  |  | 
|November 1 to November 30, 2004   |  |            |    |  |             |      |                 |                      |  |                        |                             |  |  |  |  | 
|December 1 to December 31, 2004   |  |            | 77  |  |             | CAD$ | 4.00             |                      |  |                        |                             |  |  |  |  | 
|January 1 to January 31, 2005     |  |            |    |  |             |      |                 |                      |  |                        |                             |  |  |  |  | 

|                                  |  |            |        |  |             |      |                  |                      |  |                        |                              |  |  |  |   | 
|--------------------------------- |  | ---------- | ------ |  | ----------- | ---- | ---------------- | -------------------- |  | ---------------------- | ---------------------------- |  |  |  | - | 
|                                  |  | (a) Total  |        |  |             |      | (c) Total Number |                      |  | (d) Maximum Number (or |                             
|                                  |  | Number     |        |  | (b) Average |      |                  | of Shares (or Units) |  |                        | Approximate Dollar Value) of | 
|                                  |  | of Shares  |        |  | Price Paid  |      |                  | Purchased as Part of |  |                        | Shares (or Units) that may   | 
|                                  |  | (or Units) |        |  | per Share   |      |                  | Publicly Announced   |  |                        | yet be Purchased Under the   | 
|Period                            |  | Purchased  |        |  | (or Units)  |      |                  | Plans or Programs    |  |                        | Plans or Programs            | 
|                                  |  |            |        |  |             |      |                  |                      |  |                        |                              | 
|February 1 to February 29, 2005   |  |            |       |  |             |      |                 |                      |  |                        |                             |  |  |  |  | 
|March 1 to March 31, 2005         |  |            | 8,970  |  |             | CAD$ | 4.00             |                      |  |                        |                             |  |  |  |  | 
|                                  |  |            | 269    |  |             | CAD$ | 1.00             |                      |  |                        |                              |  |  |  |   | 
|April 1 to April 30, 2005         |  |            |       |  |             |      |                 |                      |  |                        |                             |  |  |  |  | 
|May 1 to May 31, 2005             |  |            | 17,398 |  |             | CAD$ | 4.00             |                      |  |                        |                             |  |  |  |  | 
|                                  |  |            | 1,995  |  |             | CAD$ | 1.00             |                      |  |                        |                              |  |  |  |   | 
|June 1 to June 30, 2005           |  |            | 5,823  |  |             | CAD$ | 1.00             |                      |  |                        |                             |  |  |  |  | 
|July 1 to July 31, 2005           |  |            | 423    |  |             | CAD$ | 1.00             |                      |  |                        |                             |  |  |  |  | 
|August 1 to August 31, 2005       |  |            |       |  |             |      |                 |                      |  |                        |                             |  |  |  |  | 
|September 1 to September 30, 2005 |  |            | 6,415  |  |             | CAD$ | 4.00             |                      |  |                        |                             |  |  |  |  | 
|TOTAL                             |  |            | 41,717 |  |             |      |                  |                      |  |                        |                              |  |  |  |   | 




PART III







|         |                     
|-------- | --------------------
|Item 17. | Financial Statements








|         |                     
|-------- | --------------------
|Item 18. | Financial Statements



76



---



##### Table of Contents








|         |         
|-------- | --------
|Item 19. | Exhibits



|    |  |                                                                                 
|--- |  | --------------------------------------------------------------------------------
|1.1 |  | Articles of Incorporation and amendments thereto prior to
    April 22, 2004****
|1.2 |  | Articles of Amendment, dated April 22, 2004****                                 
|1.3 |  | Articles of Amendment, dated April 23, 2004****                                 
|1.4 |  | Bylaws****                                                                      



| |   |     |  |                                                                                                                                                                                                                                       
| | - | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2 | .1  |  | See Articles of Incorporation described above in
    Exhibit 1.1, Articles of Amendment dated April 22,
    2004 described above in Exhibit 1.2, and Articles of
    Amendment dated April 23, 2004 described above in
    Exhibit 1.3
| | 2 | .2  |  | Specimen Common Share certificate*                                                                                                                                                                                                    
| | 2 | .3  |  | Specimen Series A Share certificate****                                                                                                                                                                                               
| | 2 | .4  |  | Specimen Series B Share certificate****                                                                                                                                                                                               
| | 2 | .5  |  | Securities Purchase Agreement between Mitel and the Noteholders,
    dated April 27, 2005                                                                                                                                           
| | 2 | .6  |  | Form of Note (see Exhibit 2.5 above)                                                                                                                                                                                                  
| | 2 | .7  |  | General Security Agreement between Mitel and Highbridge (as a
    secured party, and also in its capacity as Collateral Agent (now
    BNY) on behalf of the Noteholders), dated April 27, 2005                                       
| | 2 | .8  |  | Guaranty and Security Agreement between MNI and Highbridge (as a
    secured party, and also in its capacity as Collateral Agent (now
    BNY) on behalf of the Noteholders), dated April 27,
    2005                              
| | 2 | .9  |  | Pledge Agreement between MNL and Highbridge (as a secured party,
    and also in its capacity as Collateral Agent (now BNY) on behalf
    of the Noteholders), dated April 27, 2005                                                   
| | 2 | .10 |  | Charge Over Book Debts and Cash at Bank between MNL and
    Highbridge (as trustee for itself and other Secured Parties),
    dated April 27, 2005                                                                                  
| | 2 | .11 |  | Guarantee and Indemnity between MNL and Highbridge (in its
    capacity as Collateral Agent on behalf of the Noteholders),
    dated April 27, 2005                                                                                   
| | 2 | .12 |  | Mortgage Debenture between MNL and Highbridge (as a secured
    party, and also in its capacity as Collateral Agent (now BNY) on
    behalf of the Noteholders), dated April 27, 2005                                                 
| | 2 | .13 |  | Guarantee and Security Agreement between MNOL and Highbridge (as
    a secured party, and also in its capacity as Collateral Agent
    (now BNY) on behalf of the Noteholders), dated June 30, 2005                                   
| | 2 | .14 |  | Deed of Guarantee and Subordination between MNIL, MNOL and
    Highbridge (as a secured party, and also in its capacity as
    Collateral Agent (now BNY) on behalf of the Noteholders), dated
    June 30, 2005                      
| | 2 | .15 |  | Deed of Guarantee and Subordination between MNIL, MNOL and BNY,
    dated July 15, 2005                                                                                                                                               
| | 2 | .16 |  | Intellectual Property Security Agreement between Mitel and BNY,
    effective from April 27, 2005                                                                                                                                     



| |   |    |  |                                                                                                                                                                        
| | - | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 4 | .1 |  | Cap/ Floor Collar Transaction Agreement between Mitel and
    JPMorgan Chase Bank N.A., dated October 3, 2005                                                          
| | 4 | .2 |  | ISDA Master Agreement between Mitel and JPMorgan Chase Bank
    N.A., dated September 25, 2005                                                                         
| | 4 | .3 |  | Contract for the Sale of Freehold Land and Building Subject to
    Leases and the Leaseback of Part of Building between MNL and
    Hitchens, effective August 31, 2005
| | 4 | .4 |  | Securities Purchase Agreement between Mitel and the Noteholders,
    dated April 27, 2005 (see Exhibit 2.5 above)
                                                   
| | 4 | .5 |  | Form of Note (see Exhibit 2.5 above)                                                                                                                                   
| | 4 | .6 |  | Form of Warrant (see Exhibit 2.5 above)                                                                                                                                

77



---



##### Table of Contents



| |   |     |  |                                                                                                                                                                                                                                          
| | - | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 4 | .7  |  | Registration Rights Agreement between Mitel and the Noteholders,
    dated April 27, 2005.                                                                                                                                               
| | 4 | .8  |  | General Security Agreement between Mitel and Highbridge (as a
    secured party, and also in its capacity as Collateral Agent (now
    BNY) on behalf of the Noteholders), dated April 27, 2005
    (see Exhibit 2.7 above)              
| | 4 | .9  |  | Guaranty and Security Agreement between MNI and Highbridge (as a
    secured party, and also in its capacity as Collateral Agent (now
    BNY) on behalf of the Noteholders), dated April 27, 2005
    (see Exhibit 2.8 above)         
| | 4 | .10 |  | Pledge Agreement between MNL and Highbridge (as a secured party,
    and also in its capacity as Collateral Agent (now BNY) on behalf
    of the Noteholders), dated April 27, 2005 (see
    Exhibit 2.9 above)                          
| | 4 | .11 |  | Charge Over Book Debts and Cash at Bank between MNL and
    Highbridge (as trustee for itself and other Secured Parties),
    dated April 27, 2005 (see Exhibit 2.10
    above)                                                        
| | 4 | .12 |  | Guarantee and Indemnity between MNL and Highbridge (as a secured
    party, and also in its capacity as Collateral Agent (now BNY) on
    behalf of the Noteholders), dated April 27, 2005 (see
    Exhibit 2.11 above)                  
| | 4 | .13 |  | Mortgage Debenture between MNL and Highbridge (as a secured
    party, and also in its capacity as Collateral Agent (now BNY) on
    behalf of the Noteholders), dated April 27, 2005 (see
    Exhibit 2.12 above)                       
| | 4 | .14 |  | Guarantee and Security Agreement between MNOL and Highbridge (as
    a secured party, and also in its capacity as Collateral Agent
    (now BNY) on behalf of the Noteholders), dated June 30,
    2005 (see Exhibit 2.13 above)         
| | 4 | .15 |  | Deed of Guarantee and Subordination between MNIL, MNOL and
    Highbridge (as a secured party, and also in its capacity as
    Collateral Agent (now BNY) on behalf of the Noteholders), dated
    June 30, 2005 (see Exhibit 2.14 above)
| | 4 | .16 |  | Deed of Guarantee and Subordination between MNIL, MNOL and BNY,
    dated July 15, 2005 (see Exhibit 2.15 above)                                                                                                                         
| | 4 | .17 |  | Intellectual Property Security Agreement between Mitel and BNY,
    effective from April 27, 2005 (see Exhibit 2.16 above)                                                                                                               
| | 4 | .18 |  | Union Agreement between MNSI (now MNI as a result of the merger
    of MNI and MNSI) and IBEW, expiring on September 30,
    2007                                                                                                      
| | 4 | .19 |  | Deferred Share Unit Plan (DSU Plan) for Executives, effective
    December 9, 2004                                                                                                                                                       
| | 4 | .20 |  | Shareholders Agreement between Mitel, Mitel Knowledge, PTIC,
    Zarlink, Mitel Systems (now Wesley Clover), WCC (now Wesley
    Clover), EdgeStone, and Dr. Matthews, dated April 23,
    2004**                                        
| | 4 | .21 |  | Class A Convertible Preferred Share Subscription Agreement
    between Mitel and EdgeStone dated April 23,
    2004**                                                                                                                  
| | 4 | .22 |  | Registration Rights Agreement between Mitel, Mitel Knowledge,
    PTIC, Zarlink, EdgeStone, Mitel Systems (now Wesley Clover) and
    WCC (now Wesley Clover), dated April 23, 2004**                                                    
| | 4 | .23 |  | Receivables Purchase Agreement between Mitel, MNI and MNSI, and
    The Canada Trust Company, effective date of April 16,
    2004****                                                                                                 
| | 4 | .24 |  | Amended and Restated Credit Agreement between Mitel, the Lenders
    from time to time and Bank of Montreal as Administrative Agent,
    dated April 21, 2004, as amended July 24,
    2004 ****, as further amended February 7, 2005  
| | 4 | .25 |  | Loan Agreement between MNL and Export Development Canada, dated
    March 4, 2003, as amended***                                                                                                                                         
| | 4 | .26 |  | Chattel Mortgage Loan Agreement between MNL and Barclays Bank
    PLC, dated October 22, 2001*                                                                                                                                           
| | 4 | .27 |  | Chattel Mortgage Loan Agreement between MNL and Barclays Bank
    PLC, dated April 25, 2003***                                                                                                                                           
| | 4 | .28 |  | Real Property Loan Facility between MNL and Barclays Bank
    PLC dated December 13, 2001, secured by a legal charge,
    dated January 24, 2002*                                                                                        

78



---



##### Table of Contents



| |    |     |  |                                                                                                                                                                                                                                                                                                                                
| | -- | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 4  | .29 |  | Business Overdraft and Ancillary Facility Agreement between MNL
    and Barclays Bank PLC, dated August 30, 2002***                                                                                                                                                                                                            
| | 4  | .30 |  | Supply Agreement between Mitel and its subsidiaries and
    BreconRidge and its subsidiaries dated August 30, 2001, and
    related amendment, dated February 27, 2003.*                                                                                                                                                      
| | 4  | .31 |  | Amendment to the Supply Agreement between Mitel and its
    subsidiaries and BreconRidge and its subsidiaries, dated
    February 27, 2003***                                                                                                                                                                                  
| | 4  | .32 |  | Sublease Agreement between Mitel and BreconRidge dated
    August 31, 2001 and First Amendment of Sublease Agreement
    between Mitel and BreconRidge, dated May 31, 2002*                                                                                                                                                   
| | 4  | .33 |  | Supply Agreement between Mitel and Zarlink (formerly Mitel
    Corporation) dated February 16, 2001 and related amendment,
    dated October 24, 2001*, amended by Amending
    Agreement, dated April 23, 2004****                                                                                                           
| | 4  | .34 |  | Intellectual Property License Agreement between Mitel and
    Zarlink (formerly Mitel Corporation), dated February 16,
    2001*                                                                                                                                                                                              
| | 4  | .35 |  | Amendment to the Intellectual Property License Agreement between
    Mitel and Zarlink, dated October 24, 2001*                                                                                                                                                                                                                
| | 4  | .36 |  | Non Competition and Non Solicitation Agreement between Zarlink
    (formerly Mitel Corporation), Mitel Semiconductor V.N. Inc.,
    Mitel Semiconductor Limited, Mitel Semiconductor Inc., 3755461
    Canada Inc. (now Wesley Clover), Mitel and MRPC, dated
    February 16, 2001*                                           
| | 4  | .37 |  | Lease Agreement between Mitel and MRPC, dated March 27,
    2001*                                                                                                                                                                                                                                                              
| | 4  | .38 |  | Strategic Alliance Agreement between Mitel and March Networks,
    dated September 21, 2001*, as amended September 20,
    2003 ****, and September 20, 2004                                                                                                                                                                   
| | 4  | .39 |  | Amended and Restated Employment Contract between Mitel and
    Donald Smith, dated April 17, 2001*                                                                                                                                                                                                                            
| | 4  | .40 |  | Amended and Restated Employment Contract between Mitel and Paul
    Butcher, dated February 16, 2001*                                                                                                                                                                                                                         
| | 4  | .41 |  | Integrated Communications Solutions R&D Project Agreement
    between Mitel, Mitel Knowledge, March Networks and Her Majesty
    the Queen in Right of Canada, dated October 10,
    2002*, as amended on March 27, 2003*, May 2,
    2004, September 16, 2004,
    June 27, 2005, and October 3, 2005,
    respectively
| | 8  | .1  |  | Subsidiaries of Mitel Corporation                                                                                                                                                                                                                                                                                              
| | 12 | .1  |  | Certification by CEO pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                             
| | 12 | .2  |  | Certification by CFO pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                             
| | 13 | .1  |  | Certification by CEO pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                             
| | 13 | .2  |  | Certification by CFO pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                             






| |   |                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------
| | * | Filed as an exhibit to the Registration Statement on
    Form 20-F, as amended (File No. 0-49984) of Mitel and
    incorporated herein by reference.



| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ** | Filed on May 3, 2004 as an exhibit to a Schedule 13D
    (Mitel as issuer) by EdgeStone Capital Equity Fund II-A,
    L.P.; EdgeStone Capital Equity Fund II-US, L.P.; EdgeStone
    Capital Equity Fund II-US-Inst., L.P.; National Bank
    Financial & Co. Inc.; EdgeStone Capital Equity
    Fund II-A GP, L.P.; EdgeStone Capital Equity Fund II
    US GP, L.P.; EdgeStone Capital Equity Fund II-US-Inst. GP,
    L.P.; EdgeStone Capital Equity Fund II-A GP, Inc.;
    EdgeStone Capital Equity Fund II-US Main GP, Inc.;
    EdgeStone Capital Equity Fund II-US-Inst. GP, Inc.; Samuel
    L. Duboc; Gilbert S. Palter; Bryan W. Kerdman; Sandra Cowan; and
    EdgeStone Capital Equity Fund II-B GP, Inc. and
    incorporated herein by reference.



|    |                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------
|*** | Filed as an exhibit to the annual report on Form 20-F of
    Mitel for the year ended April 27, 2003 and incorporated
    herein by reference.



|     |                                                                                                                                                
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------
|**** | Filed as an exhibit to the annual report on Form 20-F of
    Mitel for the year ended April 25, 2004, and incorporated
    herein by reference.

79



---



##### Table of Contents





|   |                                                                                                                                                              
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|  | Portions of this document have been granted Confidential
    Treatment by the Secretary of the Securities and Exchange
    Commission.                     
|  
| | Portions of this document are subject to a pending Confidential
    Treatment Request filed with the Secretary of the Securities and
    Exchange Commission.

80



---



##### Table of Contents



Index to Financial Statements




|                               |                                                                                                                                                                                                             |  |  |      | 
|------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | ---- | 
|                               | Independent Auditors
    Report  Deloitte & Touche LLP                                                                                                                                                    |  |  | F-2  | 
|                               | Consolidated Balance Sheets                                                                                                                                                                                 |  |  | F-3  | 
|                               | Consolidated Statements of Operations                                                                                                                                                                       |  |  | F-4  | 
|                               | Consolidated Statements of
    Shareholders Equity                                                                                                                                                         |  |  | F-5  | 
|                               | Consolidated Statement of Cash Flows                                                                                                                                                                        |  |  | F-7  | 
|                               | Notes to Consolidated Financial
    Statements                                                                                                                                                              |  |  | F-8  | 
|Financial Statement Schedules: |                                                                                                                                                                                                             |  |  |     
|                               | (Note: Schedules other than that listed below are omitted as
    they are not applicable or not required, or the information is
    included in the consolidated financial statements or notes
    thereto) |  |  |      | 
|                               | Schedule II  Valuation of
    Qualifying Accounts                                                                                                                                                          |  |  | F-51 | 

81



---



##### Table of Contents



SIGNATURE






| |                           
| | --------------------------
| | MITEL NETWORKS CORPORATION
|
| | /s/ Donald W. Smith       
| |                           
| | Name: Donald W. Smith     

| |        |                        
| | ------ | -----------------------
| | Title: | Chief Executive Officer



82



---



##### Table of Contents



|     |  |                               
|---- |  | ------------------------------
|LOGO |  | MITEL NETWORKS
    CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS 
 (in accordance with US GAAP)


FOR THE SIX DAY PERIOD ENDED APRIL 30, 2005, and the
FISCAL YEARS ENDED APRIL 24, 2005 and April 25,
2004


(Audited)


F-1



---



##### Table of Contents






REPORT OF INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS














| |              
| | -------------
| | Deloitte logo

|                                                                    |  |                                             
|------------------------------------------------------------------- |  | --------------------------------------------
|Ottawa, Canada                                                      |  | Deloitte & Touche LLP                       
|June 14, 2005, except for Note 31, which is at
    October 14, 2005 |  | Independent Registered Chartered Accountants

F-2



---



##### Table of Contents



MITEL NETWORKS CORPORATION


(incorporated under the laws of Canada)





CONSOLIDATED BALANCE SHEETS


(in millions of US dollars, except share amounts)


|                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                               |                |       |        |                |   |        |                |   |   |       |        |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------- | -------------- | ----- | ------ | -------------- | - | ------ | -------------- | - | - | ----- | ------ | -
|                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                               | April 30, 2005 |       |        | April 24, 2005 |   |        | April 25, 2004 |  
|                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                               |                |       |        |                |   |        |                |  
|ASSETS                                                                                                                                                                                                                                                                                                                                                
|Current assets:                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                               |                |       |        |                |   |        |                |   |   |       |       
|                                                                                                                                                                                                                                                                                                                                                       | Cash and cash equivalents                                                                                                                     |                | $     | 46.6   |                |   | $      | 9.7            |   |   | $     | 26.7   |  
|                                                                                                                                                                                                                                                                                                                                                       | Restricted cash                                                                                                                               |                |       | 1.0    |                |   |        |               |   |   |       | 0.9    |  
|                                                                                                                                                                                                                                                                                                                                                       | Accounts receivable (net of allowance of $3.0, $3.0, and $2.7,
    respectively)                                                              |                |       | 66.9   |                |   |        | 71.1           |   |   |       | 76.5   |  
|                                                                                                                                                                                                                                                                                                                                                       | Due from related parties                                                                                                                      |                |       | 0.7    |                |   |        | 0.7            |   |   |       | 0.3    |  
|                                                                                                                                                                                                                                                                                                                                                       | Inventories                                                                                                                                   |                |       | 17.4   |                |   |        | 17.1           |   |   |       | 14.5   |  
|                                                                                                                                                                                                                                                                                                                                                       | Deferred tax asset                                                                                                                            |                |       |       |                |   |        |               |   |   |       | 1.5    |  
|                                                                                                                                                                                                                                                                                                                                                       | Income tax receivable                                                                                                                         |                |       | 1.4    |                |   |        | 1.4            |   |   |       |       |  
|                                                                                                                                                                                                                                                                                                                                                       | Other receivables                                                                                                                             |                |       | 12.7   |                |   |        | 12.3           |   |   |       | 8.3    |  
|                                                                                                                                                                                                                                                                                                                                                       | Prepaid expenses and other assets                                                                                                             |                |       | 15.7   |                |   |        | 14.9           |   |   |       | 13.0   |  
|                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                               |                |       |        |                |   |        |                |  
|                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                               |                | 162.4 |        |                |   | 127.2  |                |   |   | 141.7 |       
|Long-term receivables                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                               |                | 0.4   |        |                |   | 0.4    |                |   |   | 0.3   |       
|Property and equipment                                                                                                                                                                                                                                                                                                                                 |                                                                                                                                               |                | 20.6  |        |                |   | 20.9   |                |   |   | 20.3  |       
|Goodwill                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                               |                | 6.0   |        |                |   | 6.2    |                |   |   | 5.6   |       
|Intangible and other assets                                                                                                                                                                                                                                                                                                                            |                                                                                                                                               |                | 5.9   |        |                |   | 1.9    |                |   |   | 1.5   |       
|                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                               |                |       |        |                |   |        |                |  
|                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                               | $              | 195.3 |        |                | $ | 156.6  |                |   | $ | 169.4 |       
|                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                               |                |       |        |                |   |        |                |  
|                                                                                                                                                                                                                                                                                                                                                      
|LIABILITIES, REDEEMABLE SHARES AND SHAREHOLDERS
    DEFICIENCY                                                                                                                                                                                                                                                                                       
|Current liabilities:                                                                                                                                                                                                                                                                                                                                   |                                                                                                                                               |                |       |        |                |   |        |                |   |   |       |       
|                                                                                                                                                                                                                                                                                                                                                       | Bank indebtedness                                                                                                                             |                | $     | 1.2    |                |   | $      | 15.8           |   |   | $     | 7.1    |  
|                                                                                                                                                                                                                                                                                                                                                       | Accounts payable and accrued liabilities                                                                                                      |                |       | 55.8   |                |   |        | 53.6           |   |   |       | 46.0   |  
|                                                                                                                                                                                                                                                                                                                                                       | Income and other taxes payable                                                                                                                |                |       | 2.2    |                |   |        | 2.2            |   |   |       | 5.3    |  
|                                                                                                                                                                                                                                                                                                                                                       | Deferred revenue                                                                                                                              |                |       | 25.9   |                |   |        | 25.5           |   |   |       | 27.0   |  
|                                                                                                                                                                                                                                                                                                                                                       | Due to related parties                                                                                                                        |                |       | 14.0   |                |   |        | 15.9           |   |   |       | 13.7   |  
|                                                                                                                                                                                                                                                                                                                                                       | Current portion of long-term debt                                                                                                             |                |       | 2.8    |                |   |        | 2.8            |   |   |       | 4.1    |  
|                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                               |                |       |        |                |   |        |                |  
|                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                               |                | 101.9 |        |                |   | 115.8  |                |   |   | 103.2 |       
|Long-term debt                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                               |                | 11.8  |        |                |   | 11.8   |                |   |   | 10.8  |       
|Long-term portion of lease termination obligations                                                                                                                                                                                                                                                                                                     |                                                                                                                                               |                | 8.3   |        |                |   | 8.4    |                |   |   | 4.7   |       
|Convertible notes                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                               |                | 46.6  |        |                |   |       |                |   |   |      |       
|Derivative instruments                                                                                                                                                                                                                                                                                                                                 |                                                                                                                                               |                | 37.4  |        |                |   | 38.0   |                |   |   | 29.2  |       
|Pension liability                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                               |                | 25.1  |        |                |   | 25.4   |                |   |   | 24.8  |       
|                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                               |                |       |        |                |   |        |                |  
|                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                               |                | 231.1 |        |                |   | 199.4  |                |   |   | 172.7 |       
|                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                               |                |       |        |                |   |        |                |  
|Commitments and contingencies                                                                                                                                                                                                                                                                                                                          |                                                                                                                                               |                |       |        |                |   |        |                |   |   |       |       
|Redeemable common shares, without par value:
    10,000,000 shares authorized; issued and outstanding at
    April 30, 2005, April 24, 2005 and April 25, 2004                                                                                                                                                                                         |                                                                                                                                               |                | 18.2  |        |                |   | 18.2   |                |   |   | 17.8  |       
|Convertible, redeemable preferred shares, without par
    value  unlimited shares authorized; issued and
    outstanding: Series A: 20,000,000 shares at
    April 30, 2005, April 24, 2005 and April 25,
    2004; Series B: 67,789,300, 67,789,300 and
    67,060,988 shares at April 30, 2005, April 24,
    2005 and April 25, 2004, respectively |                                                                                                                                               |                | 39.1  |        |                |   | 39.0   |                |   |   | 33.5  |       
|                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                               |                |       |        |                |   |        |                |  
|                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                               |                | 57.3  |        |                |   | 57.2   |                |   |   | 51.3  |       
|                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                               |                |       |        |                |   |        |                |  
|Shareholders deficiency:                                                                                                                                                                                                                                                                                                                              |                                                                                                                                               |                |       |        |                |   |        |                |   |   |       |       
|                                                                                                                                                                                                                                                                                                                                                       | Common shares, without par value  unlimited shares
    authorized:                                                                           |                |       |        |                |   |        |                |   |   |       |        |  
|                                                                                                                                                                                                                                                                                                                                                       | 107,149,933, 107,149,933 and 101,782,757 Issued and outstanding
    as of April 30, 2005, April 24, 2005 and
    April 25, 2004, respectively |                |       | 187.6  |                |   |        | 187.6          |   |   |       | 184.8  |  
|                                                                                                                                                                                                                                                                                                                                                       | Warrants                                                                                                                                      |                |       | 47.9   |                |   |        | 40.2           |   |   |       | 29.8   |  
|                                                                                                                                                                                                                                                                                                                                                       | Deferred stock-based compensation                                                                                                             |                |       | (0.4   | )              |   |        | (0.4           | ) |   |       | (0.2   | )
|                                                                                                                                                                                                                                                                                                                                                       | Accumulated deficit                                                                                                                           |                |       | (304.0 | )              |   |        | (302.3         | ) |   |       | (247.1 | )
|                                                                                                                                                                                                                                                                                                                                                       | Accumulated other comprehensive loss                                                                                                          |                |       | (24.2  | )              |   |        | (25.1          | ) |   |       | (21.9  | )
|                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                               |                |       |        |                |   |        |                |  
|                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                               |                | (93.1 | )      |                |   | (100.0 | )              |   |   | (54.6 | )     
|                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                               |                |       |        |                |   |        |                |  
|                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                               | $              | 195.3 |        |                | $ | 156.6  |                |   | $ | 169.4 |       
|                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                               |                |       |        |                |   |        |                |  











F-3



---



##### Table of Contents



MITEL NETWORKS CORPORATION


(incorporated under the laws of Canada)





CONSOLIDATED STATEMENTS OF OPERATIONS


(in millions of US dollars, except share and per share
amounts)


|                                                        |                                          |                   |      |             |                |   |       |                |             |   |                |       |             |   |       |       |             |  
|------------------------------------------------------- | ---------------------------------------- | ----------------- | ---- | ----------- | -------------- | - | ----- | -------------- | ----------- | - | -------------- | ----- | ----------- | - | ----- | ----- | ----------- | -
|                                                        |                                          |                   |      | Years Ended |               
|                                                        |                                          | Six Days Ended    |      |             |                |  
|                                                        |                                          | April 30, 2005    |      |             | April 24, 2005 |   |       | April 25, 2004 |             |   | April 27, 2003 |      
|                                                        |                                          |                   |      |             |                |   |       |                |             |   |                |      
|Revenues:                                               |                                          |                   |      |             |                |   |       |                |             |   |                |       |             |   |       |      
|                                                        | Products                                 |                   | $    | 1.8         |                |   | $     | 232.5          |             |   | $              | 230.9 |             |   | $     | 256.8 |            
|                                                        | Services                                 |                   |      | 1.4         |                |   |       | 109.7          |             |   |                | 109.8 |             |   |       | 95.4  |            
|                                                        |                                          |                   |      |             |                |   |       |                |             |   |                |      
|                                                        |                                          |                   | 3.2  |             |                |   | 342.2 |                |             |   | 340.7          |       |             |   | 352.2 |      
|                                                        |                                          |                   |      |             |                |   |       |                |             |   |                |      
|Cost of revenues:                                       |                                          |                   |      |             |                |   |       |                |             |   |                |       |             |   |       |      
|                                                        | Products                                 |                   |      | 1.7         |                |   |       | 152.4          |             |   |                | 147.6 |             |   |       | 167.1 |            
|                                                        | Services                                 |                   |      | 0.7         |                |   |       | 60.8           |             |   |                | 55.3  |             |   |       | 58.3  |            
|                                                        |                                          |                   |      |             |                |   |       |                |             |   |                |      
|                                                        |                                          |                   | 2.4  |             |                |   | 213.2 |                |             |   | 202.9          |       |             |   | 225.4 |      
|                                                        |                                          |                   |      |             |                |   |       |                |             |   |                |      
|Gross margin                                            |                                          |                   | 0.8  |             |                |   | 129.0 |                |             |   | 137.8          |       |             |   | 126.8 |      
|                                                        |                                          |                   |      |             |                |   |       |                |             |   |                |      
|Expenses:                                               |                                          |                   |      |             |                |   |       |                |             |   |                |       |             |   |       |      
|                                                        | Selling, general and administrative      |                   |      | 1.8         |                |   |       | 114.9          |             |   |                | 111.4 |             |   |       | 114.9 |            
|                                                        | Research and development                 |                   |      | 0.7         |                |   |       | 41.4           |             |   |                | 36.2  |             |   |       | 41.2  |            
|                                                        | Special charges                          |                   |      |            |                |   |       | 10.6           |             |   |                | 11.7  |             |   |       | 13.7  |            
|                                                        | Loss on sale of manufacturing operations |                   |      |            |                |   |       | 3.4            |             |   |                | 0.6   |             |   |       |      |            
|                                                        | Amortization of acquired intangibles     |                   |      |            |                |   |       |               |             |   |                | 0.2   |             |   |       | 29.1  |            
|                                                        |                                          |                   |      |             |                |   |       |                |             |   |                |      
|                                                        |                                          |                   | 2.5  |             |                |   | 170.3 |                |             |   | 160.1          |       |             |   | 198.9 |      
|                                                        |                                          |                   |      |             |                |   |       |                |             |   |                |      
|Operating loss                                          |                                          |                   | (1.7 | )           |                |   | (41.3 | )              |             |   | (22.3          | )     |             |   | (72.1 | )    
|Interest expense                                        |                                          |                   |     |             |                |   | (2.6  | )              |             |   | (4.3           | )     |             |   | (4.2  | )    
|Mark to market adjustment on derivatives                |                                          |                   | (0.1 | )           |                |   | (5.3  | )              |             |   |               |       |             |   |      |      
|Beneficial conversion feature on convertible debentures |                                          |                   |     |             |                |   |      |                |             |   | (3.1           | )     |             |   |      |      
|Other income (expense), net                             |                                          |                   | 0.2  |             |                |   | 0.4   |                |             |   | (0.6           | )     |             |   | 3.3   |      
|                                                        |                                          |                   |      |             |                |   |       |                |             |   |                |      
|Loss before income taxes                                |                                          |                   | (1.6 | )           |                |   | (48.8 | )              |             |   | (30.3          | )     |             |   | (73.0 | )    
|Current income tax expense (recovery)                   |                                          |                   |     |             |                |   | 0.8   |                |             |   | 2.0            |       |             |   | (2.9  | )    
|Deferred income tax recovery                            |                                          |                   |     |             |                |   |      |                |             |   | (1.7           | )     |             |   |      |      
|                                                        |                                          |                   |      |             |                |   |       |                |             |   |                |      
|Net loss                                                |                                          | $                 | (1.6 | )           |                | $ | (49.6 | )              |             | $ | (30.6          | )     |             | $ | (70.1 | )    
|                                                        |                                          |                   |      |             |                |   |       |                |             |   |                |      
|Net loss per common share:                              |                                          |                   |      |             |                |   |       |                |             |   |                |       |             |   |       |      
|                                                        |                                          | Basic and diluted |      | $           | (0.02          | ) |       | $              | (0.49       | ) |                | $     | (0.26       | ) |       | $     | (0.63       | )
|                                                        |                                          |                   |      |             |                |   |       |                |             |   |                |      
|Weighted-average number of common shares outstanding    |                                          |                   |      |             |                |   |       |                |             |   |                |       |             |   |       |      
|                                                        |                                          | Basic and diluted |      |             | 113,847,268    |   |       |                | 113,792,829 |   |                |       | 127,831,211 |   |       |       | 113,109,751 |  
|                                                        |                                          |                   |      |             |                |   |       |                |             |   |                |      



F-4



---



##### Table of Contents



MITEL NETWORKS CORPORATION


(incorporated under the laws of Canada)





CONSOLIDATED STATEMENTS OF SHAREHOLDERS DEFICIENCY


(in millions of US dollars, except share amounts)


|                                                                                           |                                                                                   |               |             |            |        |   |             |          |   |             |              |       |               |         |               |        |               |   |        |              |  |   |       |       |   |   |       |       |  
|------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------------- | ------------- | ----------- | ---------- | ------ | - | ----------- | -------- | - | ----------- | ------------ | ----- | ------------- | ------- | ------------- | ------ | ------------- | - | ------ | ------------ |  | - | ----- | ----- | - | - | ----- | ----- | -
|                                                                                           |                                                                                   |               |             |            |        |   |             |          |   | Accumulated |              |       | Total         |        
|                                                                                           |                                                                                   | Common Shares |             |            |        |   | Deferred    |          |   |             |              | Other |               |         | Shareholders |       
|                                                                                           |                                                                                   |               |             |            |        |   | Stock-based |          |   | Accumulated |              |       | Comprehensive |         |               | Equity |              
|                                                                                           |                                                                                   | Shares        |             |            | Amount |   |             | Warrants |   |             | Compensation |       |               | Deficit |               |        | Income (Loss) |   |        | (Deficiency) | 
|                                                                                           |                                                                                   |               |             |            |        |   |             |          |   |             |              |       |               |         |               |        |               |   |        |              | 
|Balances at April 28, 2002                                                                 |                                                                                   |               | 96,924,924  |            |        | $ | 167.5       |          |   | $           |             |       |               | $       | (0.5          | )      |               | $ | (147.0 | )            |  | $ | (0.3  | )     |   | $ | 19.7  |      
|                                                                                           |                                                                                   |               |             |            |        |   |             |          |   |             |              |       |               |         |               |        |               |   |        |              | 
|Common shares issued:                                                                      |                                                                                   |               |             |            |        |   |             |          |   |             |              |       |               |         |               |        |               |   |        |              |  |   |       |       |   |   |       |      
|                                                                                           | Acquisition of intellectual property from related party                           |               |             | 4,555,169  |        |   |             | 14.8     |   |             |              |      |               |         |               |       |               |   |        |             |  |   |       |      |   |   |       | 14.8  |  
|                                                                                           | Professional services received                                                    |               |             | 10,487     |        |   |             | 0.1      |   |             |              |      |               |         |               |       |               |   |        |             |  |   |       |      |   |   |       | 0.1   |  
|                                                                                           | Exercise of stock options                                                         |               |             | 3,966      |        |   |             |         |   |             |              |      |               |         |               |       |               |   |        |             |  |   |       |      |   |   |       |      |  
|                                                                                           | Common share issue costs                                                          |               |             |           |        |   |             | (0.4     | ) |             |              |      |               |         |               |       |               |   |        |             |  |   |       |      |   |   |       | (0.4  | )
|                                                                                           | Share purchase loan repayments                                                    |               |             |           |        |   |             | 1.7      |   |             |              |      |               |         |               |       |               |   |        |             |  |   |       |      |   |   |       | 1.7   |  
|Shares repurchased                                                                         |                                                                                   |               | (94,333     | )          |        |   | (0.3        | )        |   |             |             |       |               |         |              |        |               |   |       |              |  |   |      |       |   |   | (0.3  | )    
|Accretion of interest on redeemable shares                                                 |                                                                                   |               |            |            |        |   |            |          |   |             |             |       |               |         |              |        |               |   | (1.1   | )            |  |   |      |       |   |   | (1.1  | )    
|Stock-based dividends                                                                      |                                                                                   |               |            |            |        |   |            |          |   |             |             |       |               |         |              |        |               |   |       |              |  |   |      |       |   |   |      |      
|Amortization of deferred stock-based compensation                                          |                                                                                   |               |            |            |        |   |            |          |   |             |             |       |               |         | 0.1           |        |               |   |       |              |  |   |      |       |   |   | 0.1   |      
|Issuance of warrants                                                                       |                                                                                   |               |            |            |        |   |            |          |   |             | 17.6         |       |               |         |              |        |               |   |       |              |  |   |      |       |   |   | 17.6  |      
|                                                                                           |                                                                                   |               |             |            |        |   |             |          |   |             |              |       |               |         |               |        |               |   |        |              | 
|                                                                                           |                                                                                   |               | 101,400,213 |            |        |   | 183.4       |          |   |             | 17.6         |       |               |         | (0.4          | )      |               |   | (148.1 | )            |  |   | (0.3  | )     |   |   | 52.2  |      
|                                                                                           |                                                                                   |               |             |            |        |   |             |          |   |             |              |       |               |         |               |        |               |   |        |              | 
|Net loss                                                                                   |                                                                                   |               |             |            |        |   |             |          |   |             |              |       |               |         |               |        |               |   | (70.1  | )            |  |   |       |       |   |   | (70.1 | )    
|Other comprehensive income:                                                                |                                                                                   |               |             |            |        |   |             |          |   |             |              |       |               |         |               |        |               |   |        |              |  |   |       |       |   |   |       |      
|                                                                                           | Foreign currency translation adjustments                                          |               |             |           |        |   |             |         |   |             |              |      |               |         |               |       |               |   |        |             |  |   |       | (2.6  | ) |   |       | (2.6  | )
|                                                                                           | Minimum pension liability adjustments                                             |               |             |           |        |   |             |         |   |             |              |      |               |         |               |       |               |   |        |             |  |   |       | (16.5 | ) |   |       | (16.5 | )
|                                                                                           |                                                                                   |               |             |            |        |   |             |          |   |             |              |       |               |         |               |        |               |   |        |              | 
|Comprehensive loss                                                                         |                                                                                   |               |            |            |        |   |            |          |   |             |             |       |               |         |              |        |               |   | (70.1  | )            |  |   | (19.1 | )     |   |   | (89.2 | )    
|                                                                                           |                                                                                   |               |             |            |        |   |             |          |   |             |              |       |               |         |               |        |               |   |        |              | 
|Balances at April 27, 2003                                                                 |                                                                                   |               | 101,400,213 |            |        | $ | 183.4       |          |   | $           | 17.6         |       |               | $       | (0.4          | )      |               | $ | (218.2 | )            |  | $ | (19.4 | )     |   | $ | (37.0 | )    
|                                                                                           |                                                                                   |               |             |            |        |   |             |          |   |             |              |       |               |         |               |        |               |   |        |              | 
|Common shares issued:                                                                      |                                                                                   |               |             |            |        |   |             |          |   |             |              |       |               |         |               |        |               |   |        |              |  |   |       |       |   |   |       |      
|                                                                                           | Conversion of convertible debentures                                              |               |             | 5,445,775  |        |   |             | 8.3      |   |             |              |      |               |         |               |       |               |   |        |             |  |   |       |      |   |   |       | 8.3   |  
|                                                                                           | Conversion of related party loans                                                 |               |             | 20,448,875 |        |   |             | 31.0     |   |             |              |      |               |         |               |       |               |   |        |             |  |   |       |      |   |   |       | 31.0  |  
|                                                                                           | Professional services received                                                    |               |             | 33,591     |        |   |             | 0.1      |   |             |              |      |               |         |               |       |               |   |        |             |  |   |       |      |   |   |       | 0.1   |  
|                                                                                           | Exercise of stock options                                                         |               |             | 5,950      |        |   |             |         |   |             |              |      |               |         |               |       |               |   |        |             |  |   |       |      |   |   |       |      |  
|                                                                                           | Reallocation of share issue costs to convertible, redeemable
    preferred shares |               |             |           |        |   |             | 0.3      |   |             |              |      |               |         |               |       |               |   |        |             |  |   |       |      |   |   |       | 0.3   |  
|Exchange of common shares for convertible, redeemable preferred
    shares                 |                                                                                   |               | (25,530,494 | )          |        |   | (38.7       | )        |   |             |             |       |               |         |              |        |               |   |       |              |  |   |      |       |   |   | (38.7 | )    
|Share purchase loan repayments                                                             |                                                                                   |               |            |            |        |   | 0.4         |          |   |             |             |       |               |         |              |        |               |   |       |              |  |   |      |       |   |   | 0.4   |      
|Shares repurchased                                                                         |                                                                                   |               | (21,153     | )          |        |   | (0.1        | )        |   |             |             |       |               |         |              |        |               |   |       |              |  |   |      |       |   |   | (0.1  | )    
|Beneficial conversion feature on Series A preferred shares                                 |                                                                                   |               |            |            |        |   |            |          |   |             |             |       |               |         |              |        |               |   | 1.4    |              |  |   |      |       |   |   | 1.4   |      
|Deemed dividend relating to beneficial conversion feature on
    Series A preferred shares |                                                                                   |               |            |            |        |   |            |          |   |             |             |       |               |         |              |        |               |   | (1.4   | )            |  |   |      |       |   |   | (1.4  | )    
|Stock-based dividends                                                                      |                                                                                   |               |            |            |        |   | 0.1         |          |   |             |             |       |               |         |              |        |               |   | (0.1   | )            |  |   |      |       |   |   |      |      
|Issuance of warrants                                                                       |                                                                                   |               |            |            |        |   |            |          |   |             | 12.2         |       |               |         |              |        |               |   |       |              |  |   |      |       |   |   | 12.2  |      
|Amortization of deferred stock-based compensation                                          |                                                                                   |               |            |            |        |   |            |          |   |             |             |       |               |         | 0.2           |        |               |   |       |              |  |   |      |       |   |   | 0.2   |      
|Accretion of interest on redeemable common and preferred shares                            |                                                                                   |               |            |            |        |   |            |          |   |             |             |       |               |         |              |        |               |   | (1.3   | )            |  |   |      |       |   |   | (1.3  | )    
|Beneficial conversion feature on convertible debentures                                    |                                                                                   |               |            |            |        |   |            |          |   |             |             |       |               |         |              |        |               |   | 3.1    |              |  |   |      |       |   |   | 3.1   |      
|                                                                                           |                                                                                   |               |             |            |        |   |             |          |   |             |              |       |               |         |               |        |               |   |        |              | 
|                                                                                           |                                                                                   |               | 101,782,757 |            |        |   | 184.8       |          |   |             | 29.8         |       |               |         | (0.2          | )      |               |   | (216.5 | )            |  |   | (19.4 | )     |   |   | (21.5 | )    
|                                                                                           |                                                                                   |               |             |            |        |   |             |          |   |             |              |       |               |         |               |        |               |   |        |              | 
|Net loss                                                                                   |                                                                                   |               |            |            |        |   |            |          |   |             |             |       |               |         |              |        |               |   | (30.6  | )            |  |   |      |       |   |   | (30.6 | )    
|Other comprehensive income:                                                                |                                                                                   |               |             |            |        |   |             |          |   |             |              |       |               |         |               |        |               |   |        |              |  |   |       |       |   |   |       |      
|                                                                                           | Foreign currency translation adjustments                                          |               |             |           |        |   |             |         |   |             |              |      |               |         |               |       |               |   |        |             |  |   |       | (6.0  | ) |   |       | (6.0  | )
|                                                                                           | Minimum pension liability adjustments                                             |               |             |           |        |   |             |         |   |             |              |      |               |         |               |       |               |   |        |             |  |   |       | 3.5   |   |   |       | 3.5   |  
|                                                                                           |                                                                                   |               |             |            |        |   |             |          |   |             |              |       |               |         |               |        |               |   |        |              | 
|Comprehensive loss                                                                         |                                                                                   |               |            |            |        |   |            |          |   |             |             |       |               |         |              |        |               |   | (30.6  | )            |  |   | (2.5  | )     |   |   | (33.1 | )    
|                                                                                           |                                                                                   |               |             |            |        |   |             |          |   |             |              |       |               |         |               |        |               |   |        |              | 
|Balances at April 25, 2004                                                                 |                                                                                   |               | 101,782,757 |            |        | $ | 184.8       |          |   | $           | 29.8         |       |               | $       | (0.2          | )      |               | $ | (247.1 | )            |  | $ | (21.9 | )     |   | $ | (54.6 | )    
|                                                                                           |                                                                                   |               |             |            |        |   |             |          |   |             |              |       |               |         |               |        |               |   |        |              | 



F-5



---



##### Table of Contents



MITEL NETWORKS CORPORATION


(incorporated under the laws of Canada)


CONSOLIDATED STATEMENTS OF SHAREHOLDERS DEFICIENCY
(continued)


(in millions of US dollars, except share amounts)


|                                                                                    |                                          |               |             |           |        |   |             |          |  |             |              |       |               |         |               |        |               |   |        |              |  |   |       |      |   |   |        |      |  
|----------------------------------------------------------------------------------- | ---------------------------------------- | ------------- | ----------- | --------- | ------ | - | ----------- | -------- |  | ----------- | ------------ | ----- | ------------- | ------- | ------------- | ------ | ------------- | - | ------ | ------------ |  | - | ----- | ---- | - | - | ------ | ---- | -
|                                                                                    |                                          |               |             |           |        |   |             |          |  | Accumulated |              |       | Total         |        
|                                                                                    |                                          | Common Shares |             |           |        |   | Deferred    |          |  |             |              | Other |               |         | Shareholders |       
|                                                                                    |                                          |               |             |           |        |   | Stock-based |          |  | Accumulated |              |       | Comprehensive |         |               | Equity |              
|                                                                                    |                                          | Shares        |             |           | Amount |   |             | Warrants |  |             | Compensation |       |               | Deficit |               |        | Income (Loss) |   |        | (Deficiency) | 
|                                                                                    |                                          |               |             |           |        |   |             |          |  |             |              |       |               |         |               |        |               |   |        |              | 
|Balances at April 25, 2004                                                          |                                          |               | 101,782,757 |           |        | $ | 184.8       |          |  | $           | 29.8         |       |               | $       | (0.2          | )      |               | $ | (247.1 | )            |  | $ | (21.9 | )    |   | $ | (54.6  | )   
|                                                                                    |                                          |               |             |           |        |   |             |          |  |             |              |       |               |         |               |        |               |   |        |              | 
|Common shares issued:                                                               |                                          |               |             |           |        |   |             |          |  |             |              |       |               |         |               |        |               |   |        |              |  |   |       |      |   |   |        |     
|                                                                                    | Cash and employee loans                  |               |             | 5,601,870 |        |   |             | 4.6      |  |             |              |      |               |         |               |       |               |   |        |             |  |   |       |     |   |   |        | 4.6  |  
|                                                                                    | Professional services received           |               |             | 153,616   |        |   |             | 0.1      |  |             |              |      |               |         |               |       |               |   |        |             |  |   |       |     |   |   |        | 0.1  |  
|Exchange of common shares for Series B convertible,
    redeemable preferred shares |                                          |               | (364,156    | )         |        |   | (0.5        | )        |  |             |             |       |               |         |              |        |               |   |       |              |  |   |      |      |   |   | (0.5   | )   
|Common share issue costs                                                            |                                          |               |            |           |        |   | (0.3        | )        |  |             |             |       |               |         |              |        |               |   |       |              |  |   |      |      |   |   | (0.3   | )   
|Share purchase loans                                                                |                                          |               |            |           |        |   | (1.3        | )        |  |             |             |       |               |         |              |        |               |   |       |              |  |   |      |      |   |   | (1.3   | )   
|Share purchase loan repayments                                                      |                                          |               |            |           |        |   | 0.2         |          |  |             |             |       |               |         |              |        |               |   |       |              |  |   |      |      |   |   | 0.2    |     
|Shares repurchased                                                                  |                                          |               | (24,154     | )         |        |   |            |          |  |             |             |       |               |         |              |        |               |   |       |              |  |   |      |      |   |   |       |     
|Issuance of warrants                                                                |                                          |               |            |           |        |   |            |          |  |             | 10.4         |       |               |         |              |        |               |   |       |              |  |   |      |      |   |   | 10.4   |     
|Amortization of deferred stock-based compensation                                   |                                          |               |            |           |        |   |            |          |  |             |             |       |               |         | (0.2          | )      |               |   |       |              |  |   |      |      |   |   | (0.2   | )   
|Accretion of interest on redeemable common and preferred shares                     |                                          |               |            |           |        |   |            |          |  |             |             |       |               |         |              |        |               |   | (5.6   | )            |  |   |      |      |   |   | (5.6   | )   
|                                                                                    |                                          |               |             |           |        |   |             |          |  |             |              |       |               |         |               |        |               |   |        |              | 
|                                                                                    |                                          |               | 107,149,933 |           |        |   | 187.6       |          |  |             | 40.2         |       |               |         | (0.4          | )      |               |   | (252.7 | )            |  |   | (21.9 | )    |   |   | (47.2  | )   
|                                                                                    |                                          |               |             |           |        |   |             |          |  |             |              |       |               |         |               |        |               |   |        |              | 
|Net loss                                                                            |                                          |               |            |           |        |   |            |          |  |             |             |       |               |         |              |        |               |   | (49.6  | )            |  |   |      |      |   |   | (49.6  | )   
|Other comprehensive income:                                                         |                                          |               |            |           |        |   |            |          |  |             |             |       |               |         |              |        |               |   |       |              |  |   |      |      |   |   |       |     
|                                                                                    | Foreign currency translation adjustments |               |             |          |        |   |             |         |  |             |              |      |               |         |               |       |               |   |        |             |  |   |       | (5.6 | ) |   |        | (5.6 | )
|                                                                                    | Minimum pension liability adjustments    |               |             |          |        |   |             |         |  |             |              |      |               |         |               |       |               |   |        |             |  |   |       | 2.4  |   |   |        | 2.4  |  
|                                                                                    |                                          |               |             |           |        |   |             |          |  |             |              |       |               |         |               |        |               |   |        |              | 
|Comprehensive loss                                                                  |                                          |               |            |           |        |   |            |          |  |             |             |       |               |         |              |        |               |   | (49.6  | )            |  |   | (3.2  | )    |   |   | (52.8  | )   
|                                                                                    |                                          |               |             |           |        |   |             |          |  |             |              |       |               |         |               |        |               |   |        |              | 
|Balances at April 24, 2005                                                          |                                          |               | 107,149,933 |           |        | $ | 187.6       |          |  | $           | 40.2         |       |               | $       | (0.4          | )      |               | $ | (302.3 | )            |  | $ | (25.1 | )    |   | $ | (100.0 | )   
|                                                                                    |                                          |               |             |           |        |   |             |          |  |             |              |       |               |         |               |        |               |   |        |              | 
|Issuance of warrants                                                                |                                          |               |            |           |        |   |            |          |  |             | 7.7          |       |               |         |              |        |               |   |       |              |  |   |      |      |   |   | 7.7    |     
|Accretion of interest on redeemable common and preferred shares                     |                                          |               |            |           |        |   |            |          |  |             |             |       |               |         |              |        |               |   | (0.1   | )            |  |   |      |      |   |   | (0.1   | )   
|                                                                                    |                                          |               |             |           |        |   |             |          |  |             |              |       |               |         |               |        |               |   |        |              | 
|                                                                                    |                                          |               | 107,149,933 |           |        |   | 187.6       |          |  |             | 47.9         |       |               |         | (0.4          | )      |               |   | (302.4 | )            |  |   | (25.1 | )    |   |   | (92.4  | )   
|                                                                                    |                                          |               |             |           |        |   |             |          |  |             |              |       |               |         |               |        |               |   |        |              | 
|Net loss                                                                            |                                          |               |            |           |        |   |            |          |  |             |             |       |               |         |              |        |               |   | (1.6   | )            |  |   |      |      |   |   | (1.6   | )   
|Other comprehensive income:                                                         |                                          |               |            |           |        |   |            |          |  |             |             |       |               |         |              |        |               |   |       |              |  |   |      |      |   |   |       |     
|                                                                                    | Foreign currency translation adjustments |               |             |          |        |   |             |         |  |             |              |      |               |         |               |       |               |   |        |             |  |   |       | 0.9  |   |   |        | 0.9  |  
|                                                                                    |                                          |               |             |           |        |   |             |          |  |             |              |       |               |         |               |        |               |   |        |              | 
|Comprehensive loss                                                                  |                                          |               |            |           |        |   |            |          |  |             |             |       |               |         |              |        |               |   | (1.6   | )            |  |   | 0.9   |      |   |   | (0.7   | )   
|                                                                                    |                                          |               |             |           |        |   |             |          |  |             |              |       |               |         |               |        |               |   |        |              | 
|Balances at April 30, 2005                                                          |                                          |               | 107,149,933 |           |        | $ | 187.6       |          |  | $           | 47.9         |       |               | $       | (0.4          | )      |               | $ | (304.0 | )            |  | $ | (24.2 | )    |   | $ | (93.1  | )   
|                                                                                    |                                          |               |             |           |        |   |             |          |  |             |              |       |               |         |               |        |               |   |        |              | 



F-6



---



##### Table of Contents



MITEL NETWORKS CORPORATION


(incorporated under the laws of Canada)





CONSOLIDATED STATEMENTS OF CASH FLOWS


(in millions of US dollars)


|                                                             |                                                                              |                                                          |      |            |                |   |       |                |      |   |                |       |      |   |       |       |      |  
|------------------------------------------------------------ | ---------------------------------------------------------------------------- | -------------------------------------------------------- | ---- | ---------- | -------------- | - | ----- | -------------- | ---- | - | -------------- | ----- | ---- | - | ----- | ----- | ---- | -
|                                                             |                                                                              |                                                          |      | Year Ended |               
|                                                             |                                                                              | Six Days Ended                                           |      |            |                |  
|                                                             |                                                                              | April 30, 2005                                           |      |            | April 24, 2005 |   |       | April 25, 2004 |      |   | April 27, 2003 |      
|                                                             |                                                                              |                                                          |      |            |                |   |       |                |      |   |                |      
|CASH PROVIDED BY (USED IN)                                   |                                                                              |                                                          |      |            |                |   |       |                |      |   |                |       |      |   |       |      
|Operating activities:                                        |                                                                              |                                                          |      |            |                |   |       |                |      |   |                |       |      |   |       |      
|                                                             | Net loss                                                                     |                                                          | $    | (1.6       | )              |   | $     | (49.6          | )    |   | $              | (30.6 | )    |   | $     | (70.1 | )   
|                                                             | Adjustments to reconcile net loss to net cash from operating
    activities: |                                                          |      |            |                |   |       |                |      |   |                |       |      |   |       |       |     
|                                                             |                                                                              | Amortization and depreciation                            |      |            | 0.2            |   |       |                | 8.9  |   |                |       | 11.8 |   |       |       | 42.6 |  
|                                                             |                                                                              | Fair value adjustment on derivative instruments          |      |            | 0.1            |   |       |                | 5.3  |   |                |       |     |   |       |       |     |  
|                                                             |                                                                              | Beneficial conversion feature on convertible debentures  |      |            |               |   |       |                |     |   |                |       | 3.1  |   |       |       |     |  
|                                                             |                                                                              | Stock-based compensation                                 |      |            |               |   |       |                |     |   |                |       | 0.2  |   |       |       | 0.2  |  
|                                                             |                                                                              | Increase in deferred income taxes                        |      |            |               |   |       |                |     |   |                |       | (1.5 | ) |       |       |     |  
|                                                             |                                                                              | Change in pension liability                              |      |            |               |   |       |                | 0.9  |   |                |       | 1.6  |   |       |       |     |  
|                                                             |                                                                              | Special charges                                          |      |            |               |   |       |                |     |   |                |       | 0.3  |   |       |       | 2.7  |  
|                                                             |                                                                              | Loss on sale of manufacturing operations                 |      |            |               |   |       |                | 3.4  |   |                |       | 0.6  |   |       |       |     |  
|                                                             |                                                                              | Loss on sale of property and equipment                   |      |            |               |   |       |                |     |   |                |       | 0.1  |   |       |       | 0.2  |  
|                                                             |                                                                              | Unrealized foreign exchange gain                         |      |            | (0.9           | ) |       |                | (2.0 | ) |                |       | (2.9 | ) |       |       | (1.4 | )
|                                                             |                                                                              | Non-cash movements in provisions                         |      |            |               |   |       |                | 5.5  |   |                |       | 5.1  |   |       |       | 8.9  |  
|                                                             |                                                                              | Change in non-cash operating assets and liabilities, net |      |            | 1.0            |   |       |                | (4.2 | ) |                |       | 23.0 |   |       |       | 5.0  |  
|                                                             |                                                                              |                                                          |      |            |                |   |       |                |      |   |                |      
|Net cash provided by (used in) operating activities          |                                                                              |                                                          | (1.2 | )          |                |   | (31.8 | )              |      |   | 10.8           |       |      |   | (11.9 | )    
|                                                             |                                                                              |                                                          |      |            |                |   |       |                |      |   |                |      
|Investing activities:                                        |                                                                              |                                                          |      |            |                |   |       |                |      |   |                |       |      |   |       |      
|                                                             | Additions to capital and intangible assets                                   |                                                          |      | (0.1       | )              |   |       | (4.5           | )    |   |                | (3.7  | )    |   |       | (4.2  | )   
|                                                             | (Increase) decrease in restricted cash                                       |                                                          |      | (1.0       | )              |   |       | 0.9            |      |   |                |      |      |   |       |      |     
|                                                             | Proceeds from repayment of related party notes receivable                    |                                                          |      |           |                |   |       |               |      |   |                |      |      |   |       | 5.3   |     
|                                                             | Realized foreign exchange loss on hedging activities                         |                                                          |      |           |                |   |       | (8.4           | )    |   |                | (6.7  | )    |   |       | (4.2  | )   
|                                                             | Realized foreign exchange gain on hedging activities                         |                                                          |      |           |                |   |       | 6.2            |      |   |                | 4.1   |      |   |       | 2.9   |     
|                                                             |                                                                              |                                                          |      |            |                |   |       |                |      |   |                |      
|Net cash used in investing activities                        |                                                                              |                                                          | (1.1 | )          |                |   | (5.8  | )              |      |   | (6.3           | )     |      |   | (0.2  | )    
|                                                             |                                                                              |                                                          |      |            |                |   |       |                |      |   |                |      
|Financing activities:                                        |                                                                              |                                                          |      |            |                |   |       |                |      |   |                |       |      |   |       |      
|                                                             | (Repayment of) proceeds from bank indebtedness                               |                                                          |      | (14.6      | )              |   |       | 8.9            |      |   |                | (19.0 | )    |   |       | (10.6 | )   
|                                                             | Debt issue costs                                                             |                                                          |      | (0.4       | )              |   |       |               |      |   |                |      |      |   |       | (0.3  | )   
|                                                             | Proceeds from issuance of convertible notes                                  |                                                          |      | 54.3       |                |   |       |               |      |   |                |      |      |   |       |      |     
|                                                             | Proceeds from issuance of convertible, redeemable preferred
    shares       |                                                          |      |           |                |   |       |               |      |   |                | 15.0  |      |   |       |      |     
|                                                             | Proceeds from related party loans payable                                    |                                                          |      |           |                |   |       |               |      |   |                |      |      |   |       | 23.5  |     
|                                                             | Repayment of related party loans payable                                     |                                                          |      |           |                |   |       |               |      |   |                | (1.0  | )    |   |       | (3.2  | )   
|                                                             | Repayment of capital lease liabilities                                       |                                                          |      |           |                |   |       | (1.2           | )    |   |                | (0.8  | )    |   |       | (0.6  | )   
|                                                             | Proceeds from long-term debt                                                 |                                                          |      |           |                |   |       |               |      |   |                |      |      |   |       | 1.4   |     
|                                                             | Repayment of long-term debt                                                  |                                                          |      |           |                |   |       | (3.2           | )    |   |                | (4.4  | )    |   |       | (3.3  | )   
|                                                             | Proceeds from issuance of warrants                                           |                                                          |      |           |                |   |       | 12.4           |      |   |                | 9.8   |      |   |       | 15.9  |     
|                                                             | Proceeds from issuance of convertible debentures                             |                                                          |      |           |                |   |       |               |      |   |                |      |      |   |       | 6.4   |     
|                                                             | Proceeds from issuance of common shares                                      |                                                          |      |           |                |   |       | 2.4            |      |   |                | 0.1   |      |   |       |      |     
|                                                             | Proceeds from repayments of employee share purchase loans                    |                                                          |      |           |                |   |       | 1.1            |      |   |                | 0.4   |      |   |       | 1.7   |     
|                                                             | Share issue costs                                                            |                                                          |      |           |                |   |       | (0.3           | )    |   |                | (2.1  | )    |   |       | (0.4  | )   
|                                                             |                                                                              |                                                          |      |            |                |   |       |                |      |   |                |      
|Net cash provided by (used in) financing activities          |                                                                              |                                                          | 39.3 |            |                |   | 20.1  |                |      |   | (2.0           | )     |      |   | 30.5  |      
|                                                             |                                                                              |                                                          |      |            |                |   |       |                |      |   |                |      
|Effect of exchange rate changes on cash and cash equivalents |                                                                              |                                                          | (0.1 | )          |                |   | 0.5   |                |      |   | 1.9            |       |      |   | 0.3   |      
|                                                             |                                                                              |                                                          |      |            |                |   |       |                |      |   |                |      
|Increase (decrease) in cash and cash equivalents             |                                                                              |                                                          | 36.9 |            |                |   | (17.0 | )              |      |   | 4.4            |       |      |   | 18.7  |      
|Cash and cash equivalents, beginning of period               |                                                                              |                                                          | 9.7  |            |                |   | 26.7  |                |      |   | 22.3           |       |      |   | 3.6   |      
|                                                             |                                                                              |                                                          |      |            |                |   |       |                |      |   |                |      
|Cash and cash equivalents, end of period                     |                                                                              | $                                                        | 46.6 |            |                | $ | 9.7   |                |      | $ | 26.7           |       |      | $ | 22.3  |      
|                                                             |                                                                              |                                                          |      |            |                |   |       |                |      |   |                |      



F-7



---



##### Table of Contents



MITEL NETWORKS CORPORATION


(incorporated under the laws of Canada)





NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


(in millions of US dollars, except share and per share
amounts)




|   |                     
|-- | --------------------
|1. | NATURE OF OPERATIONS





|   |                                     
|-- | ------------------------------------
|2. | BACKGROUND AND BASIS OF PRESENTATION





|   |                    
|-- | -------------------
|3. | ACCOUNTING POLICIES







|   |                
|-- | ---------------
|a) | Fiscal Year End





|   |                       
|-- | ----------------------
|b) | Basis of Consolidation





|   |                 
|-- | ----------------
|c) | Use of Estimates





F-8



---



##### Table of Contents







|   |                                                    
|-- | ---------------------------------------------------
|d) | Reporting Currency and Foreign Currency Translation



| |                   
| | ------------------
| | Reporting Currency

Foreign Currency
Translation.




| |                             
| | ----------------------------
| | Foreign Currency Translation







|   |                    
|-- | -------------------
|e) | Revenue Recognition







| |                  
| | -----------------
| | Indirect channels



F-9



---



##### Table of Contents









| |                
| | ---------------
| | Direct channels









|   |                          
|-- | -------------------------
|f) | Cash and Cash Equivalents





|   |                
|-- | ---------------
|g) | Restricted Cash



F-10



---



##### Table of Contents





|   |                                
|-- | -------------------------------
|h) | Allowance for Doubtful Accounts





|   |                                                           
|-- | ----------------------------------------------------------
|i) | Securitizations and Transfers of Financial
    Instruments





|   |            
|-- | -----------
|j) | Inventories





|   |                       
|-- | ----------------------
|k) | Property and Equipment

Accounting for the Impairment or Disposal of Long-Lived
Assets






|   |                               
|-- | ------------------------------
|l) | Goodwill and Intangible Assets



F-11



---



##### Table of Contents





Goodwill and Other Intangible
Assets




|   |                                 
|-- | --------------------------------
|m) | Derivative Financial Instruments



Accounting for Derivative Instruments and Hedging Activities






|   |             
|-- | ------------
|n) | Income Taxes





|   |                         
|-- | ------------------------
|o) | Research and Development





|   |                             
|-- | ----------------------------
|p) | Defined Benefit Pension Plan



F-12



---



##### Table of Contents











|   |                              
|-- | -----------------------------
|q) | Stock-Based Compensation Plan

Accounting for Stock Issued to Employees Accounting for Stock-Based Compensation


|                                                                     |  |              |         |            |           |   |         |           |  |   |           |   |  |   |         |  
|-------------------------------------------------------------------- |  | ------------ | ------- | ---------- | --------- | - | ------- | --------- |  | - | --------- | - |  | - | ------- | -
|                                                                     |  |              |         | Year Ended |          
|                                                                     |  | 6 Days Ended |         |            |           |  
|                                                                     |  | April 30,    |         |            | April 24, |   |         | April 25, |  |   | April 27, |  
|                                                                     |  | 2005         |         |            | 2005      |   |         | 2004      |  |   | 2003      |  
|                                                                     |  |              |         |            |           |   |         |           |  |   |           |  
|Net loss available to common shareholders, as reported
    (Note 23) |  | $            | (1.7    | )          |           | $ | (55.2   | )         |  | $ | (33.4     | ) |  | $ | (71.2   | )
|Estimated additional stock-based compensation                        |  |              |        |            |           |   | (1.5    | )         |  |   | (1.6      | ) |  |   | (2.1    | )
|                                                                     |  |              |         |            |           |   |         |           |  |   |           |  
|Pro forma net loss available to common shareholders                  |  |              | (1.7    | )          |           |   | (56.7   | )         |  |   | (35.0     | ) |  |   | (73.3   | )
|Net loss per share, as reported  basic and diluted                  |  | $            | (0.02   | )          |           | $ | (0.49   | )         |  | $ | (0.26     | ) |  | $ | (0.63   | )
|Pro forma net loss per share  basic and diluted                     |  | $            | (0.02   | )          |           | $ | (0.50   | )         |  | $ | (0.27     | ) |  | $ | (0.65   | )
|                                                                     |  |              |         |            |           |   |         |           |  |   |           |  
|Risk-free interest rate                                              |  |              | 3.8     | %          |           |   | 3.8     | %         |  |   | 3.7       | % |  |   | 4.1     | %
|Dividends                                                            |  |              | 0       | %          |           |   | 0       | %         |  |   | 0         | % |  |   | 0       | %
|Expected life of the options                                         |  |              | 5 years |            |           |   | 5 years |           |  |   | 5 years   |   |  |   | 5 years |  





|   |                                 
|-- | --------------------------------
|r) | Earnings (Loss) per Common Share



F-13



---



##### Table of Contents





|   |                         
|-- | ------------------------
|s) | Other Comprehensive Loss





|   |                  
|-- | -----------------
|t) | Advertising Costs





|   |                   
|-- | ------------------
|u) | Product Warranties





|   |                                 
|-- | --------------------------------
|v) | Recent Accounting Pronouncements

,
Accounting Changes and Error Corrections  a
replacement of APB Opinion No. 20 and FASB Statement
No. 3. Accounting Changes, Reporting Accounting Changes in Interim Financial Statements,


Share-Based Payment ,


Inventory Costs


F-14



---



##### Table of Contents











|   |                           
|-- | --------------------------
|4. | RELATED PARTY TRANSACTIONS





| |                                     
| | ------------------------------------
| | Disposal of manufacturing operations



F-15



---



##### Table of Contents













| |                  
| | -----------------
| | Leased properties







F-16



---



##### Table of Contents





| |          
| | ---------
| | Financing







| |                         
| | ------------------------
| | Research and development





| |      
| | -----
| | Other







|   |                
|-- | ---------------
|5. | SPECIAL CHARGES



F-17



---



##### Table of Contents









|                                        |                         |           |     |       |             |   |        |         |   |   |             |      |   |       |     |      |   |   |     |       |  
|--------------------------------------- | ----------------------- | --------- | --- | ----- | ----------- | - | ------ | ------- | - | - | ----------- | ---- | - | ----- | --- | ---- | - | - | --- | ----- | -
|                                        |                         |           |     | Lease |             |   | Assets |         |   |   |             |     
|                                        |                         | Workforce |     |       | Termination |   |        | Written |   |   |             |      |  
|Description                             |                         | Reduction |     |       | Obligation  |   |        | Off     |   |   | Legal Costs |      |   | Total |    
|                                        |                         |           |     |       |             |   |        |         |   |   |             |      |   |       |    
|Balance of reserve as of April 27, 2003 |                         | $         | 0.6 |       |             | $ | 2.6    |         |   | $ |            |      |   | $     |    |      |   | $ | 3.2 |      
|                                        |                         |           |     |       |             |   |        |         |   |   |             |      |   |       |    
|Fiscal 2004:                            |                         |           |     |       |             |   |        |         |   |   |             |      |   |       |     |      |   |   |     |      
|                                        | Charges                 |           |     | 8.1   |             |   |        | 3.2     |   |   |             | 0.3  |   |       |     | 0.4  |   |   |     | 12.0  |  
|                                        | Adjustments             |           |     | (0.3  | )           |   |        |        |   |   |             |     |   |       |     |     |   |   |     | (0.3  | )
|                                        | Cash payments           |           |     | (6.5  | )           |   |        | (0.7    | ) |   |             |     |   |       |     |     |   |   |     | (7.2  | )
|                                        | Assets written off      |           |     |      |             |   |        |        |   |   |             | (0.3 | ) |       |     |     |   |   |     | (0.3  | )
|                                        | Foreign currency impact |           |     | 0.2   |             |   |        | 0.2     |   |   |             |     |   |       |     |     |   |   |     | 0.4   |  
|                                        |                         |           |     |       |             |   |        |         |   |   |             |      |   |       |    
|Balance of reserve as of April 25, 2004 |                         | $         | 2.1 |       |             | $ | 5.3    |         |   | $ |            |      |   | $     | 0.4 |      |   | $ | 7.8 |      
|                                        |                         |           |     |       |             |   |        |         |   |   |             |      |   |       |    
|Fiscal 2005:                            |                         |           |     |       |             |   |        |         |   |   |             |      |   |       |     |      |   |   |     |      
|                                        | Charges                 |           |     | 8.7   |             |   |        | 1.3     |   |   |             | 0.9  |   |       |     |     |   |   |     | 10.9  |  
|                                        | Adjustments             |           |     | (0.3  | )           |   |        |        |   |   |             |     |   |       |     |     |   |   |     | (0.3  | )
|                                        | Cash payments           |           |     | (8.9  | )           |   |        | (1.2    | ) |   |             |     |   |       |     | (0.4 | ) |   |     | (10.5 | )
|                                        | Assets written off      |           |     |      |             |   |        |        |   |   |             | (0.9 | ) |       |     |     |   |   |     | (0.9  | )
|                                        | Foreign currency impact |           |     | 0.4   |             |   |        | 0.3     |   |   |             |     |   |       |     |     |   |   |     | 0.7   |  
|                                        |                         |           |     |       |             |   |        |         |   |   |             |      |   |       |    
|Balance of reserve as of April 24, 2005 |                         | $         | 2.0 |       |             | $ | 5.7    |         |   | $ |            |      |   | $     |    |      |   | $ | 7.7 |      
|                                        |                         |           |     |       |             |   |        |         |   |   |             |      |   |       |    
|Transition Period:                      |                         |           |     |       |             |   |        |         |   |   |             |      |   |       |     |      |   |   |     |      
|                                        | Charges                 |           |     |      |             |   |        |        |   |   |             |     |   |       |     |     |   |   |     |      |  
|                                        | Adjustments             |           |     |      |             |   |        |        |   |   |             |     |   |       |     |     |   |   |     |      |  
|                                        | Cash payments           |           |     | (0.2  | )           |   |        |        |   |   |             |     |   |       |     |     |   |   |     | (0.2  | )
|                                        | Foreign currency impact |           |     |      |             |   |        | (0.1    | ) |   |             |     |   |       |     |     |   |   |     | (0.1  | )
|                                        |                         |           |     |       |             |   |        |         |   |   |             |      |   |       |    
|Balance of reserve as of April 30, 2005 |                         | $         | 1.8 |       |             | $ | 5.6    |         |   | $ |            |      |   | $     |    |      |   | $ | 7.4 |      
|                                        |                         |           |     |       |             |   |        |         |   |   |             |      |   |       |    



|   |                    
|-- | -------------------
|6. | SEGMENT INFORMATION



| |                    
| | -------------------
| | General description



F-18



---



##### Table of Contents









| |                  
| | -----------------
| | Business segments



|                  |                                           |           |   |       |          |           |   |           |  |  |       |       |   |  |   |       |  
|----------------- | ----------------------------------------- | --------- | - | ----- | -------- | --------- | - | --------- |  |  | ----- | ----- | - |  | - | ----- | -
|                  |                                           |           |   |       |          | Corporate |   |           | 
|                  |                                           | Solutions |   |       | Services |           |   | and Other |  |  | Total |      
|                  |                                           |           |   |       |          |           |   |           |  |  |       |      
|Transition Period |                                           |           |   |       |          |           |   |           |  |  |       |       |   |  |   |      
|                  | External revenue                          |           | $ | 1.6   |          |           | $ | 1.6       |  |  | $     |      |   |  | $ | 3.2   |  
|                  | Inter-segment revenue                     |           |   | 0.1   |          |           |   |          |  |  |       | (0.1  | ) |  |   |      |  
|                  |                                           |           |   |       |          |           |   |           |  |  |       |      
|                  | Total revenue                             |           |   | 1.7   |          |           |   | 1.6       |  |  |       | (0.1  | ) |  |   | 3.2   |  
|                  |                                           |           |   |       |          |           |   |           |  |  |       |      
|                  | Goodwill                                  |           |   | 3.5   |          |           |   | 2.5       |  |  |       |      |   |  |   | 6.0   |  
|                  |                                           |           |   |       |          |           |   |           |  |  |       |      
|                  | Depreciation of property and equipment    |           |   | 0.1   |          |           |   |          |  |  |       | 0.1   |   |  |   | 0.2   |  
|                  |                                           |           |   |       |          |           |   |           |  |  |       |      
|                  | Segment operating income (loss)           |           |   | (0.8  | )        |           |   | 0.4       |  |  |       |      |   |  |   | (0.4  | )
|                  | Corporate and unallocated shared expenses |           |   |      |          |           |   |          |  |  |       | (1.3  | ) |  |   | (1.3  | )
|                  |                                           |           |   |       |          |           |   |           |  |  |       |      
|                  | Operating income (loss)                   |           | $ | (0.8  | )        |           | $ | 0.4       |  |  | $     | (1.3  | ) |  | $ | (1.7  | )
|                  |                                           |           |   |       |          |           |   |           |  |  |       |      
|Fiscal 2005       |                                           |           |   |       |          |           |   |           |  |  |       |       |   |  |   |      
|                  | External revenue                          |           | $ | 180.9 |          |           | $ | 161.3     |  |  | $     |      |   |  | $ | 342.2 |  
|                  | Inter-segment revenue                     |           |   | 19.5  |          |           |   |          |  |  |       | (19.5 | ) |  |   |      |  
|                  |                                           |           |   |       |          |           |   |           |  |  |       |      
|                  | Total revenue                             |           |   | 200.4 |          |           |   | 161.3     |  |  |       | (19.5 | ) |  |   | 342.2 |  
|                  |                                           |           |   |       |          |           |   |           |  |  |       |      
|                  | Goodwill                                  |           |   | 3.6   |          |           |   | 2.6       |  |  |       |      |   |  |   | 6.2   |  
|                  |                                           |           |   |       |          |           |   |           |  |  |       |      
|                  | Depreciation of property and equipment    |           |   | 2.3   |          |           |   | 2.1       |  |  |       | 3.2   |   |  |   | 7.6   |  
|                  |                                           |           |   |       |          |           |   |           |  |  |       |      
|                  | Segment operating income (loss)           |           |   | 18.1  |          |           |   | 40.2      |  |  |       |      |   |  |   | 58.3  |  
|                  | Corporate and unallocated shared expenses |           |   |      |          |           |   |          |  |  |       | (89.0 | ) |  |   | (89.0 | )
|                  | Stock-based compensation                  |           |   |      |          |           |   |           |  |  |       |       |   |  |   |       |  
|                  | Special charges                           |           |   |       |          |           |   |           |  |  |       | (10.6 | ) |  |   | (10.6 | )
|                  |                                           |           |   |       |          |           |   |           |  |  |       |      
|                  | Operating income (loss)                   |           | $ | 18.1  |          |           | $ | 40.2      |  |  | $     | (99.6 | ) |  | $ | (41.3 | )
|                  |                                           |           |   |       |          |           |   |           |  |  |       |      

F-19



---



##### Table of Contents



|            |                                           |           |   |       |          |           |   |           |  |  |       |        |   |  |   |       |  
|----------- | ----------------------------------------- | --------- | - | ----- | -------- | --------- | - | --------- |  |  | ----- | ------ | - |  | - | ----- | -
|            |                                           |           |   |       |          | Corporate |   |           | 
|            |                                           | Solutions |   |       | Services |           |   | and Other |  |  | Total |       
|            |                                           |           |   |       |          |           |   |           |  |  |       |       
|Fiscal 2004 |                                           |           |   |       |          |           |   |           |  |  |       |        |   |  |   |      
|            | External revenue                          |           | $ | 174.9 |          |           | $ | 165.8     |  |  | $     |       |   |  | $ | 340.7 |  
|            | Inter-segment revenue                     |           |   | 27.5  |          |           |   |          |  |  |       | (27.5  | ) |  |   |      |  
|            |                                           |           |   |       |          |           |   |           |  |  |       |       
|            | Total revenue                             |           |   | 202.4 |          |           |   | 165.8     |  |  |       | (27.5  | ) |  |   | 340.7 |  
|            |                                           |           |   |       |          |           |   |           |  |  |       |       
|            | Goodwill                                  |           |   | 3.3   |          |           |   | 2.3       |  |  |       |       |   |  |   | 5.6   |  
|            |                                           |           |   |       |          |           |   |           |  |  |       |       
|            | Depreciation of property and equipment    |           |   | 2.7   |          |           |   | 3.7       |  |  |       | 4.4    |   |  |   | 10.8  |  
|            |                                           |           |   |       |          |           |   |           |  |  |       |       
|            | Segment operating income (loss)           |           |   | 29.8  |          |           |   | 40.2      |  |  |       |       |   |  |   | 70.0  |  
|            | Corporate and unallocated shared expenses |           |   |      |          |           |   |          |  |  |       | (80.2  | ) |  |   | (80.2 | )
|            | Stock-based compensation                  |           |   |      |          |           |   |          |  |  |       | (0.2   | ) |  |   | (0.2  | )
|            | Special charges                           |           |   |      |          |           |   |          |  |  |       | (11.7  | ) |  |   | (11.7 | )
|            | Amortization of intangible assets         |           |   |       |          |           |   |           |  |  |       | (0.2   | ) |  |   | (0.2  | )
|            |                                           |           |   |       |          |           |   |           |  |  |       |       
|            | Operating income (loss)                   |           | $ | 29.8  |          |           | $ | 40.2      |  |  | $     | (92.3  | ) |  | $ | (22.3 | )
|            |                                           |           |   |       |          |           |   |           |  |  |       |       
|Fiscal 2003 |                                           |           |   |       |          |           |   |           |  |  |       |        |   |  |   |      
|            | External revenue                          |           | $ | 164.8 |          |           | $ | 187.4     |  |  | $     |       |   |  | $ | 352.2 |  
|            | Inter-segment revenue                     |           |   | 30.0  |          |           |   |          |  |  |       | (30.0  | ) |  |   |      |  
|            |                                           |           |   |       |          |           |   |           |  |  |       |       
|            | Total revenue                             |           |   | 194.8 |          |           |   | 187.4     |  |  |       | (30.0  | ) |  |   | 352.2 |  
|            |                                           |           |   |       |          |           |   |           |  |  |       |       
|            | Goodwill                                  |           |   | 3.1   |          |           |   | 2.1       |  |  |       |       |   |  |   | 5.2   |  
|            |                                           |           |   |       |          |           |   |           |  |  |       |       
|            | Depreciation of property and equipment    |           |   | 4.6   |          |           |   | 3.0       |  |  |       | 5.1    |   |  |   | 12.7  |  
|            |                                           |           |   |       |          |           |   |           |  |  |       |       
|            | Segment operating income (loss)           |           |   | 10.1  |          |           |   | 41.1      |  |  |       |       |   |  |   | 51.2  |  
|            | Corporate and unallocated shared expenses |           |   |      |          |           |   |          |  |  |       | (80.3  | ) |  |   | (80.3 | )
|            | Stock-based compensation                  |           |   |      |          |           |   |          |  |  |       | (0.2   | ) |  |   | (0.2  | )
|            | Special charges                           |           |   |      |          |           |   |          |  |  |       | (13.7  | ) |  |   | (13.7 | )
|            | Amortization of intangible assets         |           |   |      |          |           |   |          |  |  |       | (29.1  | ) |  |   | (29.1 | )
|            |                                           |           |   |       |          |           |   |           |  |  |       |       
|            | Operating income (loss)                   |           | $ | 10.1  |          |           | $ | 41.1      |  |  | $     | (123.3 | ) |  | $ | (72.1 | )
|            |                                           |           |   |       |          |           |   |           |  |  |       |       



| |                    
| | -------------------
| | Product information



|          |                                  |            |     |     |      |   |       |       |  |   |       |       |  |   |       |       | 
|--------- | -------------------------------- | ---------- | --- | --- | ---- | - | ----- | ----- |  | - | ----- | ----- |  | - | ----- | ----- | 
|          |                                  | Transition |     |     |      |   |       |       | 
|          |                                  | Period     |     |     | 2005 |   |       | 2004  |  |   | 2003  |      
|          |                                  |            |     |     |      |   |       |       |  |   |       |      
|Products: |                                  |            |     |     |      |   |       |       |  |   |       |       |  |   |       |      
|          | Platforms and desktop appliances |            | $   | 1.4 |      |   | $     | 189.8 |  |   | $     | 191.9 |  |   | $     | 191.1 | 
|          | Applications                     |            |     | 0.3 |      |   |       | 23.5  |  |   |       | 23.9  |  |   |       | 29.6  | 
|          | Other(1)                         |            |     | 0.1 |      |   |       | 19.2  |  |   |       | 15.1  |  |   |       | 36.1  | 
|          |                                  |            |     |     |      |   |       |       |  |   |       |      
|          |                                  |            | 1.8 |     |      |   | 232.5 |       |  |   | 230.9 |       |  |   | 256.8 |      
|          |                                  |            |     |     |      |   |       |       |  |   |       |      
|Services: |                                  |            |     |     |      |   |       |       |  |   |       |       |  |   |       |      
|          | Maintenance and support          |            |     | 1.2 |      |   |       | 95.0  |  |   |       | 94.5  |  |   |       | 83.4  | 
|          | Managed services                 |            |     | 0.2 |      |   |       | 10.9  |  |   |       | 10.6  |  |   |       | 9.7   | 
|          | Professional services            |            |     |    |      |   |       | 3.8   |  |   |       | 4.7   |  |   |       | 2.3   | 
|          |                                  |            |     |     |      |   |       |       |  |   |       |      
|          |                                  |            | 1.4 |     |      |   | 109.7 |       |  |   | 109.8 |       |  |   | 95.4  |      
|          |                                  |            |     |     |      |   |       |       |  |   |       |      
|Total     |                                  | $          | 3.2 |     |      | $ | 342.2 |       |  | $ | 340.7 |       |  | $ | 352.2 |      
|          |                                  |            |     |     |      |   |       |       |  |   |       |      

F-20



---



##### Table of Contents








|    |                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Other products include mainly OEM products representing
    approximately five percent, four percent and eight percent of
    total revenue in Fiscal 2005, Fiscal 2004 and Fiscal 2003,
    respectively.



| |                       
| | ----------------------
| | Geographic information



|                        |  |            |     |  |      |   |       |      |  |   |       |  |  |   |       | 
|----------------------- |  | ---------- | --- |  | ---- | - | ----- | ---- |  | - | ----- |  |  | - | ----- | 
|                        |  | Transition |     |  |      |   |       |      | 
|                        |  | Period     |     |  | 2005 |   |       | 2004 |  |   | 2003  | 
|                        |  |            |     |  |      |   |       |      |  |   |       | 
|Canada                  |  | $          | 0.3 |  |      | $ | 26.5  |      |  | $ | 25.2  |  |  | $ | 25.1  | 
|United States           |  |            | 1.8 |  |      |   | 155.3 |      |  |   | 162.8 |  |  |   | 173.3 | 
|United Kingdom          |  |            | 1.0 |  |      |   | 127.3 |      |  |   | 124.2 |  |  |   | 126.0 | 
|Other foreign countries |  |            | 0.1 |  |      |   | 33.1  |      |  |   | 28.5  |  |  |   | 27.8  | 
|                        |  |            |     |  |      |   |       |      |  |   |       | 
|                        |  | $          | 3.2 |  |      | $ | 342.2 |      |  | $ | 340.7 |  |  | $ | 352.2 | 
|                        |  |            |     |  |      |   |       |      |  |   |       | 



|                        |  |                |      |            |                |   |           |        |            |              |           |  |  |          |           |  |        |   |     |  |  |   |     | 
|----------------------- |  | -------------- | ---- | ---------- | -------------- | - | --------- | ------ | ---------- | ------------ | --------- |  |  | -------- | --------- |  | ------ | - | --- |  |  | - | --- | 
|                        |  | April 30, 2005 |      |            | April 24, 2005 |  
|                        |  |                |      |            |                |  
|                        |  |                |      | Intangible |                |   |           |        | Intangible |             
|                        |  | Property and   |      |            |                |   | and Other |        |            | Property and |           |  |  |          | and Other | 
|                        |  | Equipment      |      |            | Goodwill       |   |           | Assets |            |              | Equipment |  |  | Goodwill |           |  | Assets |  
|                        |  |                |      |            |                |   |           |        |            |              |           |  |  |          |           |  |        |  
|Canada                  |  | $              | 9.3  |            |                | $ | 3.6       |        |            | $            | 1.8       |  |  | $        | 9.5       |  |        | $ | 3.8 |  |  | $ | 1.9 | 
|United States           |  |                | 0.9  |            |                |   | 0.9       |        |            |              |          |  |  |          | 0.9       |  |        |   | 0.8 |  |  |   |    | 
|United Kingdom          |  |                | 10.1 |            |                |   | 1.5       |        |            |              |          |  |  |          | 10.2      |  |        |   | 1.6 |  |  |   |    | 
|Other foreign countries |  |                | 0.3  |            |                |   |          |        |            |              |          |  |  |          | 0.3       |  |        |   |    |  |  |   |    | 
|                        |  |                |      |            |                |   |           |        |            |              |           |  |  |          |           |  |        |  
|                        |  | $              | 20.6 |            |                | $ | 6.0       |        |            | $            | 1.8       |  |  | $        | 20.9      |  |        | $ | 6.2 |  |  | $ | 1.9 | 
|                        |  |                |      |            |                |   |           |        |            |              |           |  |  |          |           |  |        |  

|                        |  |                |      |            |          |   |           |        |  |   |     | 
|----------------------- |  | -------------- | ---- | ---------- | -------- | - | --------- | ------ |  | - | --- | 
|                        |  | April 25, 2004 |     
|                        |  |                |     
|                        |  |                |      | Intangible |         
|                        |  | Property and   |      |            |          |   | and Other |       
|                        |  | Equipment      |      |            | Goodwill |   |           | Assets | 
|                        |  |                |      |            |          |   |           |        | 
|Canada                  |  | $              | 6.2  |            |          | $ | 3.5       |        |  | $ | 1.5 | 
|United States           |  |                | 0.9  |            |          |   | 0.7       |        |  |   |    | 
|United Kingdom          |  |                | 12.9 |            |          |   | 1.4       |        |  |   |    | 
|Other foreign countries |  |                | 0.3  |            |          |   |          |        |  |   |    | 
|                        |  |                |      |            |          |   |           |        | 
|                        |  | $              | 20.3 |            |          | $ | 5.6       |        |  | $ | 1.5 | 
|                        |  |                |      |            |          |   |           |        | 



| |               
| | --------------
| | Concentrations





F-21



---



##### Table of Contents







|   |                                      
|-- | -------------------------------------
|7. | SECURITIZATION OF ACCOUNTS RECEIVABLE









|                                    |                                  |                |   |                |  |   |                |      |   |   |   |   | 
|----------------------------------- | -------------------------------- | -------------- | - | -------------- |  | - | -------------- | ---- | - | - | - | - | 
|                                    |                                  | Six Days Ended |   | Year Ended     |  |   | Year Ended    
|                                    |                                  | April 30, 2005 |   | April 24, 2005 |  |   | April 25, 2004
|                                    |                                  |                |   |                |  |   |               
|Receipts                            |                                  |                |   |                |  |   |                |      |   |   |   |  
|                                    | Receivables sold                 |                | $ |               |  |   | $              | 64.8 |   |   | $ |  | 
|                                    | Less dilutions                   |                |   |               |  |   |                | (1.9 | ) |   |   |  | 
|                                    | Less loss on sale of receivables |                |   |               |  |   |                | (0.3 | ) |   |   |  | 
|                                    |                                  |                |   |                |  |   |                |      |  
|Net proceeds on sale of receivables |                                  |                |  |                |  |   | 62.6           |      |   |   |  |  
|Service revenue                     |                                  |                |  |                |  |   | 0.3            |      |   |   |  |  
|Disbursements:                      |                                  |                |   |                |  |   |                |      |   |   |   |  
|                                    | Funding of reserves              |                |   |               |  |   |                |     |   |   |   |  | 
|                                    | Fees                             |                |   |               |  |   |                | (0.4 | ) |   |   |  | 
|                                    |                                  |                |   |                |  |   |                |      |  
|                                    |                                  | $              |  |                |  | $ | 62.5           |      |   | $ |  |  
|                                    |                                  |                |   |                |  |   |                |      |  



|   |                  
|-- | -----------------
|8. | OTHER RECEIVABLES





|   |                                  
|-- | ---------------------------------
|9. | PREPAID EXPENSES AND OTHER ASSETS



F-22



---



##### Table of Contents





|    |            
|--- | -----------
|10. | INVENTORIES

|               |  |           |      |  |           |   |      |           |  |   |      | 
|-------------- |  | --------- | ---- |  | --------- | - | ---- | --------- |  | - | ---- | 
|               |  | April 30, |      |  | April 24, |   |      | April 25, | 
|               |  | 2005      |      |  | 2005      |   |      | 2004      | 
|               |  |           |      |  |           |   |      |           | 
|Raw materials  |  | $         | 0.7  |  |           | $ | 0.7  |           |  | $ | 0.2  | 
|Finished goods |  |           | 16.7 |  |           |   | 16.4 |           |  |   | 14.3 | 
|               |  |           |      |  |           |   |      |           | 
|               |  | $         | 17.4 |  |           | $ | 17.1 |           |  | $ | 14.5 | 
|               |  |           |      |  |           |   |      |           | 



|    |                       
|--- | ----------------------
|11. | PROPERTY AND EQUIPMENT

|                               |           |           |      |      |           |   |      |           |  |   |      |      | 
|------------------------------ | --------- | --------- | ---- | ---- | --------- | - | ---- | --------- |  | - | ---- | ---- | 
|                               |           | April 30, |      |      | April 24, |   |      | April 25, | 
|                               |           | 2005      |      |      | 2005      |   |      | 2004      | 
|                               |           |           |      |      |           |   |      |           | 
|Cost:                          |           |           |      |      |           |   |      |           |  |   |      |     
|                               | Land      |           | $    | 0.6  |           |   | $    | 0.6       |  |   | $    | 0.6  | 
|                               | Buildings |           |      | 5.0  |           |   |      | 5.0       |  |   |      | 4.6  | 
|                               | Equipment |           |      | 61.0 |           |   |      | 61.6      |  |   |      | 55.0 | 
|                               |           |           |      |      |           |   |      |           | 
|                               |           |           | 66.6 |      |           |   | 67.2 |           |  |   | 60.2 |     
|                               |           |           |      |      |           |   |      |           | 
|Less accumulated depreciation: |           |           |      |      |           |   |      |           |  |   |      |     
|                               | Buildings |           |      | 0.4  |           |   |      | 0.4       |  |   |      | 0.2  | 
|                               | Equipment |           |      | 45.6 |           |   |      | 45.9      |  |   |      | 39.7 | 
|                               |           |           |      |      |           |   |      |           | 
|                               |           |           | 46.0 |      |           |   | 46.3 |           |  |   | 39.9 |     
|                               |           |           |      |      |           |   |      |           | 
|                               |           | $         | 20.6 |      |           | $ | 20.9 |           |  | $ | 20.3 |     
|                               |           |           |      |      |           |   |      |           | 





|    |         
|--- | --------
|12. | GOODWILL

|                                 |  |           |      |   |           |   |     |           |  |   |     | 
|-------------------------------- |  | --------- | ---- | - | --------- | - | --- | --------- |  | - | --- | 
|                                 |  | April 30, |      |   | April 24, |   |     | April 25, | 
|                                 |  | 2005      |      |   | 2005      |   |     | 2004      | 
|                                 |  |           |      |   |           |   |     |           | 
|Balance, beginning of the period |  | $         | 6.2  |   |           | $ | 5.6 |           |  | $ | 5.2 | 
|Foreign currency impact          |  |           | (0.2 | ) |           |   | 0.6 |           |  |   | 0.4 | 
|                                 |  |           |      |   |           |   |     |           | 
|Balance, end of the period       |  | $         | 6.0  |   |           | $ | 6.2 |           |  | $ | 5.6 | 
|                                 |  |           |      |   |           |   |     |           | 



F-23



---



##### Table of Contents





|    |                            
|--- | ---------------------------
|13. | INTANGIBLE AND OTHER ASSETS

|                               |                               |           |     |     |           |   |     |           |  |   |     |     | 
|------------------------------ | ----------------------------- | --------- | --- | --- | --------- | - | --- | --------- |  | - | --- | --- | 
|                               |                               | April 30, |     |     | April 24, |   |     | April 25, | 
|                               |                               | 2005      |     |     | 2005      |   |     | 2004      | 
|                               |                               |           |     |     |           |   |     |           | 
|Cost:                          |                               |           |     |     |           |   |     |           |  |   |     |    
|                               | Patents, trademarks and other |           | $   | 3.6 |           |   | $   | 3.5       |  |   | $   | 3.2 | 
|                               | Deferred debt issue costs     |           |     | 3.9 |           |   |     |          |  |   |     |    | 
|                               |                               |           |     |     |           |   |     |           | 
|                               |                               |           | 7.5 |     |           |   | 3.5 |           |  |   | 3.2 |    
|                               |                               |           |     |     |           |   |     |           | 
|Less accumulated amortization: |                               |           |     |     |           |   |     |           |  |   |     |    
|                               | Patents, trademarks and other |           |     | 1.6 |           |   |     | 1.6       |  |   |     | 1.7 | 
|                               | Deferred debt issue costs     |           |     |    |           |   |     |          |  |   |     |    | 
|                               |                               |           |     |     |           |   |     |           | 
|                               |                               |           | 1.6 |     |           |   | 1.6 |           |  |   | 1.7 |    
|                               |                               |           |     |     |           |   |     |           | 
|                               |                               | $         | 5.9 |     |           | $ | 1.9 |           |  | $ | 1.5 |    
|                               |                               |           |     |     |           |   |     |           | 





|    |                  
|--- | -----------------
|14. | BANK INDEBTEDNESS







F-24



---



##### Table of Contents





|    |                                         
|--- | ----------------------------------------
|15. | ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

|                                             |  |           |      |  |           |   |      |           |  |   |      | 
|-------------------------------------------- |  | --------- | ---- |  | --------- | - | ---- | --------- |  | - | ---- | 
|                                             |  | April 30, |      |  | April 24, |   |      | April 25, | 
|                                             |  | 2005      |      |  | 2005      |   |      | 2004      | 
|                                             |  |           |      |  |           |   |      |           | 
|Trade payable                                |  | $         | 14.9 |  |           | $ | 18.0 |           |  | $ | 11.8 | 
|Employee-related payables                    |  |           | 11.1 |  |           |   | 9.3  |           |  |   | 9.6  | 
|Restructuring, warranty and other provisions |  |           | 6.2  |  |           |   | 6.3  |           |  |   | 5.8  | 
|Other accrued liabilities                    |  |           | 23.6 |  |           |   | 20.0 |           |  |   | 18.8 | 
|                                             |  |           |      |  |           |   |      |           | 
|                                             |  | $         | 55.8 |  |           | $ | 53.6 |           |  | $ | 46.0 | 
|                                             |  |           |      |  |           |   |      |           | 



|    |               
|--- | --------------
|16. | LONG-TERM DEBT

|                                                                                                                                                                                                                                                                                                               |  |           |      |  |           |   |      |           |  |   |      | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------- | ---- |  | --------- | - | ---- | --------- |  | - | ---- | 
|                                                                                                                                                                                                                                                                                                               |  | April 30, |      |  | April 24, |   |      | April 25, | 
|                                                                                                                                                                                                                                                                                                               |  | 2005      |      |  | 2005      |   |      | 2004      | 
|                                                                                                                                                                                                                                                                                                               |  |           |      |  |           |   |      |           | 
|Capital leases, at interest rates varying from 5.6% to 11.8%,
    payable in monthly installments, with maturity dates ranging
    from 21 to 46 months, secured by the leased assets                                                                                                                          |  | $         | 3.2  |  |           | $ | 3.2  |           |  | $ | 1.1  | 
|Chattel mortgage loan, bearing interest at 7.7%, payable in
    monthly installments, repaid in October 2004                                                                                                                                                                                                   |  |           |     |  |           |   |     |           |  |   | 1.6  | 
|Chattel mortgage loan, bearing interest at 6.3%, payable in
    monthly installments and due in April 2006, secured by certain
    UK equipment                                                                                                                                                                |  |           | 0.6  |  |           |   | 0.6  |           |  |   | 1.0  | 
|Mortgage loan, bearing interest at 7.4% until December 2006,
    with an option to select a fixed or variable interest rate
    thereafter, payable in quarterly installments of $0.6
    (£0.3) fixed until December 2006 with the balance due in
    December 2011, secured by the UK real estate properties |  |           | 10.8 |  |           |   | 10.8 |           |  |   | 11.2 | 
|                                                                                                                                                                                                                                                                                                               |  |           |      |  |           |   |      |           | 
|                                                                                                                                                                                                                                                                                                               |  |           | 14.6 |  |           |   | 14.6 |           |  |   | 14.9 | 
|Less: current portion                                                                                                                                                                                                                                                                                          |  |           | 2.8  |  |           |   | 2.8  |           |  |   | 4.1  | 
|                                                                                                                                                                                                                                                                                                               |  |           |      |  |           |   |      |           | 
|                                                                                                                                                                                                                                                                                                               |  | $         | 11.8 |  |           | $ | 11.8 |           |  | $ | 10.8 | 
|                                                                                                                                                                                                                                                                                                               |  |           |      |  |           |   |      |           | 







|    |                  
|--- | -----------------
|17. | CONVERTIBLE NOTES



| |                                 
| | --------------------------------
| | Senior Secured Convertible Notes



F-25



---



##### Table of Contents







and


pari passu




F-26



---



##### Table of Contents





|                                          |  |           |      |  
|----------------------------------------- |  | --------- | ---- | -
|                                          |  | April 30, |     
|                                          |  | 2005      |     
|                                          |  |           |     
|Proceeds on issuance of convertible notes |  | $         | 55.0 |  
|Less: amount allocated to warrants        |  |           | (7.7 | )
|Foreign currency impact                   |  |           | (0.7 | )
|                                          |  |           |     
|Carrying value of convertible debt        |  | $         | 46.6 |  
|                                          |  |           |     



| |                       
| | ----------------------
| | Convertible Debentures







F-27



---



##### Table of Contents





|    |                           
|--- | --------------------------
|18. | COMMITMENTS AND GUARANTEES



| |                 
| | ----------------
| | Operating leases



|               |               |            |   |     |      |  |   |      |  |  |      |      |  |  |   |      | 
|-------------- | ------------- | ---------- | - | --- | ---- |  | - | ---- |  |  | ---- | ---- |  |  | - | ---- | 
|               |               | Transition |   |     |      |  |   |      | 
|               |               | Period     |   |     | 2005 |  |   | 2004 |  |  | 2003 |     
|               |               |            |   |     |      |  |   |      |  |  |      |     
|Rental expense |               |            |   |     |      |  |   |      |  |  |      |      |  |  |   |     
|               | Arms-length   |            | $ |    |      |  | $ | 8.3  |  |  | $    | 8.6  |  |  | $ | 9.9  | 
|               | Related party |            |   | 0.1 |      |  |   | 5.9  |  |  |      | 6.7  |  |  |   | 6.0  | 
|               |               |            |   |     |      |  |   |      |  |  |      |     
|               | Total         |            | $ | 0.1 |      |  | $ | 14.2 |  |  | $    | 15.3 |  |  | $ | 15.9 | 
|               |               |            |   |     |      |  |   |      |  |  |      |     
|Rental income  |               |            |   |     |      |  |   |      |  |  |      |      |  |  |   |     
|               | Arms-length   |            | $ |    |      |  | $ | 0.6  |  |  | $    | 0.1  |  |  | $ | 1.2  | 
|               | Related party |            |   |    |      |  |   | 3.6  |  |  |      | 4.3  |  |  |   | 3.7  | 
|               |               |            |   |     |      |  |   |      |  |  |      |     
|               | Total         |            | $ |    |      |  | $ | 4.2  |  |  | $    | 4.4  |  |  | $ | 4.9  | 
|               |               |            |   |     |      |  |   |      |  |  |      |     



|            |  |                       |      |  |                     |   |      |             |  |   |               |  |  |   |     | 
|----------- |  | --------------------- | ---- |  | ------------------- | - | ---- | ----------- |  | - | ------------- |  |  | - | --- | 
|            |  | Future Lease Payments |      |  | Future Lease Income |  
|            |  |                       |      |  |                     |  
|Fiscal Year |  | Arms-length           |      |  | Related Party       |   |      | Arms-length |  |   | Related Party | 
|            |  |                       |      |  |                     |   |      |             |  |   |               | 
|2006        |  | $                     | 6.5  |  |                     | $ | 7.0  |             |  | $ | 0.3           |  |  | $ | 3.0 | 
|2007        |  |                       | 4.6  |  |                     |   | 7.0  |             |  |   |              |  |  |   | 1.0 | 
|2008        |  |                       | 3.8  |  |                     |   | 7.0  |             |  |   |              |  |  |   |    | 
|2009        |  |                       | 2.4  |  |                     |   | 7.0  |             |  |   |              |  |  |   |    | 
|2010        |  |                       | 1.6  |  |                     |   | 7.0  |             |  |   |              |  |  |   |    | 
|Thereafter  |  |                       | 5.4  |  |                     |   | 7.0  |             |  |   |              |  |  |   |    | 
|            |  |                       |      |  |                     |   |      |             |  |   |               | 
|Total       |  | $                     | 24.3 |  |                     | $ | 42.0 |             |  | $ | 0.3           |  |  | $ | 4.0 | 
|            |  |                       |      |  |                     |   |      |             |  |   |               | 



| |                     
| | --------------------
| | Capital expenditures



F-28



---



##### Table of Contents





| |           
| | ----------
| | Guarantees

Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others




| |                    
| | -------------------
| | Product warranties:



|                                                       |  |           |     |  |           |   |      |           |  |   |      |  
|------------------------------------------------------ |  | --------- | --- |  | --------- | - | ---- | --------- |  | - | ---- | -
|                                                       |  | April 30, |     |  | April 24, |   |      | April 25, | 
|                                                       |  | 2005      |     |  | 2005      |   |      | 2004      | 
|                                                       |  |           |     |  |           |   |      |           | 
|Balance, beginning of period                           |  | $         | 2.6 |  |           | $ | 2.1  |           |  | $ | 1.9  |  
|Warranty costs incurred                                |  |           |    |  |           |   | (1.0 | )         |  |   | (0.7 | )
|Warranties issued                                      |  |           |    |  |           |   | 1.0  |           |  |   | 0.4  |  
|Changes to accruals related to pre-existing warranties |  |           |    |  |           |   | 0.5  |           |  |   | 0.5  |  
|                                                       |  |           |     |  |           |   |      |           | 
|Balance, end of period                                 |  | $         | 2.6 |  |           | $ | 2.6  |           |  | $ | 2.1  |  
|                                                       |  |           |     |  |           |   |      |           | 



| |                                                   
| | --------------------------------------------------
| | Intellectual property indemnification obligations:





| |                                   
| | ----------------------------------
| | Bid and performance related bonds:





|    |              
|--- | -------------
|19. | CONTINGENCIES





F-29



---



##### Table of Contents







|    |                         
|--- | ------------------------
|20. | REDEEMABLE COMMON SHARES







|                                                                                                     |  |                |      |  |                |   |      |                |  |   |       |  
|---------------------------------------------------------------------------------------------------- |  | -------------- | ---- |  | -------------- | - | ---- | -------------- |  | - | ----- | -
|                                                                                                     |  | April 30, 2005 |      |  | April 24, 2005 |   |      | April 25, 2004 | 
|                                                                                                     |  |                |      |  |                |   |      |                | 
|Balance, beginning of the period                                                                     |  | $              | 18.2 |  |                | $ | 17.8 |                |  | $ | 29.0  |  
|Interest accreted during the period                                                                  |  |                |     |  |                |   | 0.4  |                |  |   | 1.3   |  
|Exchange of redeemable common shares, including accreted
    interest, for Series B preferred shares |  |                |     |  |                |   |     |                |  |   | (12.5 | )
|                                                                                                     |  |                |      |  |                |   |      |                | 
|Balance, end of period                                                                               |  | $              | 18.2 |  |                | $ | 18.2 |                |  | $ | 17.8  |  
|                                                                                                     |  |                |      |  |                |   |      |                | 



|    |                                         
|--- | ----------------------------------------
|21. | CONVERTIBLE, REDEEMABLE PREFERRED SHARES



| |                          
| | -------------------------
| | Series A Preferred Shares







F-30



---



##### Table of Contents











| |                          
| | -------------------------
| | Series B Preferred Shares









F-31



---



##### Table of Contents









|                                                                                           |                                                 |                                                 |      |      |          |   |       |       |      |   |       |      |      |  
|------------------------------------------------------------------------------------------ | ----------------------------------------------- | ----------------------------------------------- | ---- | ---- | -------- | - | ----- | ----- | ---- | - | ----- | ---- | ---- | -
|                                                                                           |                                                 | Series A                                        |      |      | Series B |   |       | Total |     
|                                                                                           |                                                 |                                                 |      |      |          |   |       |       |     
|Fiscal 2004                                                                                |                                                 |                                                 |      |      |          |   |       |       |      |   |       |     
|Convertible, redeemable preferred shares (all net of share issue
    costs):               |                                                 |                                                 |      |      |          |   |       |       |      |   |       |     
|                                                                                           | Issued for cash                                 |                                                 | $    | 13.5 |          |   | $     |      |      |   | $     | 13.5 |     
|                                                                                           | Issued in exchange for common shares            |                                                 |      |     |          |   |       | 37.8  |      |   |       | 37.8 |     
|                                                                                           | Issued in exchange for redeemable common shares |                                                 |      |     |          |   |       | 10.3  |      |   |       | 10.3 |     
|Less: amount allocated to warrants                                                         |                                                 |                                                 | (1.0 | )    |          |   |      |       |      |   | (1.0  | )   
|Less: amount allocated to derivative instrument                                            |                                                 |                                                 | (6.7 | )    |          |   | (22.5 | )     |      |   | (29.2 | )   
|Beneficial conversion feature on Series A preferred shares                                 |                                                 |                                                 | (1.4 | )    |          |   |      |       |      |   | (1.4  | )   
|Deemed dividend relating to beneficial conversion feature on
    Series A preferred shares |                                                 |                                                 | 1.4  |      |          |   |      |       |      |   | 1.4   |     
|Accreted interest on redeemable common shares exchanged for
    Series B preferred shares  |                                                 |                                                 |     |      |          |   | 2.1   |       |      |   | 2.1   |     
|                                                                                           |                                                 |                                                 |      |      |          |   |       |       |     
|Carrying value as of April 25, 2004                                                        |                                                 | $                                               | 5.8  |      |          | $ | 27.7  |       |      | $ | 33.5  |     
|                                                                                           |                                                 |                                                 |      |      |          |   |       |       |     
|Fiscal 2005                                                                                |                                                 |                                                 |      |      |          |   |       |       |      |   |       |     
|Issued in exchange for common shares                                                       |                                                 |                                                 |     |      |          |   | 0.5   |       |      |   | 0.5   |     
|                                                                                           |                                                 | Less: amount allocated to derivative instrument |      |      |         |   |       |       | (0.2 | ) |       |      | (0.2 | )
|Accreted interest                                                                          |                                                 |                                                 | 1.2  |      |          |   | 4.0   |       |      |   | 5.2   |     
|                                                                                           |                                                 |                                                 |      |      |          |   |       |       |     
|Carrying value as of April 24, 2005                                                        |                                                 | $                                               | 7.0  |      |          | $ | 32.0  |       |      | $ | 39.0  |     
|                                                                                           |                                                 |                                                 |      |      |          |   |       |       |     
|Transition Period                                                                          |                                                 |                                                 |      |      |          |   |       |       |      |   |       |     
|Accreted interest                                                                          |                                                 |                                                 |     |      |          |   | 0.1   |       |      |   | 0.1   |     
|                                                                                           |                                                 |                                                 |      |      |          |   |       |       |     
|Carrying value as of April 30, 2005                                                        |                                                 | $                                               | 7.0  |      |          | $ | 32.1  |       |      | $ | 39.1  |     
|                                                                                           |                                                 |                                                 |      |      |          |   |       |       |     

F-32



---



##### Table of Contents





|    |         
|--- | --------
|22. | WARRANTS



|                                                                            |                                                                |                |      |      |                |   |      |                |  |   |      |      | 
|--------------------------------------------------------------------------- | -------------------------------------------------------------- | -------------- | ---- | ---- | -------------- | - | ---- | -------------- |  | - | ---- | ---- | 
|                                                                            |                                                                | April 30, 2005 |      |      | April 24, 2005 |   |      | April 25, 2004 | 
|                                                                            |                                                                |                |      |      |                |   |      |                | 
|i) Warrants issued/issuable in connection with government
    funding       |                                                                |                |      |      |                |   |      |                |  |   |      |     
|                                                                            | Balance at beginning of the period                             |                | $    | 39.1 |                |   | $    | 28.7           |  |   | $    | 17.6 | 
|                                                                            | Government funding received in period  warrants issued        |                |      |     |                |   |      | 1.9            |  |   |      | 2.4  | 
|                                                                            | Government funding received in period  no warrants
    issued |                |      |     |                |   |      | 7.2            |  |   |      | 5.5  | 
|                                                                            | Accrued government funding receivable  no warrants
    issued |                |      |     |                |   |      | 1.3            |  |   |      | 3.2  | 
|                                                                            |                                                                |                |      |      |                |   |      |                | 
|Balance at end of the period                                                |                                                                |                | 39.1 |      |                |   | 39.1 |                |  |   | 28.7 |     
|ii) Warrants issued in connection with Series A
    Preferred Shares        |                                                                |                | 1.0  |      |                |   | 1.0  |                |  |   | 1.0  |     
|iii) Warrants issued to financing agent                                     |                                                                |                | 0.1  |      |                |   | 0.1  |                |  |   | 0.1  |     
|iv) Warrants issued in connection with Senior Secured
    Convertible Notes |                                                                |                | 7.7  |      |                |   |     |                |  |   |     |     
|                                                                            |                                                                |                |      |      |                |   |      |                | 
|Total warrants outstanding                                                  |                                                                | $              | 47.9 |      |                | $ | 40.2 |                |  | $ | 29.8 |     
|                                                                            |                                                                |                |      |      |                |   |      |                | 











F-33



---



##### Table of Contents







|    |              
|--- | -------------
|23. | SHARE CAPITAL







| |                 
| | ----------------
| | Equity offerings









| |                     
| | --------------------
| | Share Purchase Loans



F-34



---



##### Table of Contents





| |                  
| | -----------------
| | Stock Option Plan







|                                                                                                                  |           |                   |            |                  |                |   |      |                   |                  |  |                |            |   |   |      |      | 
|----------------------------------------------------------------------------------------------------------------- | --------- | ----------------- | ---------- | ---------------- | -------------- | - | ---- | ----------------- | ---------------- |  | -------------- | ---------- | - | - | ---- | ---- | 
|                                                                                                                  |           | Transition Period |            |                  | 2005           |  
|                                                                                                                  |           |                   |            |                  |                |  
|                                                                                                                  |           |                   |            | Weighted Average |                |   |      |                   | Weighted Average | 
|                                                                                                                  |           | Number of Options |            |                  | Exercise Price |   |      | Number of Options |                  |  | Exercise Price |           
|                                                                                                                  |           |                   |            |                  |                |   |      |                   |                  |  |                |           
|Outstanding options:                                                                                              |           |                   |            |                  |                |   |      |                   |                  |  |                |            |   |   |      |     
|Balance, beginning of period:                                                                                     |           |                   | 18,480,002 |                  |                | $ | 1.20 |                   |                  |  | 4,482,264      |            |   | $ | 2.77 |     
|                                                                                                                  | Granted   |                   |            |                 |                |   | $    |                  |                  |  |                | 15,220,873 |   |   | $    | 0.81 | 
|                                                                                                                  | Exercised |                   |            |                 |                |   | $    |                  |                  |  |                |           |   |   | $    |     | 
|                                                                                                                  | Forfeited |                   |            | (15,153          | )              |   | $    | 1.69              |                  |  |                | (725,856   | ) |   | $    | 1.54 | 
|                                                                                                                  | Expired   |                   |            | (8,600           | )              |   | $    | 2.96              |                  |  |                | (497,279   | ) |   | $    | 2.84 | 
|                                                                                                                  | Cancelled |                   |            |                 |                |   | $    |                  |                  |  |                |           |   |   | $    |     | 
|                                                                                                                  |           |                   |            |                  |                |   |      |                   |                  |  |                |           
|Balance, end of period:                                                                                           |           |                   | 18,456,249 |                  |                | $ | 1.19 |                   |                  |  | 18,480,002     |            |   | $ | 1.22 |     
|                                                                                                                  |           |                   |            |                  |                |   |      |                   |                  |  |                |           
|Number of options exercisable                                                                                     |           |                   | 3,102,973  |                  |                | $ | 2.78 |                   |                  |  | 3,017,863      |            |   | $ | 2.82 |     
|                                                                                                                  |           |                   |            |                  |                |   |      |                   |                  |  |                |           
|Weighted average fair value of options granted during the period
    using the minimum value option pricing model |           |                   |            |                  |                | $ |     |                   |                  |  |                |            |   | $ | 0.15 |     
|                                                                                                                  |           |                   |            |                  |                |   |      |                   |                  |  |                |           

F-35



---



##### Table of Contents



|                                                                                                                |           |                   |            |                  |                |   |      |                   |                  |  |                |            |   |   |      |      | 
|--------------------------------------------------------------------------------------------------------------- | --------- | ----------------- | ---------- | ---------------- | -------------- | - | ---- | ----------------- | ---------------- |  | -------------- | ---------- | - | - | ---- | ---- | 
|                                                                                                                |           | 2004              |            |                  | 2003           |  
|                                                                                                                |           |                   |            |                  |                |  
|                                                                                                                |           |                   |            | Weighted Average |                |   |      |                   | Weighted Average | 
|                                                                                                                |           | Number of Options |            |                  | Exercise Price |   |      | Number of Options |                  |  | Exercise Price |           
|                                                                                                                |           |                   |            |                  |                |   |      |                   |                  |  |                |           
|Outstanding options:                                                                                            |           |                   |            |                  |                |   |      |                   |                  |  |                |            |   |   |      |     
|Balance, beginning of period:                                                                                   |           |                   | 16,037,154 |                  |                | $ | 2.59 |                   |                  |  | 16,873,299     |            |   | $ | 2.48 |     
|                                                                                                                | Granted   |                   |            | 1,337,087        |                |   | $    | 1.76              |                  |  |                | 1,406,900  |   |   | $    | 1.94 | 
|                                                                                                                | Exercised |                   |            | (5,950           | )              |   | $    | 2.57              |                  |  |                | (3,695     | ) |   | $    | 2.59 | 
|                                                                                                                | Forfeited |                   |            | (1,527,436       | )              |   | $    | 2.58              |                  |  |                | (1,774,572 | ) |   | $    | 2.52 | 
|                                                                                                                | Expired   |                   |            | (985,289         | )              |   | $    | 2.69              |                  |  |                | (464,778   | ) |   | $    | 2.48 | 
|                                                                                                                | Cancelled |                   |            | (10,373,302      | )              |   | $    | 2.51              |                  |  |                |           |   |   | $    |     | 
|                                                                                                                |           |                   |            |                  |                |   |      |                   |                  |  |                |           
|Balance, end of period:                                                                                         |           |                   | 4,482,264  |                  |                | $ | 2.50 |                   |                  |  | 16,037,154     |            |   | $ | 2.42 |     
|                                                                                                                |           |                   |            |                  |                |   |      |                   |                  |  |                |           
|Number of options exercisable                                                                                   |           |                   | 2,462,636  |                  |                | $ | 2.59 |                   |                  |  | 6,787,640      |            |   | $ | 2.44 |     
|                                                                                                                |           |                   |            |                  |                |   |      |                   |                  |  |                |           
|Weighted average fair value of options granted during the year
    using the minimum value option pricing model |           |                   |            |                  |                | $ | 0.29 |                   |                  |  |                |            |   | $ | 0.41 |     
|                                                                                                                |           |                   |            |                  |                |   |      |                   |                  |  |                |           



|               |  |                   |            |                  |                   |  |           |                   |                  |  |                  |  |  |  |           | 
|-------------- |  | ----------------- | ---------- | ---------------- | ----------------- |  | --------- | ----------------- | ---------------- |  | ---------------- |  |  |  | --------- | 
|               |  | April 24, 2005    |           
|               |  |                   |           
|               |  | Total outstanding |            |                  | Total exercisable | 
|               |  |                   |            |                  |                   | 
|               |  |                   |            | Weighted-Average |                   |  |           |                   | Weighted-Average | 
|               |  |                   |            | Remaining        |                   |  |           |                   | Remaining        | 
|Exercise Price |  | Number of Options |            |                  | Contractual Life  |  |           | Number of Options |                  |  | Contractual Life | 
|               |  |                   |            |                  |                   |  |           |                   |                  |  |                  | 
|$0.81          |  |                   | 14,611,295 |                  |                   |  | 4.4 years |                   |                  |  | 3,000            |  |  |  | 4.3 years | 
|$1.62          |  |                   | 182,874    |                  |                   |  | 3.6 years |                   |                  |  | 46,367           |  |  |  | 3.6 years | 
|$2.23          |  |                   | 749,750    |                  |                   |  | 2.7 years |                   |                  |  | 327,875          |  |  |  | 2.6 years | 
|$2.84          |  |                   | 2,088,997  |                  |                   |  | 0.9 years |                   |                  |  | 2,087,497        |  |  |  | 0.9 years | 
|$3.24          |  |                   | 847,086    |                  |                   |  | 1.7 years |                   |                  |  | 553,124          |  |  |  | 1.7 years | 
|               |  |                   |            |                  |                   |  |           |                   |                  |  |                  | 
|               |  |                   | 18,480,002 |                  |                   |  |           |                   |                  |  | 3,017,863        |  |  |  |           | 
|               |  |                   |            |                  |                   |  |           |                   |                  |  |                  | 

|               |  |                   |            |                  |                   |  |           |                   |                  |  |                  |  |  |  |           | 
|-------------- |  | ----------------- | ---------- | ---------------- | ----------------- |  | --------- | ----------------- | ---------------- |  | ---------------- |  |  |  | --------- | 
|               |  | April 30, 2005    |           
|               |  |                   |           
|               |  | Total outstanding |            |                  | Total exercisable | 
|               |  |                   |            |                  |                   | 
|               |  |                   |            | Weighted-Average |                   |  |           |                   | Weighted-Average | 
|               |  |                   |            | Remaining        |                   |  |           |                   | Remaining        | 
|Exercise Price |  | Number of Options |            |                  | Contractual Life  |  |           | Number of Options |                  |  | Contractual Life | 
|               |  |                   |            |                  |                   |  |           |                   |                  |  |                  | 
|$0.80          |  |                   | 14,599,055 |                  |                   |  | 4.4 years |                   |                  |  | 3,000            |  |  |  | 4.2 years | 
|$1.59          |  |                   | 182,311    |                  |                   |  | 3.6 years |                   |                  |  | 46,367           |  |  |  | 3.6 years | 
|$2.19          |  |                   | 749,750    |                  |                   |  | 2.7 years |                   |                  |  | 327,875          |  |  |  | 2.6 years | 
|$2.78          |  |                   | 2,082,647  |                  |                   |  | 0.9 years |                   |                  |  | 2,081,147        |  |  |  | 0.9 years | 
|$3.18          |  |                   | 842,486    |                  |                   |  | 1.7 years |                   |                  |  | 644,584          |  |  |  | 1.7 years | 
|               |  |                   |            |                  |                   |  |           |                   |                  |  |                  | 
|               |  |                   | 18,456,249 |                  |                   |  |           |                   |                  |  | 3,102,973        |  |  |  |           | 
|               |  |                   |            |                  |                   |  |           |                   |                  |  |                  | 

F-36



---



##### Table of Contents





| |                          
| | -------------------------
| | Earnings (loss) per share



|                                                                                           |  |                   |             |   |      |   |             |      |  |   |             |   |  |   |             |  
|------------------------------------------------------------------------------------------ |  | ----------------- | ----------- | - | ---- | - | ----------- | ---- |  | - | ----------- | - |  | - | ----------- | -
|                                                                                           |  | Transition Period |             |   | 2005 |   |             | 2004 |  |   | 2003        |  
|                                                                                           |  |                   |             |   |      |   |             |      |  |   |             |  
|Net loss, as reported                                                                      |  | $                 | (1.6        | ) |      | $ | (49.6       | )    |  | $ | (30.6       | ) |  | $ | (70.1       | )
|Stock-based dividend                                                                       |  |                   |            |   |      |   |            |      |  |   | (0.1        | ) |  |   |            |  
|Accreted interest on redeemable shares                                                     |  |                   | (0.1        | ) |      |   | (5.6        | )    |  |   | (1.3        | ) |  |   | (1.1        | )
|Deemed dividend relating to beneficial conversion feature on
    Series A preferred shares |  |                   |            |   |      |   |            |      |  |   | (1.4        | ) |  |   |            |  
|                                                                                           |  |                   |             |   |      |   |             |      |  |   |             |  
|Net loss available to common shareholders                                                  |  | $                 | (1.7        | ) |      | $ | (55.2       | )    |  | $ | (33.4       | ) |  | $ | (71.2       | )
|                                                                                           |  |                   |             |   |      |   |             |      |  |   |             |  
|Weighted average number of common shares outstanding during the
    period                 |  |                   | 113,847,268 |   |      |   | 113,792,829 |      |  |   | 127,831,211 |   |  |   | 113,109,751 |  
|Loss per common share  basic and diluted                                                  |  |                   |             |   |      |   |             |      |  |   |             |   |  |   |             |  
|                                                                                           |  |                   |             |   |      |   |             |      |  |   |             |  
|                                                                                           |  | $                 | (0.02       | ) |      | $ | (0.49       | )    |  | $ | (0.26       | ) |  | $ | (0.63       | )
|                                                                                           |  |                   |             |   |      |   |             |      |  |   |             |  



|                                         |  |                   |             |  |      |  |             |      |  |  |            |  |  |  |            | 
|---------------------------------------- |  | ----------------- | ----------- |  | ---- |  | ----------- | ---- |  |  | ---------- |  |  |  | ---------- | 
|(Number of Shares)                       |  | Transition Period |             |  | 2005 |  |             | 2004 |  |  | 2003       | 
|                                         |  |                   |             |  |      |  |             |      |  |  |            | 
|Stock options                            |  |                   |            |  |      |  |            |      |  |  | 19,888     |  |  |  |           | 
|Warrants                                 |  |                   | 28,686,974  |  |      |  | 28,475,127  |      |  |  | 11,278,329 |  |  |  | 5,254,920  | 
|Convertible debentures                   |  |                   |            |  |      |  |            |      |  |  | 2,029,111  |  |  |  | 4,885,389  | 
|Convertible, redeemable preferred shares |  |                   | 87,789,300  |  |      |  | 87,789,300  |      |  |  | 477,047    |  |  |  |           | 
|                                         |  |                   |             |  |      |  |             |      |  |  |            | 
|                                         |  |                   | 116,476,274 |  |      |  | 116,264,427 |      |  |  | 13,804,375 |  |  |  | 10,140,309 | 
|                                         |  |                   |             |  |      |  |             |      |  |  |            | 





| |                         
| | ------------------------
| | Stock-based compensation



F-37



---



##### Table of Contents







|    |                            
|--- | ---------------------------
|24. | OTHER INCOME (EXPENSE), NET

|                                     |  |            |     |  |      |   |      |      |  |   |      |   |  |   |     | 
|------------------------------------ |  | ---------- | --- |  | ---- | - | ---- | ---- |  | - | ---- | - |  | - | --- | 
|                                     |  | Transition |     |  |      |   |      |      | 
|                                     |  | Period     |     |  | 2005 |   |      | 2004 |  |   | 2003 |  
|                                     |  |            |     |  |      |   |      |      |  |   |      |  
|Foreign exchange gains (losses), net |  | $          | 0.2 |  |      | $ | (0.1 | )    |  | $ | (1.0 | ) |  | $ | 2.9 | 
|Interest income                      |  |            |    |  |      |   | 0.5  |      |  |   | 0.4  |   |  |   | 0.4 | 
|                                     |  |            |     |  |      |   |      |      |  |   |      |  
|                                     |  | $          | 0.2 |  |      | $ | 0.4  |      |  | $ | (0.6 | ) |  | $ | 3.3 | 
|                                     |  |            |     |  |      |   |      |      |  |   |      |  



|    |             
|--- | ------------
|25. | INCOME TAXES



|                               |           |            |          |      |      |   |       |       |   |      |       |       |     |      |       |       |   |     | 
|------------------------------ | --------- | ---------- | -------- | ---- | ---- | - | ----- | ----- | - | ---- | ----- | ----- | --- | ---- | ----- | ----- | - | --- | 
|                               |           | Transition |          |      |      |   |       |       |  
|                               |           | Period     |          |      | 2005 |   |       | 2004  |   |      | 2003  |      
|                               |           |            |          |      |      |   |       |       |   |      |       |      
|Loss before income taxes:      |           |            |          |      |      |   |       |       |   |      |       |       |     |      |       |      
|                               | Canadian  |            | $        | (0.2 | )    |   | $     | (24.8 | ) |      | $     | (10.0 | )   |      | $     | (8.7  | )
|                               | Foreign   |            |          | (1.4 | )    |   |       | (24.0 | ) |      |       | (20.3 | )   |      |       | (64.3 | )
|                               |           |            |          |      |      |   |       |       |   |      |       |      
|                               |           | $          | (1.6     | )    |      | $ | (48.8 | )     |   | $    | (30.3 | )     |     | $    | (73.0 | )    
|                               |           |            |          |      |      |   |       |       |   |      |       |      
|Income tax (expense) recovery: |           |            |          |      |      |   |       |       |   |      |       |       |     |      |       |      
|                               | Current:  |            |          |      |      |   |       |       |   |      |       |       |     |      |       |       |  
|                               |           |            | Canadian |      | $    |  |       |       | $ | 0.8  |       |       | $   |     |       |       | $ |    | 
|                               |           |            | Foreign  |      |      |  |       |       |   | (1.6 | )     |       |     | (2.0 | )     |       |   | 2.9 | 
|                               |           |            |          |      |      |   |       |       |   |      |       |      
|                               |           | $          |         |      |      | $ | (0.8  | )     |   | $    | (2.0  | )     |     | $    | 2.9   |      
|                               | Deferred: |            |          |      |      |   |       |       |   |      |       |       |     |      |       |       |  
|                               |           | Canadian   |          | $    |     |   |       | $     |  |      |       | $     |    |      |       | $     |  |    
|                               |           | Foreign    |          |      |     |   |       |       |  |      |       |       | 1.7 |      |       |       |  |    
|                               |           |            |          |      |      |   |       |       |   |      |       |      
|                               |           | $          |         |      |      | $ | (0.8  | )     |   | $    | (0.3  | )     |     | $    | 2.9   |      
|                               |           |            |          |      |      |   |       |       |   |      |       |      



|                                                                  |  |            |      |   |      |   |      |      |  |   |      |   |  |   |       |  
|----------------------------------------------------------------- |  | ---------- | ---- | - | ---- | - | ---- | ---- |  | - | ---- | - |  | - | ----- | -
|                                                                  |  | Transition |      |   |      |   |      |      | 
|                                                                  |  | Period     |      |   | 2005 |   |      | 2004 |  |   | 2003 |  
|                                                                  |  |            |      |   |      |   |      |      |  |   |      |  
|Expected tax rate                                                 |  |            | 36.0 | % |      |   | 36.0 | %    |  |   | 36.3 | % |  |   | 38.0  | %
|                                                                  |  |            |      |   |      |   |      |      |  |   |      |  
|Expected tax benefit                                              |  | $          | 0.6  |   |      | $ | 17.5 |      |  | $ | 12.8 |   |  | $ | 29.1  |  
|Foreign tax rate differences                                      |  |            | (0.5 | ) |      |   | (7.9 | )    |  |   | (9.1 | ) |  |   | (17.9 | )
|Tax effect of losses and temporary differences not recognized     |  |            | (0.1 | ) |      |   | (2.9 | )    |  |   | (5.9 | ) |  |   | (14.9 | )
|Tax effect from the recognition of previously unrecognized losses |  |            |     |   |      |   |     |      |  |   |     |   |  |   |      |  
|Permanent differences                                             |  |            |     |   |      |   | (7.0 | )    |  |   | 0.1  |   |  |   | 3.7   |  
|Tax refunds and other adjustments related to prior years          |  |            |     |   |      |   | (0.5 | )    |  |   | 1.8  |   |  |   | 2.9   |  
|                                                                  |  |            |      |   |      |   |      |      |  |   |      |  
|Income tax (expense) recovery                                     |  | $          |     |   |      | $ | (0.8 | )    |  | $ | (0.3 | ) |  | $ | 2.9   |  
|                                                                  |  |            |      |   |      |   |      |      |  |   |      |  

F-38



---



##### Table of Contents





|                                                                          |                                             |           |        |      |           |   |        |           |  |   |       |      | 
|------------------------------------------------------------------------- | ------------------------------------------- | --------- | ------ | ---- | --------- | - | ------ | --------- |  | - | ----- | ---- | 
|                                                                          |                                             | April 30, |        |      | April 24, |   |        | April 25, | 
|                                                                          |                                             | 2005      |        |      | 2005      |   |        | 2004      | 
|                                                                          |                                             |           |        |      |           |   |        |           | 
|Assets:                                                                   |                                             |           |        |      |           |   |        |           |  |   |       |     
|                                                                          | Net operating loss carryforwards            |           | $      | 74.3 |           |   | $      | 75.1      |  |   | $     | 59.5 | 
|                                                                          | Allowance for doubtful accounts             |           |        | 2.3  |           |   |        | 2.3       |  |   |       | 2.7  | 
|                                                                          | Inventory                                   |           |        | 0.9  |           |   |        | 0.9       |  |   |       | 1.2  | 
|                                                                          | Restructuring and other accrued liabilities |           |        | 3.3  |           |   |        | 3.3       |  |   |       | 8.1  | 
|                                                                          | Pension                                     |           |        | 7.8  |           |   |        | 7.9       |  |   |       | 7.6  | 
|                                                                          | Lease obligations and long-term debt        |           |        | 1.1  |           |   |        | 1.1       |  |   |       | 0.4  | 
|                                                                          | Property and equipment                      |           |        | 3.6  |           |   |        | 3.8       |  |   |       | 2.9  | 
|                                                                          | Intangible and other assets                 |           |        | 7.1  |           |   |        | 7.1       |  |   |       | 10.1 | 
|                                                                          |                                             |           |        |      |           |   |        |           | 
|Total deferred tax assets                                                 |                                             |           | 100.4  |      |           |   | 101.5  |           |  |   | 92.5  |     
|                                                                          |                                             |           |        |      |           |   |        |           | 
|Deferred tax liabilities                                                  |                                             |           |       |      |           |   |       |           |  |   |      |     
|                                                                          |                                             |           |        |      |           |   |        |           | 
|Total gross deferred tax assets net of total deferred tax
    liabilities |                                             |           | 100.4  |      |           |   | 101.5  |           |  |   | 92.5  |     
|Valuation allowance                                                       |                                             |           | (100.4 | )    |           |   | (101.5 | )         |  |   | (91.0 | )   
|                                                                          |                                             |           |        |      |           |   |        |           | 
|Total deferred tax assets                                                 |                                             | $         |       |      |           | $ |       |           |  | $ |      |     
|                                                                          |                                             |           |        |      |           |   |        |           | 





|               |  |                |       |  |                |  |      |                |  |  |         |  |  |        |      |  |         |  |       |  |  |  |      | 
|-------------- |  | -------------- | ----- |  | -------------- |  | ---- | -------------- |  |  | ------- |  |  | ------ | ---- |  | ------- |  | ----- |  |  |  | ---- | 
|               |  | April 30, 2005 |       |  | April 24, 2005 |  |      | April 25, 2004 | 
|               |  |                |       |  |                |  |      |                | 
|               |  | Tax            |       |  | Tax            |  |      | Tax            |  |  | Tax     |  |  | Tax    |      |  | Tax     | 
|Year of Expiry |  | Losses         |       |  | Credits        |  |      | Losses         |  |  | Credits |  |  | Losses |      |  | Credits | 
|               |  |                |       |  |                |  |      |                |  |  |         |  |  |        |      |  |         | 
|2005           |  |                |      |  |                |  |     |                |  |  |        |  |  |        |     |  |         |  | 8.3   |  |  |  |     | 
|2006           |  |                |      |  |                |  |     |                |  |  |        |  |  |        |     |  |         |  |      |  |  |  |     | 
|2007           |  |                |      |  |                |  |     |                |  |  |        |  |  |        |     |  |         |  |      |  |  |  |     | 
|2008           |  |                | 4.8   |  |                |  |     |                |  |  | 5.3     |  |  |        |     |  |         |  | 25.9  |  |  |  |     | 
|2009           |  |                | 3.0   |  |                |  |     |                |  |  | 3.8     |  |  |        |     |  |         |  | 5.0   |  |  |  |     | 
|2010           |  |                | 51.0  |  |                |  |     |                |  |  | 52.0    |  |  |        |     |  |         |  | 47.1  |  |  |  |     | 
|2011-2022      |  |                | 184.1 |  |                |  | 20.3 |                |  |  | 185.2   |  |  |        | 20.4 |  |         |  | 141.4 |  |  |  | 11.6 | 
|Indefinite     |  |                | 74.3  |  |                |  |     |                |  |  | 74.3    |  |  |        |     |  |         |  | 28.5  |  |  |  |     | 
|               |  |                |       |  |                |  |      |                |  |  |         |  |  |        |      |  |         | 
|Total          |  |                | 317.2 |  |                |  | 20.3 |                |  |  | 320.6   |  |  |        | 20.4 |  |         |  | 256.2 |  |  |  | 11.6 | 
|               |  |                |       |  |                |  |      |                |  |  |         |  |  |        |      |  |         | 









F-39



---



##### Table of Contents







|    |              
|--- | -------------
|26. | PENSION PLANS









F-40



---



##### Table of Contents





| |                                            
| | -------------------------------------------
| | United Kingdom Defined Benefit Pension Plan



|                                       |                                                  |           |       |       |           |   |       |       |  
|-------------------------------------- | ------------------------------------------------ | --------- | ----- | ----- | --------- | - | ----- | ----- | -
|                                       |                                                  | April 24, |       |       | April 25, |  
|                                       |                                                  | 2005      |       |       | 2004      |  
|                                       |                                                  |           |       |       |           |  
|Change in accrued pension benefits:    |                                                  |           |       |       |           |   |       |      
|                                       | Benefit obligation at beginning of period        |           | $     | 103.4 |           |   | $     | 86.6  |  
|                                       | Service cost                                     |           |       | 1.8   |           |   |       | 1.8   |  
|                                       | Interest cost                                    |           |       | 5.9   |           |   |       | 5.1   |  
|                                       | Plan participants contributions                 |           |       | 1.5   |           |   |       | 1.6   |  
|                                       | Actuarial (gain) loss                            |           |       | 1.3   |           |   |       | (0.5  | )
|                                       | Benefits paid                                    |           |       | (0.9  | )         |   |       | (0.8  | )
|                                       | Foreign exchange                                 |           |       | 8.8   |           |   |       | 9.6   |  
|                                       |                                                  |           |       |       |           |  
|                                       | Benefit obligation at end of period              |           |       | 121.8 |           |   |       | 103.4 |  
|                                       |                                                  |           |       |       |           |  
|Change in plan assets:                 |                                                  |           |       |       |           |   |       |      
|                                       | Fair value of plan assets at beginning of period |           |       | 66.1  |           |   |       | 46.8  |  
|                                       | Actual return on plan assets                     |           |       | 7.8   |           |   |       | 11.0  |  
|                                       | Employer contributions                           |           |       | 2.6   |           |   |       | 1.8   |  
|                                       | Employee contributions                           |           |       | 1.5   |           |   |       | 1.6   |  
|                                       | Benefits paid                                    |           |       | (0.9  | )         |   |       | (0.8  | )
|                                       | Foreign exchange                                 |           |       | 5.8   |           |   |       | 5.7   |  
|                                       |                                                  |           |       |       |           |  
|                                       | Fair value of plan assets at end of period       |           |       | 82.9  |           |   |       | 66.1  |  
|                                       |                                                  |           |       |       |           |  
|Funded status                          |                                                  |           | (38.9 | )     |           |   | (37.3 | )    
|Unrecognized net actuarial (gain)/loss |                                                  |           | 13.5  |       |           |   | 12.5  |      
|                                       |                                                  |           |       |       |           |  
|Net pension benefit liability          |                                                  | $         | (25.4 | )     |           | $ | (24.8 | )    
|                                       |                                                  |           |       |       |           |  



|                               |  |           |       |  |           |   |       | 
|------------------------------ |  | --------- | ----- |  | --------- | - | ----- | 
|                               |  | April 24, |       |  | April 25, |  
|                               |  | 2005      |       |  | 2004      |  
|                               |  |           |       |  |           |  
|Projected benefit obligation   |  | $         | 121.8 |  |           | $ | 103.4 | 
|Accumulated benefit obligation |  |           | 108.4 |  |           |   | 90.9  | 
|Fair value of plan assets      |  |           | 82.9  |  |           |   | 66.1  | 



|                                            |  |      |      |   |      |   |      |      |  |   |      |  
|------------------------------------------- |  | ---- | ---- | - | ---- | - | ---- | ---- |  | - | ---- | -
|                                            |  | 2005 |      |   | 2004 |   |      | 2003 | 
|                                            |  |      |      |   |      |   |      |      | 
|Current service cost  defined contribution |  | $    | 1.7  |   |      | $ | 1.5  |      |  | $ | 1.5  |  
|Current service cost  defined benefit      |  |      | 1.8  |   |      |   | 3.6  |      |  |   | 2.2  |  
|Interest cost                               |  |      | 5.9  |   |      |   | 5.1  |      |  |   | 4.1  |  
|Expected return on plan assets              |  |      | (5.5 | ) |      |   | (3.9 | )    |  |   | (4.1 | )
|Recognized actuarial loss                   |  |      | 1.3  |   |      |   | 1.3  |      |  |   | 0.1  |  
|                                            |  |      |      |   |      |   |      |      | 
|Net periodic benefit cost                   |  | $    | 5.2  |   |      | $ | 7.6  |      |  | $ | 3.8  |  
|                                            |  |      |      |   |      |   |      |      | 

F-41



---



##### Table of Contents





|                                            |  |           |          |   |           |  |          |  
|------------------------------------------- |  | --------- | -------- | - | --------- |  | -------- | -
|                                            |  | April 24, |          |   | April 25, | 
|                                            |  | 2005      |          |   | 2004      | 
|                                            |  |           |          |   |           | 
|Discount rate                               |  |           | 5.5      | % |           |  | 5.5      | %
|Compensation increase rate                  |  |           | 2.5      | % |           |  | 2.5      | %
|Investment returns assumption               |  |           | 7.75     | % |           |  | 7.75     | %
|Average remaining service life of employees |  |           | 20 years |   |           |  | 20 years |  



| |                                  
| | ---------------------------------
| | Estimated Future Benefit Payments



|          |  |          |     | 
|--------- |  | -------- | --- | 
|          |  | Benefit  |    
|          |  | Payments |    
|          |  |          |    
|2006      |  | $        | 1.1 | 
|2007      |  |          | 1.3 | 
|2008      |  |          | 1.4 | 
|2009      |  |          | 1.5 | 
|2010      |  |          | 1.7 | 
|2011-2015 |  |          | 9.6 | 



| |              
| | -------------
| | Contributions





| |            
| | -----------
| | Plan Assets



|         |  |           |    |   |           |      |    |            |  |  |    |  
|-------- |  | --------- | -- | - | --------- | ---- | -- | ---------- |  |  | -- | -
|         |  |           |    |   |           | 2006 |   
|         |  | April 24, |    |   | April 25, |      |    | Target     | 
|         |  | 2005      |    |   | 2004      |      |    | Allocation | 
|         |  |           |    |   |           |      |    |            | 
|Equities |  |           | 79 | % |           |      | 84 | %          |  |  | 80 | %
|Bonds    |  |           | 20 | % |           |      | 12 | %          |  |  | 20 | %
|Cash     |  |           | 1  | % |           |      | 4  | %          |  |  |   |  





|    |                      
|--- | ---------------------
|27. | FINANCIAL INSTRUMENTS



| |           
| | ----------
| | Fair value



F-42



---



##### Table of Contents





|                      |  |                |      |  |                |   |      |                |  |   |       |  |  |          |      |  |       |   |      |  |  |   |      | 
|--------------------- |  | -------------- | ---- |  | -------------- | - | ---- | -------------- |  | - | ----- |  |  | -------- | ---- |  | ----- | - | ---- |  |  | - | ---- | 
|                      |  | April 30, 2005 |      |  | April 24, 2005 |   |      | April 25, 2004 | 
|                      |  |                |      |  |                |   |      |                | 
|                      |  | Carrying       |      |  | Fair           |   |      | Carrying       |  |   | Fair  |  |  | Carrying |      |  | Fair  |  
|                      |  | Amount         |      |  | Value          |   |      | Amount         |  |   | Value |  |  | Amount   |      |  | Value |  
|                      |  |                |      |  |                |   |      |                |  |   |       |  |  |          |      |  |       |  
|Long-term receivables |  | $              | 0.4  |  |                | $ | 0.4  |                |  | $ | 0.4   |  |  | $        | 0.4  |  |       | $ | 0.3  |  |  | $ | 0.3  | 
|Long-term debt        |  | $              | 14.6 |  |                | $ | 14.6 |                |  | $ | 14.6  |  |  | $        | 14.6 |  |       | $ | 14.9 |  |  | $ | 15.9 | 
|Convertible notes     |  | $              | 46.6 |  |                | $ | 55.4 |                |  | $ |      |  |  | $        |     |  |       | $ |     |  |  | $ |     | 



| |            
| | -----------
| | Credit risk





| |                   
| | ------------------
| | Interest rate risk





| |                      
| | ---------------------
| | Foreign currency risk





F-43



---



##### Table of Contents





| |                                                 
| | ------------------------------------------------
| | Non-derivative and off-balance sheet instruments





|    |                                             
|--- | --------------------------------------------
|28. | RECONCILIATION FROM US GAAP TO CANADIAN GAAP





|                                                           |  |           |       |   |           |   |       |           |  |   |           |   |  |   |       |  
|---------------------------------------------------------- |  | --------- | ----- | - | --------- | - | ----- | --------- |  | - | --------- | - |  | - | ----- | -
|                                                           |  | April 30, |       |   | April 24, |   |       | April 25, |  |   | April 27, |  
|                                                           |  | 2005      |       |   | 2005      |   |       | 2004      |  |   | 2003      |  
|                                                           |  |           |       |   |           |   |       |           |  |   |           |  
|Net loss                                                   |  |           |       |   |           |   |       |           |  |   |           |   |  |   |       |  
|U.S. GAAP                                                  |  | $         | (1.6  | ) |           | $ | (49.6 | )         |  | $ | (30.6     | ) |  | $ | (70.1 | )
|Derivative accounting(a)                                   |  |           | 0.1   |   |           |   | 5.3   |           |  |   |          |   |  |   |      |  
|Interest accretion on preferred shares(a)                  |  |           | (0.3  | ) |           |   | (11.3 | )         |  |   |          |   |  |   |      |  
|Employee stock based compensation(c)                       |  |           |      |   |           |   | (0.5  | )         |  |   |          |   |  |   |      |  
|Non-employee stock based compensation(c)                   |  |           |      |   |           |   | (0.2  | )         |  |   | 0.2       |   |  |   | 0.2   |  
|Foreign exchange loss on long term investment(g)           |  |           |      |   |           |   | (8.7  | )         |  |   |          |   |  |   |      |  
|Beneficial conversion feature on convertible debentures(d) |  |           |      |   |           |   |      |           |  |   | 3.1       |   |  |   |      |  
|Interest expense on convertible debentures(d)              |  |           |      |   |           |   |      |           |  |   | 0.3       |   |  |   | 0.3   |  
|Amortization of in process R&D(e)                          |  |           |      |   |           |   |      |           |  |   |          |   |  |   | (6.1  | )
|R&D recovery(f)                                            |  |           |      |   |           |   |      |           |  |   |          |   |  |   | 4.4   |  
|                                                           |  |           |       |   |           |   |       |           |  |   |           |  
|Canadian GAAP                                              |  | $         | (1.8  | ) |           | $ | (65.0 | )         |  | $ | (27.0     | ) |  | $ | (71.3 | )
|                                                           |  |           |       |   |           |   |       |           |  |   |           |  
|Loss per share                                             |  |           |       |   |           |   |       |           |  |   |           |   |  |   |       |  
|U.S. GAAP                                                  |  | $         | (0.02 | ) |           | $ | (0.49 | )         |  | $ | (0.26     | ) |  | $ | (0.63 | )
|Canadian GAAP                                              |  | $         | (0.02 | ) |           | $ | (0.57 | )         |  | $ | (0.21     | ) |  | $ | (0.63 | )
|                                                           |  |           |       |   |           |   |       |           |  |   |           |  

F-44



---



##### Table of Contents





|                                               |  |                |        |   |                |   |          |                |  |      |        |   |  |             |          |   |      |      |       |      |  |   |             |   |  |      |        |   |  |   |       |   |  |   |        |  
|---------------------------------------------- |  | -------------- | ------ | - | -------------- | - | -------- | -------------- |  | ---- | ------ | - |  | ----------- | -------- | - | ---- | ---- | ----- | ---- |  | - | ----------- | - |  | ---- | ------ | - |  | - | ----- | - |  | - | ------ | -
|                                               |  | April 30, 2005 |        |   | April 24, 2005 |   |          | April 25, 2004 | 
|                                               |  |                |        |   |                |   |          |                | 
|                                               |  | U.S.           |        |   |                |   | Canadian |                |  | U.S. |        |   |  |             | Canadian |   |      | U.S. |       |      |  |   | Canadian    |  
|                                               |  | GAAP           |        |   | Adjustments    |   |          | GAAP           |  |      | GAAP   |   |  | Adjustments |          |   | GAAP |      |       | GAAP |  |   | Adjustments |   |  | GAAP |       
|                                               |  |                |        |   |                |   |          |                |  |      |        |   |  |             |          |   |      |      |       |      |  |   |             |   |  |      |       
|ASSETS                                         |  |                |        |   |                |   |          |                |  |      |        |   |  |             |          |   |      |      |       |      |  |   |             |   |  |      |        |   |  |   |       |   |  |   |        |  
|Total assets                                   |  | $              | 195.3  |   |                | $ |         |                |  | $    | 195.3  |   |  | $           | 156.6    |   |      | $    |      |      |  | $ | 156.6       |   |  | $    | 169.4  |   |  | $ |      |   |  | $ | 169.4  |  
|                                               |  |                |        |   |                |   |          |                |  |      |        |   |  |             |          |   |      |      |       |      |  |   |             |   |  |      |       
|                                              
|LIABILITIES AND SHAREHOLDERS DEFICIENCY       |  |                |        |   |                |   |          |                |  |      |        |   |  |             |          |   |      |      |       |      |  |   |             |   |  |      |        |   |  |   |       |   |  |   |        |  
|Current liabilities                            |  |                | 101.9  |   |                |   |         |                |  |      | 101.9  |   |  |             | 115.8    |   |      |      |      |      |  |   | 115.8       |   |  |      | 103.2  |   |  |   |      |   |  |   | 103.2  |  
|Convertible notes                              |  |                | 46.6   |   |                |   |         |                |  |      | 46.6   |   |  |             |         |   |      |      |      |      |  |   |            |   |  |      |       |   |  |   |      |   |  |   |       |  
|Derivative instrument(a)                       |  |                | 37.4   |   |                |   | (37.4    | )              |  |      |       |   |  |             | 38.0     |   |      |      | (38.0 | )    |  |   |            |   |  |      | 29.2   |   |  |   | (29.2 | ) |  |   |       |  
|Convertible, redeemable preferred shares(a)    |  |                |       |   |                |   | 72.6     |                |  |      | 72.6   |   |  |             |         |   |      |      | 73.7  |      |  |   | 73.7        |   |  |      |       |   |  |   | 56.1  |   |  |   | 56.1   |  
|Redeemable common shares(a)                    |  |                |       |   |                |   | 22.1     |                |  |      | 22.1   |   |  |             |         |   |      |      | 22.5  |      |  |   | 22.5        |   |  |      |       |   |  |   |      |   |  |   |       |  
|Pension liability(b)                           |  |                | 25.1   |   |                |   | (14.0    | )              |  |      | 11.1   |   |  |             | 25.4     |   |      |      | (14.3 | )    |  |   | 11.1        |   |  |      | 24.8   |   |  |   | (15.2 | ) |  |   | 9.6    |  
|Other long term liabilities                    |  |                | 20.1   |   |                |   |         |                |  |      | 20.1   |   |  |             | 20.2     |   |      |      |      |      |  |   | 20.2        |   |  |      | 15.5   |   |  |   |      |   |  |   | 15.5   |  
|                                               |  |                |        |   |                |   |          |                |  |      |        |   |  |             |          |   |      |      |       |      |  |   |             |   |  |      |       
|Total liabilities                              |  |                | 231.1  |   |                |   | 43.3     |                |  |      | 274.4  |   |  |             | 199.4    |   |      |      | 43.9  |      |  |   | 243.3       |   |  |      | 172.7  |   |  |   | 11.7  |   |  |   | 184.4  |  
|                                               |  |                |        |   |                |   |          |                |  |      |        |   |  |             |          |   |      |      |       |      |  |   |             |   |  |      |       
|Redeemable common shares(a)                    |  |                | 18.2   |   |                |   | (18.2    | )              |  |      |       |   |  |             | 18.2     |   |      |      | (18.2 | )    |  |   |            |   |  |      | 17.8   |   |  |   | (17.8 | ) |  |   |       |  
|Convertible, redeemable preferred shares(a)    |  |                | 39.1   |   |                |   | (39.1    | )              |  |      |       |   |  |             | 39.0     |   |      |      | (39.0 | )    |  |   |            |   |  |      | 33.5   |   |  |   | (33.5 | ) |  |   |       |  
|Common shares                                  |  |                | 187.6  |   |                |   | (18.8    | )              |  |      | 168.8  |   |  |             | 187.6    |   |      |      | (18.8 | )    |  |   | 168.8       |   |  |      | 184.8  |   |  |   | (2.7  | ) |  |   | 182.1  |  
|Warrants                                       |  |                | 47.9   |   |                |   |         |                |  |      | 47.9   |   |  |             | 40.2     |   |      |      |      |      |  |   | 40.2        |   |  |      | 29.8   |   |  |   |      |   |  |   | 29.8   |  
|Contributed surplus(a)                         |  |                |       |   |                |   | 5.3      |                |  |      | 5.3    |   |  |             |         |   |      |      | 5.3   |      |  |   | 5.3         |   |  |      |       |   |  |   | 4.6   |   |  |   | 4.6    |  
|Deferred stock based compensation              |  |                | (0.4   | ) |                |   | 0.4      |                |  |      |       |   |  |             | (0.4     | ) |      |      | 0.4   |      |  |   |            |   |  |      | (0.2   | ) |  |   | 0.2   |   |  |   |       |  
|Retained earnings                              |  |                | (304.0 | ) |                |   | 4.9      |                |  |      | (299.1 | ) |  |             | (302.3   | ) |      |      | 6.0   |      |  |   | (296.3      | ) |  |      | (247.1 | ) |  |   | 17.2  |   |  |   | (229.9 | )
|Accumulated other comprehensive loss(b)        |  |                | (24.2  | ) |                |   | 22.2     |                |  |      | (2.0   | ) |  |             | (25.1    | ) |      |      | 20.4  |      |  |   | (4.7        | ) |  |      | (21.9  | ) |  |   | 20.3  |   |  |   | (1.6   | )
|                                               |  |                |        |   |                |   |          |                |  |      |        |   |  |             |          |   |      |      |       |      |  |   |             |   |  |      |       
|Total shareholders deficiency                 |  |                | (93.1  | ) |                |   | 14.0     |                |  |      | (79.1  | ) |  |             | (100.0   | ) |      |      | 13.3  |      |  |   | (86.7       | ) |  |      | (54.6  | ) |  |   | 39.6  |   |  |   | (15.0  | )
|                                               |  |                |        |   |                |   |          |                |  |      |        |   |  |             |          |   |      |      |       |      |  |   |             |   |  |      |       
|Total liabilities and shareholders deficiency |  | $              | 195.3  |   |                | $ |         |                |  | $    | 195.3  |   |  | $           | 156.6    |   |      | $    |      |      |  | $ | 156.6       |   |  | $    | 169.4  |   |  | $ |      |   |  | $ | 169.4  |  
|                                               |  |                |        |   |                |   |          |                |  |      |        |   |  |             |          |   |      |      |       |      |  |   |             |   |  |      |       



(a) Accounting for redeemable shares


Accounting for Derivative Instruments and Hedging
Activities.




F-45



---



##### Table of Contents



(b) Pension and other post retirement benefits




(c) Stock based compensation


Accounting for
Stock-Based Compensation,


Stock-based Compensation and Other Stock-based Payments


(d) Convertible debentures






(e) Amortization of in-process R&D costs




F-46



---



##### Table of Contents



(f) R&D recovery




(g) Foreign exchange loss on long term
investment




(h) Other financial statement presentation
differences








|    |                             
|--- | ----------------------------
|29. | POTENTIAL SALE OF SUBSIDIARY

Accounting for the
impairment or disposal of long lived assets


F-47



---



##### Table of Contents





|             |                         |                                          |     |     |           |   |     |           |     |   |     |     |     | 
|------------ | ----------------------- | ---------------------------------------- | --- | --- | --------- | - | --- | --------- | --- | - | --- | --- | --- | 
|             |                         | April 30,                                |     |     | April 24, |   |     | April 25, |    
|             |                         | 2005                                     |     |     | 2005      |   |     | 2004      |    
|             |                         |                                          |     |     |           |   |     |           |    
|Assets:      |                         |                                          |     |     |           |   |     |           |     |   |     |    
|             | Cash                    |                                          | $   | 0.6 |           |   | $   | 0.4       |     |   | $   | 1.6 |    
|             | Accounts receivable     |                                          |     | 0.5 |           |   |     | 0.7       |     |   |     | 1.2 |    
|             | Fixed assets            |                                          |     |    |           |   |     |          |     |   |     |    |    
|             | Due to affiliates (net) |                                          |     | 0.6 |           |   |     | 0.6       |     |   |     |    |    
|            
|Liabilities: |                         |                                          |     |     |           |   |     |           |     |   |     |    
|             |                         | Accounts payable and accrued liabilities |     |     | 0.6       |   |     |           | 0.6 |   |     |     | 0.6 | 
|             |                         | Deferred revenue                         |     |     | 0.5       |   |     |           | 0.5 |   |     |     | 1.2 | 
|             |                         | Taxes payable                            |     |     | 0.1       |   |     |           | 0.1 |   |     |     | 0.2 | 
|             |                         |                                          |     |     |           |   |     |           |    
|Net Assets   |                         | $                                        | 0.5 |     |           | $ | 0.5 |           |     | $ | 0.8 |    
|             |                         |                                          |     |     |           |   |     |           |    



F-48



---



##### Table of Contents





|    |                                    
|--- | -----------------------------------
|30. | SUPPLEMENTARY CASH FLOW INFORMATION

|                                                     |                                                                                            |            |     |      |      |   |      |      |   |   |      |      |   |   |     |      |  
|---------------------------------------------------- | ------------------------------------------------------------------------------------------ | ---------- | --- | ---- | ---- | - | ---- | ---- | - | - | ---- | ---- | - | - | --- | ---- | -
|                                                     |                                                                                            | Transition |     |      |      |   |      |      |  
|                                                     |                                                                                            | Period     |     |      | 2005 |   |      | 2004 |   |   | 2003 |     
|                                                     |                                                                                            |            |     |      |      |   |      |      |   |   |      |     
|Change in non-cash operating assets and liabilities: |                                                                                            |            |     |      |      |   |      |      |   |   |      |      |   |   |     |     
|                                                     | Accounts receivable                                                                        |            | $   | 4.0  |      |   | $    | 7.5  |   |   | $    | (5.2 | ) |   | $   | 5.0  |  
|                                                     | Other receivables                                                                          |            |     | (0.1 | )    |   |      | (5.9 | ) |   |      | 5.4  |   |   |     | (1.3 | )
|                                                     | Inventories                                                                                |            |     | (0.6 | )    |   |      | (4.2 | ) |   |      | 8.4  |   |   |     | (1.1 | )
|                                                     | Prepaid expenses                                                                           |            |     | (0.8 | )    |   |      | (1.4 | ) |   |      | 1.9  |   |   |     | 2.2  |  
|                                                     | Long-term receivables                                                                      |            |     |     |      |   |      |     |   |   |      | 0.4  |   |   |     | 1.1  |  
|                                                     | Accounts payable and accrued liabilities                                                   |            |     | (0.6 | )    |   |      | 6.6  |   |   |      | 0.9  |   |   |     | (2.5 | )
|                                                     | Long term portion of lease termination obligations                                         |            |     |     |      |   |      | (1.2 | ) |   |      | 2.6  |   |   |     | 2.0  |  
|                                                     | Deferred revenue                                                                           |            |     | 0.5  |      |   |      | (2.8 | ) |   |      | 0.7  |   |   |     | (6.6 | )
|                                                     | Due from related parties                                                                   |            |     |     |      |   |      |     |   |   |      |     |   |   |     | (0.3 | )
|                                                     | Due to related parties                                                                     |            |     | (1.5 | )    |   |      | 0.5  |   |   |      | 5.1  |   |   |     | 5.3  |  
|                                                     | Income and other taxes payable                                                             |            |     | 0.1  |      |   |      | (3.3 | ) |   |      | 2.8  |   |   |     | 1.2  |  
|                                                     |                                                                                            |            |     |      |      |   |      |      |   |   |      |     
|                                                     |                                                                                            | $          | 1.0 |      |      | $ | (4.2 | )    |   | $ | 23.0 |      |   | $ | 5.0 |     
|                                                     |                                                                                            |            |     |      |      |   |      |      |   |   |      |     
|Interest payments                                    |                                                                                            | $          |    |      |      | $ | 1.8  |      |   | $ | 3.8  |      |   | $ | 2.8 |     
|                                                     |                                                                                            |            |     |      |      |   |      |      |   |   |      |     
|Income tax payments                                  |                                                                                            | $          |    |      |      | $ | 3.5  |      |   | $ |     |      |   | $ |    |     
|                                                     |                                                                                            |            |     |      |      |   |      |      |   |   |      |     
|Disclosure of non-cash activities during the period: |                                                                                            |            |     |      |      |   |      |      |   |   |      |      |   |   |     |     
|                                                     | Convertible debentures converted to common shares                                          |            | $   |     |      |   | $    |     |   |   | $    | 8.3  |   |   | $   |     |  
|                                                     | Related party loans converted to common shares                                             |            | $   |     |      |   | $    |     |   |   | $    | 31.0 |   |   | $   |     |  
|                                                     | Exchange of common shares for convertible, redeemable preferred
    shares                 |            | $   |     |      |   | $    |     |   |   | $    | 38.7 |   |   | $   |     |  
|                                                     | Adjustment to minimum pension liability                                                    |            | $   |     |      |   | $    | 2.4  |   |   | $    | (3.5 | ) |   | $   | 16.5 |  
|                                                     | Warrants issued in connection with financing                                               |            | $   | 7.7  |      |   | $    |     |   |   | $    | 1.0  |   |   | $   |     |  
|                                                     | Warrants issued to placement agent                                                         |            | $   |     |      |   | $    |     |   |   | $    | 0.1  |   |   | $   |     |  
|                                                     | Issuance of shares in exchange for services                                                |            | $   |     |      |   | $    | 0.1  |   |   | $    | 0.1  |   |   | $   | 0.1  |  
|                                                     | Stock-based dividends                                                                      |            | $   |     |      |   | $    |     |   |   | $    | 0.1  |   |   | $   |     |  
|                                                     | Deemed dividend relating to beneficial conversion feature on
    Series A preferred shares |            | $   |     |      |   | $    |     |   |   | $    | 1.4  |   |   | $   |     |  
|                                                     | Accretion of interest on redeemable common and preferred shares                            |            | $   | 0.1  |      |   | $    | 5.6  |   |   | $    | 1.3  |   |   | $   |     |  
|                                                     | Common shares issued in exchange for employee loans                                        |            | $   |     |      |   | $    | 1.3  |   |   | $    |     |   |   | $   |     |  



|    |                  
|--- | -----------------
|31. | SUBSEQUENT EVENTS

Accounting for Leases.






F-49



---



##### Table of Contents







|             |                         |                                          |     |     |     | 
|------------ | ----------------------- | ---------------------------------------- | --- | --- | --- | 
|             |                         | October 7,                               |    
|             |                         | 2005                                     |    
|             |                         |                                          |    
|Assets:      |                         |                                          |     |    
|             | Cash                    |                                          | $   | 0.1 |    
|             | Accounts receivable     |                                          |     | 0.3 |    
|             | Due to affiliates (net) |                                          |     | 1.0 |    
|Liabilities: |                         |                                          |     |    
|             |                         | Accounts payable and accrued liabilities |     |     | 0.6 | 
|             |                         | Deferred revenue                         |     |     | 0.5 | 
|             |                         |                                          |    
|Net Assets   |                         | $                                        | 0.3 |    
|             |                         |                                          |    



F-50



---



##### Table of Contents






SCHEDULE II


VALUATION OF QUALIFYING ACCOUNTS


AS AT APRIL 24, 2005 and April 30, 2005


(in millions of United States dollars)


|                                |  |              |     |           |            |   |            |          |  |            |          |        |        |   |      |   |  |   |     | 
|------------------------------- |  | ------------ | --- | --------- | ---------- | - | ---------- | -------- |  | ---------- | -------- | ------ | ------ | - | ---- | - |  | - | --- | 
|                                |  |              |     | Additions |            |   |            |         
|                                |  |              |     |           |            |   |            |         
|                                |  | Balance,     |     |           |            |   | Charged to |          |  |            | Balance, |       
|                                |  | Beginning of |     |           | Charged to |   |            | other    |  |            |          | End of |       
|Description                     |  | Period       |     |           | expenses   |   |            | accounts |  | Deductions |          |        | Period |  
|                                |  |              |     |           |            |   |            |          |  |            |          |        |        |  
|Allowance for doubtful accounts |  |              |     |           |            |   |            |          |  |            |          |        |        |   |      |   |  |   |     | 
|Fiscal 2003                     |  | $            | 4.0 |           |            | $ | 0.7        |          |  | $          |         |        |        | $ | (2.0 | ) |  | $ | 2.7 | 
|Fiscal 2004                     |  |              | 2.7 |           |            |   | 1.4        |          |  |            |         |        |        |   | (1.4 | ) |  |   | 2.7 | 
|Fiscal 2005                     |  |              | 2.7 |           |            |   | 1.4        |          |  |            |         |        |        |   | (1.1 | ) |  |   | 3.0 | 
|Transition Period               |  |              | 3.0 |           |            |   |           |          |  |            |         |        |        |   |     |   |  |   | 3.0 | 

F-51