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UNITED STATES
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 30, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 OR
 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
  MITEL NETWORKS CORPORATION
  
 
    o þ
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##### Table of Contents



Basis of Presentation
  Forward Looking Information
  
    
    our ability to achieve profitability in the future;
    
    the development of the market opportunity for IP-based communications solutions and
related services;
    
    technological developments and evolving industry standards;
    
    our dependence primarily upon one outside contract manufacturer to manufacture our
products;
    
    our dependence on sole source and limited source suppliers for key components;
    
    delay in the delivery of, or lack of access to, software or other intellectual property
licensed from our suppliers;
    
    our ability to protect our intellectual property and our possible infringement of the
intellectual property rights of third parties;
    
    our reliance on our channel partners for the majority of our sales;
    
    our solutions may contain design defects, errors, failures or bugs;
    
    intense competition from our competitors;
    
    our reliance on strategic alliances;
    
    uncertainties arising from our foreign operations; and
    
    the fluctuations in our quarterly and annual revenues and operating results.
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PART
I
    
    
    1Item 1. Identity of Directors, Senior Management and Advisors
    
    
    1Item 2. Offer Statistics and Expected Timetable
    
    
    1Item 3. Key Information
    
    
    1A. Selected Financial Data
    
    
    1B. Capitalization and Indebtedness
    
    
    3C. Reasons for the Offer and Use of Proceeds
    
    
    3D. Risk Factors
    
    
    3Item 4. Information on Mitel
    
    
    18A. History and Development of Mitel
    
    
    18B. Business Overview
    
    
    19C. Organizational Structure
    
    
    31D. Property, Plant and Equipment
    
    
    31Item 5. Operating and Financial Review and Prospects
    
    
    33A. Operating Results
    
    
    39B. Liquidity and Capital Resources
    
    
    65C. Research and Development, Patents and Licenses, etc.
    
    
    69D. Trend Information
    
    
    69E. Off-balance Sheet Arrangements
    
    
    72F. Tabular Disclosure of Contractual Obligations
    
    
    73G. Safe Harbor
    
    
    74Item 6. Directors, Senior Management and Employees
    
    
    74A. Directors and Senior Management
    
    
    74B. Compensation
    
    
    79C. Board Practices
    
    
    84D. Employees
    
    
    86E. Share Ownership
    
    
    87Item 7. Major Shareholders and Related Party Transactions
    
    
    89A. Major Shareholders
    
    
    89B. Related Party Transactions
    
    
    90C. Interests of Experts and Counsel
    
    
    97Item 8. Financial Information
    
    
    97A. Consolidated Statements and Other Financial Information
    
    
    97B. Significant Changes
    
    
    99Item 9. The Offer and Listing
    
    
    99
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A. Offer and Listing Details
    
    
    99B. Plan of Distribution
    
    
    99C. Markets
    
    
    99D. Selling Shareholders
    
    
    99E. Dilution
    
    
    100F. Expenses of the Issue
    
    
    100Item 10. Additional Information
    
    
    100A. Share Capital
    
    
    100B. Memorandum and Articles of Incorporation
    
    
    100C. Material Contracts
    
    
    106D. Exchange Controls
    
    
    114E. Taxation
    
    
    115F. Dividends and Paying Agents
    
    
    120G. Statement by Experts
    
    
    121H. Documents on Display
    
    
    121I. Subsidiary Information
    
    
    121Item 11. Quantitative and Qualitative Disclosures About Market Risk
    
    
    121Item 12. Description of Securities Other than Equity Securities
    
    
    122PART II
    
    
    123Item 13. Defaults, Dividend Arrearages and Delinquencies
    
    
    123Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
    
    
    123Item 15. Controls and Procedures
    
    
    123Item 16. [Reserved]
    
    
    123A. Audit Committee Financial Expert
    
    
    123B. Code of Ethics
    
    
    123C. Principal Accountant Fees and Services
    
    
    124D. Exemptions from the Listing Standards for Audit Committees
    
    
    124E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
    
    
    125PART III
    
    
    126Item 17. Financial Statements
    
    
    126Item 18. Financial Statements
    
    
    126Item 19. Exhibits
    
    
    126EX-1.4EX-1.5EX-2.5EX-2.8EX-2.10EX-2.17EX-2.19EX-4.18EX-4.20EX-4.38EX-4.39EX-4.43EX-4.51EX-4.52EX-8.1EX-12.1EX-12.2EX-13.1EX-13.2
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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
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STATEMENT OF OPERATIONS DATAYear Ended
    
    
    Six Days Ended
    
    
Year
EndedApril 28,
    
    
    April 27,
    
    
    April 25,
    
    
    April 24,
    
    
    April 30,
    
    
    April 30,2002
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2005
    
    
    2006(in millions of U.S. dollars, except share and per share data)Revenues
    
    $
    358.0
    
    
    $
    352.2
    
    
    $
    340.7
    
    
    $
    342.2
    
    
    $
    3.2
    
    
    $
    387.1Cost of revenues
    
    
    215.5
    
    
    
    225.4
    
    
    
    202.9
    
    
    
    213.2
    
    
    
    2.4
    
    
    
    225.7Gross margin
    
    
    142.5
    
    
    
    126.8
    
    
    
    137.8
    
    
    
    129.0
    
    
    
    0.8
    
    
    
    161.4Research and development
    
    
    59.1
    
    
    
    41.2
    
    
    
    36.2
    
    
    
    41.4
    
    
    
    0.7
    
    
    
    44.1Selling, general and administrative
    
    
    141.9
    
    
    
    114.9
    
    
    
    111.4
    
    
    
    114.9
    
    
    
    1.8
    
    
    
    120.7Special charges (1)
    
    
    7.4
    
    
    
    13.7
    
    
    
    11.7
    
    
    
    10.6
    
    
    
    
    
    
    
    5.7Loss (gain) on disposal of assets
    
    
    1.5
    
    
    
    
    
    
    
    0.6
    
    
    
    3.4
    
    
    
    
    
    
    
    (2.4
    )Amortization of acquired intangibles (2)
    
    
    43.8
    
    
    
    29.1
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    Operating loss
    
    
    (111.2
    )
    
    
    (72.1
    )
    
    
    (22.3
    )
    
    
    (41.3
    )
    
    
    (1.7
    )
    
    
    (6.7
    )Other (income) expense, net
    
    
    3.4
    
    
    
    0.9
    
    
    
    8.0
    
    
    
    7.5
    
    
    
    (0.1
    )
    
    
    39.8Income tax (recovery) expense
    
    
    0.1
    
    
    
    (2.9
    )
    
    
    0.3
    
    
    
    0.8
    
    
    
    
    
    
    
    (1.9
    )Net loss
    
    $
    (114.7
    )
    
    $
    (70.1
    )
    
    $
    (30.6
    )
    
    $
    (49.6
    )
    
    $
    (1.6
    )
    
    $
    (44.6
    )Net loss per common shareBasic and diluted
    
    $
    (1.10
    )
    
    $
    (0.63
    )
    
    $
    (0.26
    )
    
    $
    (0.49
    )
    
    $
    (0.01
    )
    
    $
    (0.44
    )Weighted average number of
common shares outstanding
(in millions)
    
    
    106.8
    
    
    
    113.1
    
    
    
    127.8
    
    
    
    113.8
    
    
    
    117.1
    
    
    
    117.2
 BALANCE SHEET DATAAs at
    
    
    As at
    
    
    As at
    
    
    As at
    
    
    As at
    
    
    As atApril 28,
    
    
    April 27,
    
    
    April 25,
    
    
    April 24,
    
    
    April 30,
    
    
    April 30,2002
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2005
    
    
    2006(in millions of U.S. dollars)Cash and cash equivalents
    
    $
    3.6
    
    
    $
    22.3
    
    
    $
    26.7
    
    
    $
    9.7
    
    
    $
    46.6
    
    
    $
    35.7Other current assets
    
    
    132.4
    
    
    
    120.6
    
    
    
    115.0
    
    
    
    117.5
    
    
    
    115.8
    
    
    
    130.8Property and equipment
    
    
    29.7
    
    
    
    25.3
    
    
    
    20.3
    
    
    
    20.9
    
    
    
    20.6
    
    
    
    17.4Other assets
    
    
    42.4
    
    
    
    7.3
    
    
    
    7.4
    
    
    
    8.5
    
    
    
    12.3
    
    
    
    15.9Total assets
    
    $
    208.1
    
    
    $
    175.5
    
    
    $
    169.4
    
    
    $
    156.6
    
    
    $
    195.3
    
    
    $
    199.8Current liabilities
    
    $
    138.9
    
    
    $
    135.8
    
    
    $
    103.2
    
    
    $
    115.8
    
    
    $
    101.9
    
    
    $
    126.0Long-term debt
    
    
    15.1
    
    
    
    23.1
    
    
    
    15.5
    
    
    
    20.2
    
    
    
    66.7
    
    
    
    56.7Derivative instruments (3)
    
    
    
    
    
    
    
    
    
    
    29.2
    
    
    
    38.0
    
    
    
    37.4
    
    
    
    75.9Other long-term liabilities
    
    
    6.6
    
    
    
    24.6
    
    
    
    24.8
    
    
    
    25.4
    
    
    
    25.1
    
    
    
    45.6Redeemable shares (4)
    
    
    27.9
    
    
    
    29.0
    
    
    
    51.3
    
    
    
    57.2
    
    
    
    57.3
    
    
    
    64.2Capital stock
    
    
    167.5
    
    
    
    183.4
    
    
    
    184.8
    
    
    
    187.6
    
    
    
    187.6
    
    
    
    188.8Other capital accounts
    
    
    (0.9
    )
    
    
    (2.2
    )
    
    
    7.7
    
    
    
    14.7
    
    
    
    23.3
    
    
    
    (1.9
    )Accumulated deficit
    
    
    (147.0
    )
    
    
    (218.2
    )
    
    
    (247.1
    )
    
    
    (302.3
    )
    
    
    (304.0
    )
    
    
    (355.5
    )Total liabilities and
shareholders equity
    
    $
    208.1
    
    
    $
    175.5
    
    
    $
    169.4
    
    
    $
    156.6
    
    
    $
    195.3
    
    
    $
    199.8
 
 (1)
    
    Special charges relate to restructuring activities, product line
exit and other loss accruals undertaken to improve our operational
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to realign our business.(2)
    
    Acquired intangible assets relating to the acquisition of the
Mitel name, certain assets and subsidiaries from Zarlink
Semiconductor Inc. in 2001 were fully amortized in 2004.(3)
    
    The derivative instruments relate to our Class A Series 1
Preferred Shares (the Series A Preferred Shares) and the Class
B Series 1 Preferred Shares (the Series B Preferred Shares). The
derivative instruments arose because a portion of the redemption
price of the Series A Preferred Shares and Series B Preferred
Shares is indexed to our common share price and as required by
SFAS 133 has been bifurcated and accounted for separately.(4)
    
    Redeemable shares include 10,000,000 common shares (which are
redeemable by virtue of a shareholders agreement dated April 23,
2004, as amended, among certain of our shareholders and us),
20,000,000 Series A Preferred Shares and 67,789,300 Series B
Preferred Shares. 
 B. Capitalization and Indebtedness
  
 C. Reasons for the offer and use of proceeds
  
 D. Risk Factors
 An investment in our common shares should be regarded as highly speculative and is suitable
only for those investors who are able to sustain a total loss of their investment. You should
carefully consider the following risks, as well as the other information contained in this annual
report, when evaluating us and our business and prospects. Any of the following risks, as well as
risks not currently known to us, could materially and adversely affect our business, results of
operations or financial condition, and could result in a complete loss of your investment.
 Risks Relating to our Business
 We have incurred net losses since our incorporation in 2001 and we may not be profitable in the
future.
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A key component of our strategy is our focus on the development and marketing of IP-based
communications solutions and related services, and this strategy may not be successful or may
adversely affect our business.
  
    
    the demand for IP-based communications solutions and services will grow as fast as we
anticipate;
    
    continuing reductions in long-distance and local toll charges may adversely affect sales
of certain of our solutions to customers focused on those cost savings;
    
    current or future competitors or new technologies will cause the market to evolve in a
manner different than we expect;
    
    other technologies will become more accepted or standard in our industry; or
    
    we will be able to achieve a leadership or profitable position as this opportunity
develops.
 Our solutions may fail to keep pace with rapidly changing technology and evolving industry
standards.
  Because we depend primarily upon one outside contract manufacturer to manufacture our products, our
operations could be delayed or interrupted if we encounter problems with this contractor.
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
    
    our contract manufacturers not being required to manufacture our products on a long-term
basis in any specific quantity or at any specific price;
    
    our failure to effectively manage our contract manufacturer relationships;
    
    our contract manufacturers experiencing delays, disruptions or quality control problems
in their manufacturing operations;
    
    lead-times for required materials and components varying significantly and being
dependent on factors such as the specific supplier, contract terms and the demand for each
component at a given time;
    
    overestimating our forecast requirements resulting in excess inventory and related
carrying charges;
    
    underestimating our requirements, resulting in our contract manufacturers having
inadequate materials and components required to produce our products, or overestimating our
requirements, resulting in charges assessed by the contract manufacturers or liabilities
for excess inventory, each of which could negatively affect our gross margins; and
    
    the possible absence of adequate capacity and reduced control over component
availability, quality assurances, delivery schedules, manufacturing yields and costs.
  We depend on sole source and limited source suppliers for key components. If these components are
not available on a timely basis, or at all, we may not be able to meet scheduled product deliveries
to our customers.
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Delay in the delivery of, or lack of access to, software or other intellectual property licensed
from our suppliers could adversely affect our ability to develop and deliver our solutions on a
timely and reliable basis.
  Our success is dependent on our intellectual property. Our inability or failure to protect our
intellectual property could seriously harm our ability to compete and our financial success.
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Our business may be harmed if we infringe intellectual property rights of third parties.
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We rely on our channel partners for the majority of our sales, and disruptions to, or our failure
to effectively develop and manage, our distribution channel and the processes and procedures that
support it could adversely affect our ability to generate revenues.
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Design defects, errors, failures or bugs, which may be difficult to detect, may occur in our
solutions.
  We face intense competition from many competitors and we may not be able to compete effectively
against these competitors.
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Our business may suffer if our strategic alliances are not successful.
  Our operations in international markets involve inherent risks that we may not be able to control.
  
    
    political or social unrest or economic instability in a specific country or region;
    
    macroeconomic conditions adversely affecting geographies where we do business;
    
    higher costs of doing business in foreign countries;
    
    infringement claims on foreign patents, copyrights, or trademark rights;
    
    difficulties in managing operations across disparate geographic areas;
    
    difficulties associated with enforcing agreements and intellectual property rights
through foreign legal systems;
    
    trade protection measures and other regulatory requirements which may affect our ability
to import or export our products from or to various countries;
    
    adverse tax consequences;
    
    unexpected changes in legal and regulatory requirements;
    
    military conflict, terrorist activities, natural disasters and widespread medical
epidemics; and
    
    our ability to recruit and retain channel partners in foreign jurisdictions.
 Our competitive position may be affected by fluctuations in exchange rates, and our current
currency hedging strategy may not be sufficient to counter such fluctuations.
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Our quarterly and annual revenues and operating results have historically fluctuated, and the
results of one period may not provide a reliable indicator of our future performance.
  
    
    the fact that an individual order or contract can represent a substantial amount of
revenues for that period;
    
    the size, timing and shipment of individual orders;
    
    changes in pricing or discount levels by us or our competitors;
    
    foreign currency exchange rates;
    
    the mix of products sold by us;
    
    the timing of the announcement, introduction and delivery of new products and/or product
enhancements by us and our competitors; and
    
    general economic conditions.
  We may require additional sources of funds if our sources of liquidity are unavailable or
insufficient to fund our operations.
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The exercise of redemption rights by one or more of our convertible noteholders would have a
material adverse effect on our cash flow and financial position.
  The exercise of put rights held by certain of our shareholders would have a material adverse effect
on our cash flow and financial position.
  The exercise of conversion rights by one or more of our preferred shareholders, warrant holders,
convertible noteholders, and option holders, could adversely affect the market value of our common
shares as well as our ability to complete any future equity financing.
  
    
    20,000,000 Class A Series 1 Preferred Shares (Series A Preferred Shares) and
67,789,300 Class B Series 1 Preferred Shares (Series B Preferred Shares)
(collectively, our Preferred Shares). These Preferred Shares are convertible into common
shares at the option of the holders and upon certain triggering events. The conversion
ratio is greater than one common share for each Preferred Share and
depends on the value of a common share at the time of conversion;
    
    Stock options to acquire 19,108,106 common shares;
    
    Warrants to acquire up to an additional 59,674,886 common shares;
    
    A warrant (granted to the lead investor in our 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;
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
    
    Warrants in the aggregate amount of $15 million (acquired by Wesley Clover Corporation,
a company controlled directly or indirectly by Dr. Matthews, our principal shareholder and
the chairman of our board of directors, in September 2006), to acquire common shares, such
number of common shares to be determined in accordance with the formula set forth in these
warrants. If these warrants are exercised in connection with an initial public offering,
the holder will be entitled to receive additional warrants to acquire common shares in
accordance with a formula set forth in these warrants; and
    
    $55,000,000 (plus accrued interest) in convertible notes which may be converted into
common shares on or after consummation of a qualified initial public offering (as defined
in the notes) and upon certain triggering events.
  We are exposed to risks inherent in our defined benefit pension plan.
  Transfer pricing rules may adversely affect our income tax expenses.
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Future changes in financial accounting standards could adversely affect our reported results of
operations.
   Governmental regulation could harm our operating results and future prospects.
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Our future success depends on our existing key personnel.
  We may make strategic acquisitions in the future. We may not be successful in operating or
integrating these acquisitions.
  
    
    unanticipated costs and liabilities;
    
    difficulties in integrating new products, software, businesses, operations, and
technology infrastructure in an efficient and effective manner;
    
    difficulties in maintaining customer relations;
    
    the potential loss of key employees of the acquired businesses;
    
    the diversion of the attention of our senior management from the operation of our daily
business;
    
    the potential adverse effect on our cash position as a result of all or a portion of an
acquisition purchase price being paid in cash;
    
    the potential issuance of securities that would dilute our shareholders percentage
ownership; and
    
    the inability to maintain uniform standards, controls, policies and procedures.
  The costs and risks associated with Sarbanes-Oxley regulatory compliance may have a material
adverse effect on us.
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Risks Related to an Investment in our Common Shares
 There are significant restrictions on the resale of our securities and there can be no assurance as
to when such restrictions will cease to apply, if ever.
 Securities Act of 1933
 Dr. Matthews is a significant shareholder and he has the potential to exercise significant
influence over matters requiring approval by our shareholders.
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Dr. Matthews ownership of our common shares, as well as provisions contained in our articles of
incorporation and Canadian law, may reduce the likelihood of a change of control occurring and, as
a consequence, may deprive you of the opportunity to sell your common shares at a control premium.
 Competition Act Investment Canada Act
 You may be unable to bring actions or enforce judgments against us, certain of our directors and
officers, certain of the selling shareholders or our independent public accounting firm under U.S.
federal securities laws.
  U.S. investors will suffer adverse United States federal income tax consequences if we are
characterized as a passive foreign investment company.
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Item 4. Information on Mitel
 
 A. History and Development of Mitel
  Significant developments subsequent to Fiscal 2006
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B. Business Overview
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Our Solutions
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
    
    Mitel 3300 IP Communications Platform (ICP): Rated Best IP-PBX Value, Mid-Size
systems by Miercom (2005)
    
    Mitel SX-200 IP Communications Platform (ICP): Rated Best in Test by Miercom
(2005)
    
    Mitel Your Assistant: Communications Convergence, Visions of Convergence, Product of
the Year (2004)
    
    Mitel Navigator: Internet Telephony Product of the Year (2005); and Frost & Sullivan
Award for Technology Innovation (2006)
    
    Mitel Customer Interaction Solutions/ Mitel Contact Center Solutions: Customer Value
Enhancement Award Contact Center Industry (2004); Customer Interaction Solutions IP
Contact Center Technology Pioneer Award (2005); and TMC Labs Innovation Award (2005)
    
    Mitel Messaging Server: Internet Telephony Product of the Year (2005)
  Platforms and Gateways
  
    
    The Mitel 3300 IP Communications Platform(ICP). The Mitel 3300 ICP, the cornerstone
of our IP-based communications product portfolio, is a converged communications platform
that supports our suite of advanced call processing and related applications and IP-enabled
desktop devices. Our call processing software supports over 500 networking and end user
features and is available in 10 languages. The Mitel 3300 ICPhas the flexibility to
operate as either a single site, distributed or hosted solution and interoperates with a
customers legacy infrastructure. The Mitel 3300 ICPis scalable to serve the needs of
small and medium businesses with as few as 10 users, and large enterprises with as many as
65,000 users.
    
    The Mitel 3300 ICPalso acts as an applications and services gateway, allowing customers
access to advanced applications such as messaging, mobility and teleworking. With the Mitel
Live Business Gatewayattributes enabled, the applications and services gateway provides
connectivity to Microsofts Live Communications Server for our solutions and the legacy
infrastructure of competitors. The applications and services gateway uses open industry
standards to interoperate with our and third party business applications and devices.
    
    For customers with branch offices, we offer the ability to either implement a Mitel 3300
ICPat each location or allow users at a remote site to receive a hosted service from a
Mitel 3300 ICPsituated elsewhere in the network (or a combination of both options). Those
customers using a hosted model have access to the same software applications and
services as those situated at the office where the Mitel 3300 ICPphysically resides. The
Mitel 3300 ICPcan also be implemented as a survivable gateway at a branch office such that
if the network to the office from which they are being hosted becomes unavailable,
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then the
local Mitel 3300 ICPwill provide the same services seamlessly until the network connection
is restored. We are able to distribute the features, software applications and services
normally only available at larger corporate offices to any part of the network, addressing
the communications challenges facing organizations with decentralized operations and
personnel. This approach also provides alternative network configurations for customers
concerned with disaster recovery and business continuity.
 
    
    Mitel Enterprise Manager. Our enterprise management applications allow our customers to
control their network of Mitel 3300 ICPs and associated applications and devices. These
applications allow our customers to monitor and control telecommunication spending as well
as network monitoring, alarm handling and troubleshooting. Our enterprise management
applications include the following:
 o
    
    Enterprise Manager.The Enterprise Manager suite provides a single
management interface to monitor and manage all of the activities of a single or
networked Mitel 3300 ICPand perform day-to-day management tasks helping control
costs by delivering simplified PC-based administration.o
    
    Remote Management.The Remote Management suite allows the maintainer to
access network and system information and resolve issues remotely.o
    
    Integrated Management Applications.The Integrated Management
Applications suite provides the ability to analyze the IP networks capability to
support IP communications. Voice quality metrics and diagnostics can be used to
test the network capabilities and to help troubleshoot potential issues.o
    
    Technology Interfaces.Recognizing that some customers may have
specialized requirements beyond our packaged software products, we offer a wide
range of technology interfaces for specific enhancements. Open interfaces allow
integration to third party management solutions, such as those from Microsoft and
Hewlett Packard.
 
    
    Mitel SX-200 ICP.The Mitel SX-200 ICPspecifically addresses the North American market
and provides the features required by the smaller business market and the hospitality
industry. The Mitel SX-200 ICPtargets organizations with up to 600 users either at a
single location or in multiple locations and it supports networking and interoperability
with legacy Mitel SX-200systems.
    
    Mitel 3600 Hosted IP Key System. The Mitel 3600 Hosted IP Key Systemis designed for
businesses with fewer than 20 employees. This product is sold through service providers or
channel partners who wish to offer a hosted solution and eliminate the need for the
platform to be located and managed at the end-users office. The Mitel 3600enables the
features of a key telephone system to be delivered as a service and works with Mitel IP
Phones.
 Desktop Portfolio:
  - 22 -




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Mitel 3300 ICP
 Applications
  
    
    Contact Center Applications.A contact center is generally a dedicated function within a
business that typically serves as an inside sales help desk, providing customer support,
lead generation, emergency response, telephone answering service, inbound response and
outbound telemarketing. We provide a suite of web-based applications for streamlining
contact center management and reporting. Customers can therefore choose to implement those
elements that are most relevant to their business needs. Our contact center applications
provide multimedia functionality incorporating routing of an inquiry to the first available
agent or the agent that has been idle for the longest period. Visibility of the presence
and availability of colleagues or resources can be provided by integration with Microsoft
Live Communications Server using the Mitel Live Business Gateway to facilitate first call resolution. An inquiry can be
associated with an incoming call, e-mail, fax or webchat. Contact center agents are fully
supported across a centralized or multi-site environment including home working.
    
    Wireless Telephony Applications.We offer wireless telephony applications for
in-building mobility as well as to enable the seamless convergence of in-building wired or
wireless networks with mobile cellular-based networks. Our in-building wireless
applications provide roaming users with the majority of the features available on a desktop
device including extension-to-extension dialing, attendant functions, voice mail and
messaging as well as external calling. We use wireless devices that work with other major
manufacturers wireless access points allowing customers the use of their existing access
point investment for in-building mobile telephony. The Mitel 3300 ICPcan also pair a
cellular phone with an office extension or any other telephone such that each device will
ring simultaneously if the office extension is called. This pairing significantly reduces
the number of calls that are missed. When a call is answered on a cellular phone it is
still presented at the office extension, which means that by pressing a single key on the
telephone, the call can be moved from the cellular phone to the office extension. This
process can also be achieved in reverse, so that an employee who may need to leave for a
meeting, can transfer the call from the office extension to the cellular device. This
feature reduces cellular long distance and air time charges and enables the user to operate
with one phone number whether in the office, at home or traveling.
 - 23 -




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
    
    Video Applications.Our video applications and related devices provide businesses access
to video conferencing at the desktop or for dedicated conference rooms. Our video
conferencing solutions are easy to use and a conference call can be established by simply
dialing the number or extension of the remote party from an IP telephone and then, once the
telephone call is established, pressing a single key on the handset to transform the audio
call into a video conference. Our video applications and related devices also incorporate
collaboration tools, including those from Microsoft Office, that allow users to share
computer applications during conferences. Our solutions can simultaneously support eight
separate locations involved in the video conference.
    
    Collaboration Tools.We offer a computer-based collaboration, presence and contact
management application called Your Assistantthat can optionally include a softphone. The
softphone provides a number of important features of a Mitel desktop telephone on a personal computer, at the
users desk or from any location around the world where there is access to the Internet.
Your Assistantinteracts with the users contact database and offers secure instant
messaging capabilities, video conferencing, knowledge management (automatic retrieval of
pertinent files associated with the name and number of the caller) and enables simplified
drag and drop call and conference call initiation by moving, with a computer mouse, the
name of a contact from a list or directory into the communications window. Your Assistant
also enables the simple sharing of presentations, documents or spreadsheets and also offers
the ability to create a virtual white board on each users computer screen for the purposes
of creating drawings, diagrams or for making notes. In addition, a video conference can be
established with a non-user of Your Assistantby publishing the name of an Internet web
page associated with the conference call.
    
    Speech Enabled Messaging, Unified Messaging, Integrated Messaging and Voice Mail.We offer a speech-enabled
application called Speech Server Unified Messaging that gives users the ability to control their
telephony functions through voice-activated commands. Speech Server Unified Messaging supports
conversational speech recognition, recognizing entire sentences and not simply single
words, allowing users to answer or forward voice and e-mail messages with voice or text
responses. NuPoint Messenger, our branded integrated messaging application, provides a
scalable and reliable way to relay, store, and retrieve voice messages using either a
phone, fax machine, pager or personal computer. NuPoint Messengeralso allows users to have
their calls routed to them while they are travelling, or access to their voice or fax
messages from their personal computer. NuPoint Messengerprovides a high availability and
highly scalable solution, which can be suitable as a carrier or large enterprise solution.
Our 6510 Integrated Messagingproduct allows businesses to mix and match the requirements
of individual employees by supporting both unified messaging and traditional voicemail on
the same platform. Our 6510 Messaging Serverproduct allows businesses to mix and match the requirements of
individual employees by supporting both unified messaging and traditional voicemail on the same
platform. Messaging Serveralso allows users to access voicemail, e-mail and fax messages from a
single mailbox. Messaging Serversupports Microsoft Outlook/Exchange, IBM Lotus/Domino and Novell
Goupwise messaging envirornments. Our messaging solutions interoperate with both Microsoft Live
Communications Server and Microsoft Outlook.
    
    Teleworking.Our IP-based teleworker solution enables users to make secure and encrypted
IP phone calls from their home office or any remote office by extending the features and
functionality of an office telephone over the Internet. As a result, long distance charges
can be significantly reduced or in some cases eliminated. As an option, our Teleworker
telephone can support an integral module that allows the telephone to
access the public switched telephone network for making local calls and calls to emergency
services and to receive incoming calls. Customers can download reports that
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Our Legacy Telephony Communication Solutions
 Mitel SX-2000 Mitel SX-200 Mitel SX-2000 Mitel SX-200 Mitel SX-2000 Mitel SX-200 Mitel 3300 ICP Mitel SX-200 ICP
 Our Services
   Business Segments and Principal Markets
  - 25 -




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Fiscal
    
    Six days ended
    
    Fiscal2004
    
    2005
    
    April 30, 2005
    
    2006% of
    
    
    
    
    
    % of
    
    
    
    
    
    % of
    
    
    
    
    
    % ofRevenues
    
    Revenues
    
    Revenues
    
    Revenues
    
    Revenues
    
    Revenues
    
    Revenues
    
    Revenues(in millions, except percentages)United States
    
    $
    161.4
    
    
    
    47.4
    %
    
    $
    153.5
    
    
    
    44.9
    %
    
    $
    1.8
    
    
    
    56.3
    %
    
    $
    178.5
    
    
    
    46.1
    %EMEA
    
    
    140.5
    
    
    
    41.2
    %
    
    
    145.5
    
    
    
    42.5
    %
    
    
    1.0
    
    
    
    31.2
    %
    
    
    156.3
    
    
    
    40.4
    %Canada and CALA
    
    
    33.4
    
    
    
    9.8
    %
    
    
    37.2
    
    
    
    10.8
    %
    
    
    0.4
    
    
    
    12.5
    %
    
    
    43.6
    
    
    
    11.3
    %Asia Pacific
    
    
    5.4
    
    
    
    1.6
    %
    
    
    6.0
    
    
    
    1.8
    %
    
    
    
    
    
    
    
    
    
    
    8.7
    
    
    
    2.2
    %$
    340.7
    
    
    
    100.0
    %
    
    $
    342.2
    
    
    
    100.0
    %
    
    $
    3.2
    
    
    
    100.0
    %
    
    $
    387.1
    
    
    
    100.0
    %
 Sales, Marketing and Distribution
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Our Strategy
  
    
    Continue to expand our market focus through our highly scalable solutions;
    
    Increase our focus on software applications;
    
    Provide a gradual migration path to IP for our customers and those of our competitors;
    
    Expand our geographic presence and distribution capabilities;
    
    Broaden and deepen our strategic partnerships and alliances;
    
    Continue to leverage our operating model;
  Manufacturing and Supply Chain Management
  
    
    focus on the design, development, sales and support of our products;
    
    leverage the scale and expertise of specialized contract manufacturers;
    
    reduce manufacturing and supply chain risk;
    
    reduce distribution costs; and
    
    ensure competitive pricing and levels of service.
  - 27 -




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
    
    evaluating, selecting, pricing and negotiating contracts with EMS suppliers;
    
    monitoring EMS supplier contract manufacturer performance against established service
level agreements;
    
    maintaining the authorized vendor list of component suppliers;
    
    managing finished goods inventory; and
    
    selecting outbound freight partners, shipping methods, remote stocking strategies and
shipping routes.
  Research and Development
   - 28 -




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Intellectual Property
  - 29 -




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Competition
  
    
    the quality of our IP product portfolio and richness of our software applications;
    
    the useability of our software and their application to vertical markets;
    
    the interoperability with equipment supplied by other vendors and with legacy
circuit-switched network equipment;
 - 30 -




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
    
    the scalability and flexibility of our architecture, and the ease of deployment in
either a centrally-managed, remotely-distributed or hosted architecture;
    
    the strength of our strategic alliances; and
    
    the ease of doing business for our channel partners.
   
 C. Organizational Structure
   
 
 D. Property, Plant and Equipment
 - 31 -




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Leased Facilities:
  Area
    
    ExpirationLocation
    
    Purpose
    
    (in square feet)
    
    Date of LeaseOttawa, Canada
    
    Corporate Head Office(1)
    
    
    352,000
    
    
    February 15, 2011Caldicot, United Kingdom
    
    U.K. and EMEA Regional
Headquarters
    
    
    45,000
    
    
    March 9, 2021Ottawa, Canada
    
    Office and Manufacturing
Facilities(2)
    
    
    160,000
    
    
    February 15, 2011
 
 (1)
    
    42,930 square feet sublet to an unrelated third party until August 14, 2009.(2)
    
    Sublet to BreconRidge until August 31, 2006  See Item 7.B. Major Shareholders and Related
Party Transactions  Related Party Transactions  BreconRidge Manufacturing Solutions Corporation.
An aggregate of 80,246 square feet has subsequently been sublet to two unrelated third parties
until August 31, 2009 and January 3, 2008, respectively.   
    
    throughout the United States (including New York City, Atlanta, Chicago, Boston, Orlando
(Florida), Costa Mesa (California), Herndon (Virginia) and Waukesha (Wisconsin));
    
    throughout Canada (including Toronto, Montreal, Calgary, Winnipeg, Burnaby (British
Columbia) and Halifax);
    
    throughout the United Kingdom (including London and Strathclyde (Scotland));
    
    throughout Continental Europe, the Middle East and Africa (including France, Germany,
the Netherlands, Italy, Saudi Arabia, Dubai and South Africa);
    
    in Asia-Pacific (including Hong Kong and Beijing (China), Singapore and Sydney
(Australia)); and
    
    in Mexico City, Mexico.
  - 32 -




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Item 5. Operating and Financial Review and Prospects
 Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion should be read in conjunction with our consolidated financial
statements and the notes to those statements, as well as the other financial information appearing
elsewhere in this annual report. This annual report contains forward-looking statements that
involve risks and uncertainties and that reflect estimates and assumptions. Our actual results may
differ materially from those indicated in forward-looking statements. Factors that could cause our
actual results to differ materially from our forward-looking statements are described in Item 3.D.
Key Information  Risk Factors and elsewhere in this annual report.
  Foreign Currency Translation
 Overview
   - 33 -




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Comparability of Periods
   Key Performance Indicators
 - 34 -




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Sources of Revenues and Expenses
  Revenues
    - 35 -




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- 36 -




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Cost of Revenues
    Research and Development Expenses
  - 37 -




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Sales, General and Administrative Expenses
  Special Charges
  Other Operating Expenses
  - 38 -




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A. Operating Results
  STATEMENT OF OPERATIONS DATASix DaysYear Ended
    
    
    Ended
    
    
    Year EndedApril 28,
    
    
    April 27,
    
    
    April 25,
    
    
    April 24,
    
    
    April 30,
    
    
    April 30,2002
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2005
    
    
    2006(in millions of U.S. dollars, except share and per share data)Revenues
    
    $
    358.0
    
    
    $
    352.2
    
    
    $
    340.7
    
    
    $
    342.2
    
    
    $
    3.2
    
    
    $
    387.1Cost of revenues
    
    
    215.5
    
    
    
    225.4
    
    
    
    202.9
    
    
    
    213.2
    
    
    
    2.4
    
    
    
    225.7Gross margin
    
    
    142.5
    
    
    
    126.8
    
    
    
    137.8
    
    
    
    129.0
    
    
    
    0.8
    
    
    
    161.4Research and development
    
    
    59.1
    
    
    
    41.2
    
    
    
    36.2
    
    
    
    41.4
    
    
    
    0.7
    
    
    
    44.1Selling, general and administrative
    
    
    141.9
    
    
    
    114.9
    
    
    
    111.4
    
    
    
    114.9
    
    
    
    1.8
    
    
    
    120.7Special charges
    
    
    7.4
    
    
    
    13.7
    
    
    
    11.7
    
    
    
    10.6
    
    
    
    
    
    
    
    5.7Loss (gain) on disposal of assets
    
    
    1.5
    
    
    
    
    
    
    
    0.6
    
    
    
    3.4
    
    
    
    
    
    
    
    (2.4
    )Amortization of acquired intangibles
    
    
    43.8
    
    
    
    29.1
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    Operating loss
    
    
    (111.2
    )
    
    
    (72.1
    )
    
    
    (22.3
    )
    
    
    (41.3
    )
    
    
    (1.7
    )
    
    
    (6.7
    )Other (income) expense, net
    
    
    3.4
    
    
    
    0.9
    
    
    
    8.0
    
    
    
    7.5
    
    
    
    (0.1
    )
    
    
    39.8Income tax (recovery) expense
    
    
    0.1
    
    
    
    (2.9
    )
    
    
    0.3
    
    
    
    0.8
    
    
    
    
    
    
    
    (1.9
    )Net loss
    
    $
    (114.7
    )
    
    $
    (70.1
    )
    
    $
    (30.6
    )
    
    $
    (49.6
    )
    
    $
    (1.6
    )
    
    $
    (44.6
    )Net loss per common shareBasic and diluted
    
    $
    (1.10
    )
    
    $
    (0.63
    )
    
    $
    (0.26
    )
    
    $
    (0.49
    )
    
    $
    (0.01
    )
    
    $
    (0.44
    )Weighted average number of
common shares outstanding
(in millions)
    
    
    106.8
    
    
    
    113.1
    
    
    
    127.8
    
    
    
    113.8
    
    
    
    117.1
    
    
    
    117.2
 Fiscal 2006 as compared to Fiscal 2005
  - 39 -




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Fiscal2005
    
    2006
    
    Change% of
    
    
    
    
    
    % ofAmounts
    
    Revenues
    
    Amounts
    
    Revenues
    
    Amount
    
    %(in millions, except percentages)Revenues
    
    $
    342.2
    
    
    
    100.0
    %
    
    $
    387.1
    
    
    
    100.0
    %
    
    $
    44.9
    
    
    
    13.1
    %Cost of revenues
    
    
    213.2
    
    
    
    62.3
    %
    
    
    225.7
    
    
    
    58.3
    %
    
    
    12.5
    
    
    
    5.9
    %Gross margin
    
    
    129.0
    
    
    
    37.7
    %
    
    
    161.4
    
    
    
    41.7
    %
    
    
    32.4
    
    
    
    25.1
    %Research and development
    
    
    41.4
    
    
    
    12.1
    %
    
    
    44.1
    
    
    
    11.4
    %
    
    
    2.7
    
    
    
    6.5
    %Selling, general and administrative
    
    
    114.9
    
    
    
    33.6
    %
    
    
    120.7
    
    
    
    31.1
    %
    
    
    5.8
    
    
    
    5.0
    %Special charges (1)
    
    
    10.6
    
    
    
    3.1
    %
    
    
    5.7
    
    
    
    1.5
    %
    
    
    (4.9
    )
    
    
    (46.2
    %)Loss (gain) on sale of manufacturing
operations
    
    
    3.4
    
    
    
    1.0
    %
    
    
    (0.9
    )
    
    
    (0.2
    %)
    
    
    (4.3
    )
    
    
    *Gain on sale of assets
    
    
    
    
    
    
    
    
    
    
    (1.5
    )
    
    
    (0.4
    %)
    
    
    (1.5
    )
    
    
    *Operating loss
    
    
    (41.3
    )
    
    
    (12.1
    %)
    
    
    (6.7
    )
    
    
    (1.7
    %)
    
    
    34.6
    
    
    
    *Interest expense
    
    
    2.6
    
    
    
    0.8
    %
    
    
    7.6
    
    
    
    2.0
    %
    
    
    5.0
    
    
    
    192.3
    %Mark-to-market adjustment on derivatives
    
    
    5.3
    
    
    
    1.5
    %
    
    
    32.6
    
    
    
    8.4
    %
    
    
    27.3
    
    
    
    515.1
    %Other (income) expense, net
    
    
    (0.4
    )
    
    
    (0.1
    %)
    
    
    (0.4
    )
    
    
    (0.1
    %)
    
    
    
    
    
    
    *Income tax (recovery) expense
    
    
    0.8
    
    
    
    0.2
    %
    
    
    (1.9
    )
    
    
    (0.5
    %)
    
    
    (2.7
    )
    
    
    *Net loss
    
    $
    (49.6
    )
    
    
    (14.5
    %)
    
    $
    (44.6
    )
    
    
    (11.5
    %)
    
    $
    5.0
    
    
    
    (10.1
    %)
 
 *
    
    the comparison is not meaningful(1)
    
    Special charges relate to restructuring activities, product line exit and other loss accruals undertaken to improve our operationalefficiency and realign our business. Revenues:
 Geographic Segment Revenues:
  
    
    the United States;
    
    Europe, Middle East & Africa (EMEA);
    
    Canada and Caribbean & Latin America (CALA); and
    
    Asia Pacific.
  2005
    
    2006
    
    2006 Change% of
    
    
    
    
    
    % ofRevenues
    
    Revenues
    
    Revenues
    
    Revenues
    
    Amount
    
    %(in millions, except percentages)United States
    
    $
    153.5
    
    
    
    44.9
    %
    
    $
    178.5
    
    
    
    46.1
    %
    
    $
    25.0
    
    
    
    16.3
    %EMEA
    
    
    145.5
    
    
    
    42.5
    %
    
    
    156.3
    
    
    
    40.4
    %
    
    
    10.8
    
    
    
    7.4
    %Canada and CALA
    
    
    37.2
    
    
    
    10.8
    %
    
    
    43.6
    
    
    
    11.3
    %
    
    
    6.4
    
    
    
    17.2
    %Asia Pacific
    
    
    6.0
    
    
    
    1.8
    %
    
    
    8.7
    
    
    
    2.2
    %
    
    
    2.7
    
    
    
    45.0
    %$
    342.2
    
    
    
    100.0
    %
    
    $
    387.1
    
    
    
    100.0
    %
    
    $
    44.9
    
    
    
    13.1
    %
 - 40 -




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Fiscal2005
    
    2006
    
    Change% of
    
    
    
    
    
    % ofRevenues
    
    Revenues
    
    Revenues
    
    Revenues
    

Amount
    
    %(in millions, except percentages)Products:Platforms and desktop appliances
    
    $
    165.1
    
    
    
    48.2
    %
    
    $
    204.3
    
    
    
    52.8
    %
    
    $
    39.2
    
    
    
    23.7
    %Software applications
    
    
    23.5
    
    
    
    6.9
    %
    
    
    34.2
    
    
    
    8.8
    %
    
    
    10.7
    
    
    
    45.5
    %Other (1)
    
    
    19.1
    
    
    
    5.6
    %
    
    
    22.0
    
    
    
    5.7
    %
    
    
    2.9
    
    
    
    15.2
    %207.7
    
    
    
    60.7
    %
    
    
    260.5
    
    
    
    67.3
    %
    
    
    52.8
    
    
    
    25.4
    %Services:Maintenance and support
    
    
    85.3
    
    
    
    24.9
    %
    
    
    80.9
    
    
    
    20.9
    %
    
    
    (4.4
    )
    
    
    (5.2
    %)Installation
    
    
    22.1
    
    
    
    6.5
    %
    
    
    24.6
    
    
    
    6.4
    %
    
    
    2.5
    
    
    
    11.3
    %Managed services
    
    
    10.9
    
    
    
    3.2
    %
    
    
    9.2
    
    
    
    2.4
    %
    
    
    (1.7
    )
    
    
    (15.6
    %)Professional and other services
    
    
    16.2
    
    
    
    4.7
    %
    
    
    11.9
    
    
    
    3.0
    %
    
    
    (4.3
    )
    
    
    (26.5
    %)134.5
    
    
    
    39.3
    %
    
    
    126.6
    
    
    
    32.7
    %
    
    
    (7.9
    )
    
    
    (5.9
    %)$
    342.2
    
    
    
    100.0
    %
    
    $
    387.1
    
    
    
    100.0
    %
    
    $
    44.9
    
    
    
    13.1
    %
 
 (1)
    
    Other products include mainly OEM products representing approximately 5.5% of total revenues in both the fiscal year ended
April 24, 2005 and the fiscal year ended April 30, 2006. Product Revenues:
    - 42 -




---



##### Table of Contents



Service Revenues:
      Gross Margin:
  - 43 -




---



##### Table of Contents



Fiscal2005
    
    2006% of
    
    
    
    
    
    % ofAmount
    
    Revenue
    
    Amount
    
    Revenue(in millions, except percentages)ProductsRevenues
    
    $
    207.7
    
    
    
    100.0
    %
    
    $
    260.5
    
    
    
    100.0
    %Gross Margin
    
    
    75.7
    
    
    
    36.4
    %
    
    
    111.4
    
    
    
    42.8
    %ServicesRevenues
    
    $
    134.5
    
    
    
    100.0
    %
    
    $
    126.6
    
    
    
    100.0
    %Gross Margin
    
    
    53.3
    
    
    
    39.6
    %
    
    
    50.0
    
    
    
    39.5
    %TotalRevenues
    
    $
    342.2
    
    
    
    100.0
    %
    
    $
    387.1
    
    
    
    100.0
    %Gross Margin
    
    
    129.0
    
    
    
    37.7
    %
    
    
    161.4
    
    
    
    41.7
    %
   
    
    a 1.3% improvement as a result of (i) a shift in communication platform sales mix
whereby total communication platform sales contained a higher proportion of higher margin
large enterprise business platforms in fiscal 2006 versus fiscal 2005; (ii) an improved mix
of software applications revenues as a total of product revenues as software applications
typically generate higher margins than either communication platforms and desktop
appliances or other product revenues; and (iii) cost reductions on communications platforms
and desktop appliances resulting from product re-design efforts and improved costs from
electronic contract manufacturers; and
    
    a 0.4% improvement as a result of lower inventory obsolescence provisions recorded in
fiscal 2006 compared to fiscal 2005 due to the end of life of our Mitel 3100 ICPproduct in
the third quarter of fiscal 2005.
   - 44 -




---



##### Table of Contents



Operating Expenses
 Research and Development:
    - 45 -




---



##### Table of Contents



Selling, General and Administrative:
   Special Charges:
    Gain on Sale of Manufacturing Operations:
  - 46 -




---



##### Table of Contents



Gain on Sale of Assets:
  Interest Expense:
  Other (Income) Expense, Net:
  - 47 -




---



##### Table of Contents



Mark-to-Market Adjustment on Derivatives:
    Provision for Income Taxes:
  Fiscal 2005 as compared to Fiscal 2004 and the Transition Period
  - 48 -




---



##### Table of Contents



Fiscal
    
    
    
    
    
    
    
    
    
    Six days ended2004
    
    2005
    
    Change
    
    April 30, 2005% of
    
    
    
    
    
    % of
    
    
    
    
    
    
    
    
    
    
    
    
    
    % ofAmounts
    
    Revenues
    
    Amounts
    
    Revenues
    
    Amount
    
    %
    
    Amounts
    
    Revenue(in millions, except percentages)Revenues
    
    $
    340.7
    
    
    
    100.0
    %
    
    $
    342.2
    
    
    
    100.0
    %
    
    $
    1.5
    
    
    
    0.4
    %
    
    $
    3.2
    
    
    
    100.0
    %Cost of revenues
    
    
    202.9
    
    
    
    59.6
    %
    
    
    213.2
    
    
    
    62.3
    %
    
    
    10.3
    
    
    
    5.1
    %
    
    
    2.4
    
    
    
    75.0
    %Gross margin
    
    
    137.8
    
    
    
    40.4
    %
    
    
    129.0
    
    
    
    37.7
    %
    
    
    (8.8
    )
    
    
    (6.4
    %)
    
    
    0.8
    
    
    
    25.0
    %Research and development
    
    
    36.2
    
    
    
    10.6
    %
    
    
    41.4
    
    
    
    12.1
    %
    
    
    5.2
    
    
    
    14.4
    %
    
    
    0.7
    
    
    
    21.9
    %Selling, general and administrative
    
    
    111.4
    
    
    
    32.7
    %
    
    
    114.9
    
    
    
    33.6
    %
    
    
    3.5
    
    
    
    3.1
    %
    
    
    1.8
    
    
    
    56.3
    %Special charges (1)
    
    
    11.7
    
    
    
    3.4
    %
    
    
    10.6
    
    
    
    3.1
    %
    
    
    (1.1
    )
    
    
    (9.4
    %)
    
    
    
    
    
    
    Loss on sale of manufacturing operations
    
    
    0.6
    
    
    
    0.2
    %
    
    
    3.4
    
    
    
    1.0
    %
    
    
    2.8
    
    
    
    466.7
    %
    
    
    
    
    
    
    Amortization of acquired intangibles (2)
    
    
    0.2
    
    
    
    0.1
    %
    
    
    
    
    
    
    
    
    
    
    (0.2
    )
    
    
    *
    
    
    
    
    
    
    
    Operating loss
    
    
    (22.3
    )
    
    
    (6.6
    %)
    
    
    (41.3
    )
    
    
    (12.1
    %)
    
    
    (19.0
    )
    
    
    85.2
    %
    
    
    (1.7
    )
    
    
    (53.1
    %)Interest expense
    
    
    4.3
    
    
    
    1.3
    %
    
    
    2.6
    
    
    
    0.8
    %
    
    
    (1.7
    )
    
    
    (39.5
    %)
    
    
    
    
    
    
    Mark to market adjustment on derivatives
    
    
    
    
    
    
    
    
    
    
    5.3
    
    
    
    1.5
    %
    
    
    5.3
    
    
    
    *
    
    
    
    0.1
    
    
    
    3.1
    %Beneficial conversion feature on
convertible debentures
    
    
    3.1
    
    
    
    0.9
    %
    
    
    
    
    
    
    
    
    
    
    (3.1
    )
    
    
    *
    
    
    
    
    
    
    
    Other (income) expense, net
    
    
    0.6
    
    
    
    0.2
    %
    
    
    (0.4
    )
    
    
    (0.1
    %)
    
    
    (1.0
    )
    
    
    *
    
    
    
    (0.2
    )
    
    
    (6.3
    %)Income tax (recovery) expense
    
    
    0.3
    
    
    
    0.1
    %
    
    
    0.8
    
    
    
    0.2
    %
    
    
    0.5
    
    
    
    166.7
    %
    
    
    
    
    
    
    Net loss
    
    $
    (30.6
    )
    
    
    (9.1
    %)
    
    $
    (49.6
    )
    
    
    (14.5
    %)
    
    $
    (19.0
    )
    
    
    62.1
    %
    
    $
    (1.6
    )
    
    
    (50.0
    %)
 
 *
    
    the comparison is not meaningful(1)
    
    Special charges relate to restructuring activities, product line exit
and other loss accruals undertaken to improve our operational efficiency and
realign our business.(2)
    
    Acquired intangible assets relating to the acquisition of the Mitel name,
certain assets and subsidiaries from Zarlink in 2001 were fully amortized in
2004. Revenues:
  Geographic Segment Revenues:
  Fiscal
    
    
    
    
    
    
    
    
    

Six days ended2004
    
    2005
    
    Change
    
    April 30, 2005% of
    
    
    
    
    
    % of
    
    
    
    
    
    
    
    
    
    
    
    
    
    % ofRevenues
    
    Revenues
    
    Revenues
    
    Revenues
    
    Amount
    
    %
    
    Revenues
    

Revenues(in millions, except percentages)United States
    
    $
    161.4
    
    
    
    47.4
    %
    
    $
    153.5
    
    
    
    44.9
    %
    
    $
    (7.9
    )
    
    
    (4.9
    %)
    
    $
    1.8
    
    
    
    56.3
    %EMEA
    
    
    140.5
    
    
    
    41.2
    %
    
    
    145.5
    
    
    
    42.5
    %
    
    
    5.0
    
    
    
    3.6
    %
    
    
    1.0
    
    
    
    31.2
    %Canada and CALA
    
    
    33.4
    
    
    
    9.8
    %
    
    
    37.2
    
    
    
    10.8
    %
    
    
    3.8
    
    
    
    11.4
    %
    
    
    0.4
    
    
    
    12.5
    %Asia Pacific
    
    
    5.4
    
    
    
    1.6
    %
    
    
    6.0
    
    
    
    1.8
    %
    
    
    0.6
    
    
    
    11.1
    %
    
    
    
    
    
    
    $
    340.7
    
    
    
    100.0
    %
    
    $
    342.2
    
    
    
    100.0
    %
    
    $
    1.5
    
    
    
    0.4
    %
    
    $
    3.2
    
    
    
    100.0
    %
  - 49 -




---



##### Table of Contents



Fiscal
    
    
    
    
    
    
    
    
    

Six days ended2004
    
    2005
    
    Change
    
    April 30, 2005% of
    
    
    
    
    
    % of
    
    
    
    
    
    
    
    
    
    
    
    
    
    % ofRevenues
    
    Revenues
    
    Revenues
    
    Revenues
    
    Amount
    
    %
    
    Revenue
    
    Revenue(in millions, except percentages)Products:Platforms and desktop appliances
    
    $
    168.1
    
    
    
    49.3
    %
    
    $
    165.1
    
    
    
    48.2
    %
    
    $
    (3.0
    )
    
    
    (1.8
    %)
    
    $
    1.3
    
    
    
    40.6
    %Software applications
    
    
    23.9
    
    
    
    7.0
    %
    
    
    23.5
    
    
    
    6.9
    %
    
    
    (0.4
    )
    
    
    (1.7
    %)
    
    
    0.3
    
    
    
    9.4
    %Other (1)
    
    
    15.1
    
    
    
    4.5
    %
    
    
    19.1
    
    
    
    5.6
    %
    
    
    4.0
    
    
    
    26.5
    %
    
    
    0.1
    
    
    
    3.1
    %207.1
    
    
    
    60.8
    %
    
    
    207.7
    
    
    
    60.7
    %
    
    
    0.6
    
    
    
    0.3
    %
    
    
    1.7
    
    
    
    53.1
    %Services:Maintenance and support
    
    
    95.4
    
    
    
    28.0
    %
    
    
    85.3
    
    
    
    24.9
    %
    
    
    (10.1
    )
    
    
    (10.6
    %)
    
    
    1.2
    
    
    
    37.5
    %Installation
    
    
    15.8
    
    
    
    4.6
    %
    
    
    22.1
    
    
    
    6.5
    %
    
    
    6.3
    
    
    
    39.9
    %
    
    
    0.1
    
    
    
    3.1
    %Managed services
    
    
    10.6
    
    
    
    3.1
    %
    
    
    10.9
    
    
    
    3.2
    %
    
    
    0.3
    
    
    
    2.8
    %
    
    
    0.2
    
    
    
    6.3
    %Professional and other services
    
    
    11.8
    
    
    
    3.5
    %
    
    
    16.2
    
    
    
    4.7
    %
    
    
    4.4
    
    
    
    37.3
    %
    
    
    
    
    
    
    133.6
    
    
    
    39.2
    %
    
    
    134.5
    
    
    
    39.3
    %
    
    
    0.9
    
    
    
    0.7
    %
    
    
    1.5
    
    
    
    46.9
    %$
    340.7
    
    
    
    100.0
    %
    
    $
    342.2
    
    
    
    100.0
    %
    
    $
    1.5
    
    
    
    0.4
    %
    
    $
    3.2
    
    
    
    100.0
    %
 
 (1)
    
    Other products include mainly OEM products representing approximately four percent, six percent and three percent of total
revenue in fiscal 2004, fiscal 2005, and the Transition Period, respectively. Product Revenues:
   Services Revenues:
  - 50 -




---



##### Table of Contents



Gross Margin:
  Fiscal
    
    Six days ended2004
    
    2005
    
    April 30, 2005% of
    
    
    
    
    
    % of
    
    
    
    
    
    % ofAmount
    
    Revenue
    
    Amount
    
    Revenue
    
    Amount
    
    Revenue(in millions, except percentages)ProductsRevenues
    
    $
    207.1
    
    
    
    100.0
    %
    
    $
    207.7
    
    
    
    100.0
    %
    
    $
    1.7
    
    
    
    100.0
    %Gross Margin
    
    
    81.4
    
    
    
    39.3
    %
    
    
    75.8
    
    
    
    36.5
    %
    
    
    0.1
    
    
    
    5.9
    %ServicesRevenues
    
    $
    133.6
    
    
    
    100.0
    %
    
    $
    134.5
    
    
    
    100.0
    %
    
    $
    1.5
    
    
    
    100.0
    %Gross Margin
    
    
    56.4
    
    
    
    42.2
    %
    
    
    53.2
    
    
    
    39.6
    %
    
    
    0.7
    
    
    
    46.7
    %TotalRevenues
    
    $
    340.7
    
    
    
    100.0
    %
    
    $
    342.2
    
    
    
    100.0
    %
    
    $
    3.2
    
    
    
    100.0
    %Gross Margin
    
    
    137.8
    
    
    
    40.4
    %
    
    
    129.0
    
    
    
    37.7
    %
    
    
    0.8
    
    
    
    25.0
    %
 Transition Period
  Fiscal 2005 Compared to Fiscal 2004
   
    
    a 1.5% decline as a result of increased freight and distribution costs in fiscal 2005
compared to fiscal 2004;
    
    a 1.0% decline as a result of (i) a shift in our communication platform sales mix
whereby total communication platform sales contained a higher proportion of lower margin
small and medium business platforms in fiscal 2005 compared to fiscal 2004; and (ii)
increased
 - 51 -




---



##### Table of Contents



price competition on desktop devices resulted in price reductions which contributed in
reducing overall desktop device margins; and
    
    a 0.3% decline as a result of higher inventory obsolescence provisions recorded in
fiscal 2005 compared to fiscal 2004 due primarily to the end of life of our Mitel 3100 ICP
product.
  Operating Expenses
 Research and Development:
   Selling, General and Administrative:
   Special Charges:
   - 52 -




---



##### Table of Contents



Loss on Sale of Manufacturing Operations:
  Amortization of Acquired Intangibles:
  Interest Expense:
  Other (Income) Expense, Net:
  - 53 -




---



##### Table of Contents



Mark-to-Market Adjustment on Derivatives:
   Beneficial Conversion Feature on Convertible Debentures:
  Provision for Income Taxes:
   Critical Accounting Policies
  - 54 -




---



##### Table of Contents



Revenue Recognition:
      Allowance for Doubtful Accounts:
   - 55 -




---



##### Table of Contents



Inventory Obsolescence:
   April 24,
    
    
    April 30,
    
    
    April 30,2005
    
    
    2005
    
    
    2006Raw materials
    
    $
    0.9
    
    
    $
    0.9
    
    
    $
    0.9Finished goods
    
    
    17.8
    
    
    
    18.1
    
    
    
    25.218.7
    
    
    
    19.0
    
    
    
    26.1Less: inventory write-down
    
    
    (1.6
    )
    
    
    (1.6
    )
    
    
    (2.5
    )$
    17.1
    
    
    $
    17.4
    
    
    $
    23.69
    %
    
    
    8
    %
    
    
    10
    %
  Warranty Provision:
  - 56 -




---



##### Table of Contents



April 24,
    
    
    April 30,
    
    
    April 30,2005
    
    
    2005
    
    
    2006Balance, beginning of period
    
    $
    1.9
    
    
    $
    2.1
    
    
    $
    2.6Warranty costs incurred
    
    
    (0.7
    )
    
    
    (1.0
    )
    
    
    (1.8
    )Warranties issued
    
    
    0.4
    
    
    
    1.0
    
    
    
    1.0Other
    
    
    0.5
    
    
    
    0.5
    
    
    
    0.2Balance, end of period
    
    $
    2.1
    
    
    $
    2.6
    
    
    $
    2.0
 Long-Lived Assets:
   Goodwill:
  Special Charges:
  - 57 -




---



##### Table of Contents



Lease Termination Obligations:
  Deferred Taxes:
  Pension Costs:
  - 58 -




---



##### Table of Contents



April 24,
    
    April 30,
    
    April 30,2005
    
    2005
    
    2006Discount rate
    
    
    5.50
    %
    
    
    5.50
    %
    
    
    5.00
    %Compensation increase rate
    
    
    2.50
    %
    
    
    2.50
    %
    
    
    2.75
    %Investment returns assumption
    
    
    7.75
    %
    
    
    7.75
    %
    
    
    7.25
    %Inflation rate
    
    
    2.50
    %
    
    
    2.50
    %
    
    
    2.75
    %Average remaining service life of employees
    
    20 years
    
    20 years
    
    21 years
 Derivative Instruments:
  - 59 -




---



##### Table of Contents




    
    The discount rate is determined based on several factors including our credit risk, cost
of borrowing and liquidity risk. The original discount rate when the redeemable preferred shares were issued of 17% took these factors into consideration with credit risk to
maturity being primarily considered in setting the rate above our cost of borrowing which
would have been attainable at rates lower than 17%. We evaluate the appropriateness of the
discount rate on a regular basis. As of April 30, 2006, we believed that the rate of 17%
continued to be appropriate. The basis for this opinion was that while the credit risk may
have decreased due to the reduced term to maturity and improved financial results, we did
not have access to unsecured credit facilities and as a result there might have been an
offsetting increased liquidity risk. In addition, at April 30, 2006 there was an
additional impending liquidity risk of the put options on the common shares being exercised
if we did not complete an initial public offering by September 1, 2006 (subsequent to April
30, 2006 this date was extended to May 1, 2007).
    
    The fair value of the common shares at the time the redeemable preferred shares were
issued in April 2004 was determined to be $0.87 (C$1.00). The fair value of the shares
used in the calculation of the fair value of the derivative at April 30, 2006 was $1.38
(C$1.55). The $1.38 (C$1.55) value of the common shares is discussed in the section
Determination of Fair Market Value of our Common Shares.
    
    At any time after five years, our preferred shareholders have the right to require us to
redeem the shares. Since the shares were issued in April 2004, there were three years
remaining as at April 30, 2006.
   Effect on Lossbefore income taxesChange in Assumption
    
    (Increase)/Decrease(in millions)1 percentage point increase in discount rate
    
    $
    1.91 percentage point decrease in discount rate
    
    
    (2.0
    )1 cent increase in fair value of common share price
    
    
    (0.5
    )1 cent decrease in fair value of common share price
    
    
    0.5
 - 60 -




---



##### Table of Contents



Determination of Fair Market Value of our Common Shares
     - 61 -




---



##### Table of Contents



Recent Accounting Pronouncements
 SFAS 123(R)
  SFAS 151
  SFAS 153
  - 62 -




---



##### Table of Contents



SFAS 154
  FSP SFAS 143-1
  SFAS 155
 Accounting for Certain Hybrid Financial
Instruments
 - 63 -




---



##### Table of Contents



EITF 05-2
 The Meaning of Conventional Convertible Debt Instrument in Issue No.
00-19
 FIN 48
  SFAS 157
 Fair
Value Measurements
 SFAS 158
 Employers Accounting for Defined Benefit Pension and Other Postretirement Plans  an amendment of
FASB Statement No. 87, 88, 106 and 132(R), .
 - 64 -




---



##### Table of Contents



SAB 108
  
 B. Liquidity and Capital Resources
       - 65 -




---



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- 66 -




---



##### Table of Contents



Cash Flows
 Comparison of fiscal 2006 to fiscal 2005
  Fiscal2005
    
    
    2006
    
    
    Change(in millions)Net cash provided by (used in)Operating activities
    
    $
    (31.8
    )
    
    $
    (2.3
    )
    
    $
    29.5Investing activities
    
    
    (5.8
    )
    
    
    3.7
    
    
    
    9.5Financing activities
    
    
    20.1
    
    
    
    (11.7
    )
    
    
    (31.8
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    0.5
    
    
    
    (0.6
    )
    
    
    (1.1
    )Increase (decrease) in cash and cash equivalents
    
    $
    (17.0
    )
    
    $
    (10.9
    )
    
    $
    6.1Cash and
cash equivalents, end of period
    
    $
    9.7
    
    
    $
    35.7
    
    
    $
    26.0
 Cash Used in Operating Activities:
  - 67 -




---



##### Table of Contents



Cash Provided by (Used in) Investing Activities:
  
    
    $12.4 million in proceeds resulting from the sale of our Caldicot property in August
2005; and
    
    $2.8 million in net proceeds resulting from net foreign exchange gain on our hedging
activities.
  
    
    $4.3 million increase in additions to capital; and
    
    $1.4 million increase in restricted cash.
 Cash Provided by (Used in) Financing Activities:
  
    
    the repayment of $9.8 million owed on our mortgage of the Caldicot property following
its sale in August 2005;
    
    the $12.4 million proceeds received upon the issuance of warrants to Technology
Partnerships Canada in fiscal 2005 pursuant to research and development funding received
from Technology Partnerships Canada; and
    
    cash provided by bank indebtedness was $8.2 million less in fiscal 2006 compared to
fiscal 2005.
 Comparison of Fiscal 2004, Fiscal 2005 and the Six-Day Period ended April 30, 2005
  Six DaysEndedFiscal
    
    
    
    
    
    
    April 302004
    
    
    2005
    
    
    Change
    
    
    2005Net cash provided by (used in)Operating activities
    
    $
    10.8
    
    
    $
    (31.8
    )
    
    $
    (42.6
    )
    
    $
    (1.2
    )Investing activities
    
    
    (6.3
    )
    
    
    (5.8
    )
    
    
    0.5
    
    
    
    (1.1
    )Financing activities
    
    
    (2.0
    )
    
    
    20.1
    
    
    
    22.1
    
    
    
    39.3Effect of exchange rate changes on cash and cash equivalents
    
    
    1.9
    
    
    
    0.5
    
    
    
    (1.4
    )
    
    
    (0.1
    )Increase (decrease) in cash and cash equivalents
    
    $
    4.4
    
    
    $
    (17.0
    )
    
    $
    (21.4
    )
    
    $
    36.9Cash and
cash equivalents, end of period
    
    $
    26.7
    
    
    $
    9.7
    
    
    $
    (17.0
    )
    
    $
    46.6
 Cash Provided by (Used in) Operating Activities:
  - 68 -




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Cash Used in Investing Activities:
  Cash Provided by (Used in) Financing Activities:
  
 C. Research and Development, Patents and Licenses, etc.
  
 D. Trend Information
  - 69 -




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##### Table of Contents




    
    the reduction or elimination of long distance and local toll charges;
    
    lower network maintenance expenses since physical moves, additions and changes can be
handled centrally in an IP-based network;
    
    decreased network management staff requirements since both voice and data communications
are carried on a single network; and
    
    lower cabling costs in new building construction since the same cable carries both voice
and data communications.
 - 70 -




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##### Table of Contents




    
    even though market indicators anticipate growth, particularly in IP Communications, our
performance could be impacted by our existing and prospective customers willingness to
invest in new communications solutions;
    
    our shipments of IP Communications products have continued to grow strongly throughout
fiscal 2006 due primarily to the cost saving and business process benefits an IP
Communications solution can deliver to a customer. Management believes that an
 - 71 -




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##### Table of Contents



enterprise with multiple networked locations or employees who work remote can benefit
significantly from an IP Communications solution;
 
    
    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. We believe that
this replacement trend will continue;
    
    The market in which we operate is extremely competitive, and there is significant
pressure to remain price competitive. We believe that the programs in place to reduce
costs of manufacturing will continue to offset pricing pressures; and
  
 E. Off-Balance Sheet Arrangements
  Letters of Credit:
  Bid and Performance Related Bonds:
  Intellectual Property Indemnification Obligations:
  - 72 -




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F. Tabular Disclosure of Contractual Obligations
  Payments Due by PeriodLess than
    
    
    
    
    
    
    
    
    
    
    AfterContractual Obligations
    
    Total
    
    
    1 Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    5 YearsLong-term debt obligations(1)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Capital lease obligations(1)
    
    
    4.5
    
    
    
    1.8
    
    
    
    2.7
    
    
    
    
    
    
    
    Operating lease obligations(2)
    
    
    73.7
    
    
    
    15.6
    
    
    
    27.5
    
    
    
    21.4
    
    
    
    9.2Purchase obligations(3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Defined benefit pension plan contributions(4)
    
    
    2.9
    
    
    
    2.9
    
    
    
    
    
    
    
    
    
    
    
    Convertible notes(5)
    
    
    73.5
    
    
    
    5.0
    
    
    
    12.8
    
    
    
    55.7
    
    
    
    Total contractual cash obligations
    
    $
    154.6
    
    
    $
    25.3
    
    
    $
    43.0
    
    
    $
    77.1
    
    
    $
    9.2
 
 (1)
    
    Represents the principal and interest payments for the loans. Interest on these loans
ranges from 1.3% to 11.8%, as described in our consolidated financial statements.(2)
    
    Operating lease obligations exclude payments to be received by us under sublease arrangements.(3)
    
    Represents primarily our obligation to acquire capital equipment from BreconRidge pursuant to
the supply agreement between us and BreconRidge dated August 31, 2001.(4)
    
    Represents the estimated contribution to our defined benefit pension plan over the next twelve
months. Due to the increase of $15.0 million in the unfunded pension liability during fiscal 2006,
we expect our funding requirements to increase in future years. The amount of the increase will
depend upon the time period in which the deficit is amortized. If the deficit is amortized over 15
years, which is our current practice, we would expect our annual funding requirements to increase
by approximately $2.5 million. If the deficit is amortized over 10 years, we would expect our
annual funding requirements to increase by approximately $4.5 million.(5)
    
    Represents the principal balance on maturity of the convertible notes and an estimate of the
variable interest payable on the convertible notes. The interest is based on a spread over LIBOR of
500 basis points prior to an initial public offering and 250 basis points subsequent to an initial
public offering. For the purposes estimating the variable interest, LIBOR has been assumed to be
5%.      - 73 -




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G. Safeharbor
  
 Item 6. Directors, Senior Management and Employees
 
 A. Directors and Senior Management
     - 74 -




---



##### Table of Contents



Name and Municipality of Residence
    
    Age
    
    Position
    
    Principal OccupationDr. Terence H. Matthews(1)
    
    63
    
    Chairman of the Board
    
    Chairman of the Board of MitelOttawa, Ontario, Canada
    
    
    
    
    
    Chairman of the Board ofMarch NetworksDonald W. Smith
    
    58
    
    Chief Executive
    
    Chief Executive OfficerOttawa, Ontario, Canada
    
    
    
    Officer and Director
    
    of MitelPaul A.N. Butcher
    
    44
    
    President and Chief
    
    President and ChiefOttawa, Ontario, Canada
    
    
    
    Operating Officer and
    
    Operating OfficerDirector
    
    of MitelPeter D. Charbonneau(2)
    
    53
    
    Lead Director
    
    General Partner ofOttawa, Ontario, Canada
    
    
    
    
    
    Skypoint CapitalCorporationKirk K. Mandy
    
    50
    
    Director
    
    Chief Executive OfficerOttawa, Ontario, Canada
    
    
    
    
    
    of ZarlinkGilbert S. Palter
    
    41
    
    Director
    
    Chief Investment OfficerToronto, Ontario, Canada
    
    
    
    
    
    and Managing Partner ofEdgeStone CapitalPartners, L.P.Guthrie J. Stewart
    
    51
    
    Director
    
    Partner of EdgeStoneMontréal, Quebec, Canada
    
    
    
    
    
    Capital Partners, L.P.Steven E. Spooner
    
    48
    
    Chief Financial Officer
    
    Chief Financial Officer ofOttawa, Ontario, Canada
    
    
    
    
    
    MitelGraham Bevington
    
    46
    
    Vice President and
    
    Vice President andChepstow, Wales
    
    
    
    Managing Director,
    
    Managing Director,Europe, Middle East
    
    Europe, Middle East andand Africa Region
    
    Africa Region of MitelRoger K. Fung
    
    54
    
    Vice President and
    
    Vice President andHong Kong, China
    
    
    
    Managing Director,
    
    Managing Director, Asia-Asia-Pacific Region
    
    Pacific Region of MitelDouglas W. Michaelides(3)
    
    45
    
    Vice President, Global
    
    Vice President, GlobalOttawa, Ontario, Canada
    
    
    
    Marketing
    
    Marketing of MitelRonald G. Wellard
    
    48
    
    Vice President,
    
    Vice President, ProductOttawa, Ontario, Canada
    
    
    
    Product Development
    
    Development of Mitel
 
 (1)
    
    Dr. Matthews routinely invests in and sits as a director on the boards of businesses that
are at an early stage of development and that, as a result, involve substantial risks. Dr. Matthews
was a director of Ironbridge Networks Corporation, which went into receivership in January 2001 and
West End Systems Corporation, which went into receivership in February 1999. - 75 -




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(2)
    
    Mr. Charbonneau is a director of METConnex Inc., which filed a notice of intention to file for
bankruptcy protection on September 28, 2006.(3)
    
    Mr. Michaelides was employed by Nortel Networks Corporation (Nortel) in the area of sales and
marketing prior to October 2003. In that time, he became subject to a management cease trade order
regarding the securities of Nortel issued by the Ontario Securities Commission, resulting from a
failure by Nortel to file its financial statements as required. The cease trade order was revoked
on June 21, 2005.  Dr. Terence H. Matthews
 Donald W. Smith
 Paul A.N. Butcher
 - 76 -




---



##### Table of Contents



Peter D. Charbonneau
 Kirk K. Mandy
 Gilbert S. Palter
 - 77 -




---



##### Table of Contents



Guthrie J. Stewart
 Steven E. Spooner
 Graham Bevington
 Roger K. Fung
 - 78 -




---



##### Table of Contents



Douglas W. Michaelides
 Ronald G. Wellard
 
 B. Compensation
  - 79 -




---



##### Table of Contents



Summary Compensation Table
 Long Term CompensationSecurities Underlying OptionsAnnual Compensation
    
    and Deferred Share Units
    
    All OtherName And Principal Position
    
    Salary
    
    Bonus
    
    Granted
    
    CompensationDonald W. Smith  Chief Executive
Officer(1)
    
    $
    630,927
    
    
    
    
    
    
    
    
    
    
    $
    10,080
    (4)Paul A.N. Butcher  President and
Chief Operating
Officer(1)
    
    $
    420,924
    
    
    
    
    
    
    59,700 Common Shares
    
    $
    31,080
    (5)Steven E. Spooner  Chief
Financial Officer(1)
    
    $
    231,001
    
    
    $
    84,000
    
    
    575,000 Common Shares
    
    $
    10,080
    (6)Graham Bevington  Vice President
and Managing Director, Europe, Middle
East and Africa Region(2)
    
    $
    260,031
    
    
    
    
    
    
    150,000 Common Shares(8)
    
    $
    37,538
    (7)Kevin E. Bowyer  President,
Mitel Networks, Inc.(3)
    
    $
    175,000
    
    
    
    223,375
    
    
    150,000 Common Shares(9)
    
    $
    8,000
 
 (1)
    
    Compensation paid in Canadian dollars, but converted to U.S. dollars at the average of the
noon buying rates per Federal Reserve Bank of New York for fiscal 2006 of C$1.00 = $0.84.(2)
    
    Compensation paid in British Pounds Sterling, but converted to U.S. dollars at the average of
the noon buying rates per Federal Reserve Bank of New York for fiscal 2006 of GBP £1.00 = $1.78.(3)
    
    Mr. Bowyers other compensation for fiscal 2006 was a car allowance of $8,000.(4)
    
    Mr. Smiths other compensation is a car allowance of $10,080.(5)
    
    Mr. Butchers other compensation is comprised of a car allowance of $15,120 and a company
contribution to our Deferred Share Unit Plan of $15,960.(6)
    
    Mr. Spooners other compensation is a car allowance of $10,080.(7)
    
    Mr. Bevingtons other compensation is a car allowance of $22,964 and a company contribution to
a defined benefit plan of $14,575.(8)
    
    These options were conditional on certain financial targets which were not met and in
accordance with the terms of their grant, these options were cancelled on June 8, 2006.(9)
    
    On May 2, 2006, Mr. Bowyer was terminated and all of these options were cancelled.  Number ofCommon
    
    Percent of
    
    Exercise Price
    
    Market Value ofShares
    
    Total Options
    
    Per Common
    
    Common SharesUnderlying
    
    Granted to
    
    Share
    
    UnderlyingOptions
    
    Employees in
    
    ($/Common
    
    Options onName
    
    Granted(1)
    
    Fiscal Year
    
    Share)(2)
    
    Date of Grant(3)
    
    Expiration DateDonald W. Smith
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Paul A.N. Butcher
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Steven E. Spooner
    
    
    575,000
    
    
    
    11.58
    %
    
    $
    0.89
    
    
    
    
    
    
    July 27, 2010Graham Bevington
    
    
    150,000
    (5)
    
    
    3.02
    %
    
    $
    0.89
    
    
    
    
    
    
    July 27, 2010Kevin E. Bowyer
    
    
    150,000
    
    
    
    3.02
    %
    
    $
    0.89
    
    
    
    
    
    
    July 27, 2010Dr. Terence H. Matthews
    
    
    78,947
    
    
    
    1.59
    %
    
    $
    0.89
    
    
    
    
    
    
    July 27, 2010Peter D. Charbonneau
    
    
    102,447
    
    
    
    2.06
    %
    
    $
    0.89
    
    
    
    
    
    
    July 27, 2010Kirk K. Mandy
    
    
    77,342
    
    
    
    1.56
    %
    
    $
    0.89
    
    
    
    
    
    
    July 27, 2010Gilbert S. Palter
    
    
    
    (4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Guthrie J. Stewart
    
    
    
    (4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
 (1)
    
    The options vest as to 25% on the first anniversary of the date of grant and as to an
additional 25% each year thereafter.(2)
    
    Option exercise prices have been set in Canadian dollars but converted to U.S. dollars at the
noon buying rate per Federal Reserve Bank of New York on April 30, 2006 of C$1.00 = $0.89.(3)
    
    Values based on the midpoint of the public offering price range set forth on the cover page of
this prospectus.(4)
    
    Options to purchase 78,290 common shares have been granted to EdgeStone Capital Equity Fund II
Nominee, Inc. in connection with Mr. Palter and Mr. Stewart acting as directors of Mitel.(5)
    
    These options were cancelled on June 8, 2006. - 80 -




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##### Table of Contents



Annual service on the board of directors (other than the Chair)
    
    C$
    25,000Annual service as the Chair of the board of directors
    
    C$
    100,000Annual service as a member of the audit committee (other than the Chair)
    
    C$
    10,000Annual service as the Chair of the audit committee
    
    C$
    15,000Annual service as a member of other standing committees
    
    C$
    7,500Meeting fees (varies depending on whether in person, by telephone and by committee)
    
    C$
    500-2,000
  Canada Business Corporations Act
 Employment Contracts
 Donald W. Smith.
 - 81 -




---



##### Table of Contents



Paul A.N. Butcher.
  Graham Bevington.
 - 82 -




---



##### Table of Contents



Steven E. Spooner.
 Kevin Bowyer.
  Indebtedness of Directors, Officers and Members of Senior Management:
 - 83 -




---



##### Table of Contents



Pension and Retirement Plans
        
 C. Board Practices
 - 84 -




---



##### Table of Contents



Board Committees
  Audit Committee.
  
    
    the integrity of our financial statements and accounting and financial process and the
audits of our financial statements;
    
    our compliance with legal and regulatory requirements;
    
    our external auditors qualifications and independence;
    
    the work and performance of our financial management, internal auditor and external
auditor; and
    
    our system of disclosure controls and procedures and system of internal controls
regarding finance, accounting, legal compliance, risk management and ethics established by
management and our board.
   Compensation Committee.
 - 85 -




---



##### Table of Contents




    
    compensation, development, succession and retention of the chief executive officer
and key employees;
    
    the establishment of fair and competitive compensation and performance incentive plans;
and
    
    the production of an annual report on executive compensation for inclusion in our public
disclosure documents.
 Compensation Committee Interlocks and Insider Participation.
 Other Committees
  
    
    reviewing all forward-looking information in our continuous disclosure documents;
    
    implementation of the disclosure committee policy and the education of employees,
officers and directors on matters related to the policy;
    
    approving the designation of spokespersons;
    
    ensuring that appropriate processes are in place to monitor our corporate website;
    
    ensuring that when a public disclosure requires corrections, such correction is timely
and made under the supervision of the disclosure committee;
    
    monitoring the integrity and effectiveness of our disclosure controls and procedures on
an ongoing basis and reporting findings to the CEO and CFO;
    
    reviewing and supervising the preparation of documentation that are required to be or
are voluntarily filed with a securities commission, stock exchange or government under
applicable securities or corporate law including annual certifications, annual reports
filed with the SEC on Form 20-F and 6-K; and
    
    evaluating the effectiveness of our disclosure controls and procedures as of the end of
each year end.
 
 D. Employees
  - 86 -




---



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E. Share Ownership
    Employee Equity Compensation Plans
 2001 Stock Option Plan:
  - 87 -




---



##### Table of Contents



2006 Equity Incentive Plan:
     
    
    to amend general vesting provisions;
 - 88 -




---



##### Table of Contents




    
    to amend the term of any option, subject to limits contained in the plan;
    
    to amend the provisions in the plan dealing with retirement, death, disability or
termination of participants;
    
    to make amendments for the protection of participants in the plan, including amendments
resulting from changes in law in any jurisdiction; and
    
    to make amendments to cure or correct ambiguities, defects or mistakes in the plan.
  
 Item 7. Major Shareholders and Related Party Transactions
 
 A. Major Shareholders
  Beneficial
    
    
    
    
    
    Percentage ofIdentity of Person or
    
    Amount
    
    Percentage of
    
    VotingClass of Shares
    
    Group
    
    
    Owned (1)
    
    
    Class
    

Power (2)Series BPreferred
Shares
    
    Dr. Matthews
    
    
    40,897,750
    
    
    
    60
    %
    
    
    20
    %Common Shares
    
    Wesley Clover
    
    
    90,000,000
    
    
    
    77
    %
    
    
    44
    %Total shares owned
    
    
    135,558,122
    (3)
    
    
    N/A
    
    
    
    66
    %by Dr. MatthewsSeries APreferred
Shares
    
    EdgeStone
    
    
    20,000,000
    
    
    
    100
    %
    
    
    10
    %Common Shares
    
    EdgeStone
    
    
    5,049,791
    
    
    
    4
    %
    
    
    2
    %Total shares owned
    
    
    25,049,791
    
    
    
    N/A
    
    
    
    12
    %by EdgeStoneSeries BPreferred
Shares
    
    PTIC
    
    
    16,000,000
    
    
    
    24
    %
    
    
    8
    %Common Shares
    
    Her Majesty the
    
    
    25,428,050
    
    
    
    18
    %
    
    
    11
    %(warrants only)
    
    Queen in Right ofCanadaCommon Shares
    
    Zarlink
    
    
    10,000,000
    
    
    
    9
    %
    
    
    5
    %
 
 (1)
    
    Beneficial ownership is determined in accordance with SEC rules, which generally attribute
beneficial ownership of securities to each person or entity who possesses, either solely or shared
with others, the power to vote or dispose of those securities. These rules also treat as
outstanding all shares that a person would receive upon exercise of stock options or warrants, or
upon conversion of convertible securities held by that person that are exercisable or convertible
within 60 days of the determination date. Shares issuable pursuant to exercisable or convertible
securities are deemed to be outstanding for computing the percentage ownership of the person
holding such securities, but are not deemed outstanding for computing the percentage ownership of
any other person. - 89 -




---



##### Table of Contents



(2)
    
    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 our common shares. For the purposes of
calculating the percentage of Voting Power it has been assumed that the Series A Preferred
Shares and Series B Preferred Shares convert into our common shares on a one for one basis.
The actual conversion rate will be greater than one for one and will depend on the value of a
common share at the time the Series A Preferred Shares and Series B Preferred Shares are
converted. See Item 1010.B. Additional Information  Memorandum and Articles of Incorporation
 Share Capital Stock.(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 105,203 stock options that are currently exercisable.(4)
    
    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 our shareholders, the EdgeStone nominees
are elected. See Item 1010.C. Additional Information  Material Contracts for discussion of
the Shareholders Agreement.  United States Shareholders
  
 B. Related Party Transactions
  BreconRidge Manufacturing Solutions Corporation
  - 90 -




---



##### Table of Contents



Outsourcing of Manufacturing and Repair Operations
     Management Services
  - 91 -




---



##### Table of Contents



Leased Property:
   Brookstreet Research Park Corporation
  March Networks Corporation
   - 92 -




---



##### Table of Contents



Zarlink Semiconductor Inc.
  Supply Agreement:
    - 93 -




---



##### Table of Contents



Other Supply Arrangements:
  Intellectual Property License Agreement:
    
    
    a non-competition and non-solicitation agreement among us, Zarlink and its subsidiaries,
Wesley Clover, and Dr. Matthews, dated February 16, 2001; and
    
    a lease between us and Zarlink Semiconductor Limited, a subsidiary of Zarlink, for
premises in Caldicot, United Kingdom, which we assigned in connection with the sale of the
Caldicot property on August 31, 2005.
 Wesley Clover Corporation
   - 94 -




---



##### Table of Contents



Other Transactions
  
    
    NewHeights Software (a corporation controlled by Owen Matthews, who is related to Dr.
Matthews) may be deemed a related party because Dr. Matthews indirectly owns approximately
16% of that company. During fiscal 2006, we paid NewHeights $2.6 million in software
royalties relating to a customized desktop communication management software application
which we integrate and distribute as Your Assistant(2004  $0.3 million; 2005  $0.8
million; the Transition Period  $nil). We also received $0.1 million of rental and other
income from NewHeights during fiscal 2006 (2004  $nil; 2005  $0.1 million; the Transition
Period  $nil).
    
    MKC Corporation may be deemed to be a related party because Dr. Matthews directly or
indirectly owns approximately 82% of that company. During fiscal 2006, we paid MKC $nil for
the purchase of SIP-based equipment and software components (2004  $0.1 million; 2005 
$0.1 million; the Transition Period  $0.1 million). On April 1, 2006, we entered into a
purchase and sale agreement whereby we purchased certain SIP-based IP assets from MKC. The
purchase price for the assets is payable in the form of a royalty equal to $0.50 for each
Mitel SIP-enabled IP desktop device we sell over the next five years, up to a maximum
royalty value, in the aggregate, of C$1.3 million. During fiscal 2006, we recorded
royalties payable to MKC of less than $0.05 million relating to this agreement. NewHeights
Software and MKC Corporation merged on September 1, 2006.
    
    Encore Networks may be deemed to be a related party because Dr. Matthews directly or
indirectly owns approximately 90% of that company. During fiscal 2006, we paid Encore $0.2
million for the purchase of certain signaling conversion hardware and software which we
distribute as part of our product line and for other services (2004  $nil; 2005  $nil;
the Transition Period  $nil). We also received $0.1 million of other income from Encore
Networks during fiscal 2006 (2004  $0.1 million; 2005  $0.1 million; the Transition
Period  $nil).
 Mitel 3600 Hosted IP Key System
 - 95 -




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Mitel 3600 Hosted IP Key System
  
    
    CTJL may be deemed to be a related party because Dr. Matthews directly or indirectly
wholly owns that company. During fiscal 2006, we paid less than $0.05 million to CTJL for
chartered plane rentals (2004  less than $0.05 million; 2005  less than $0.05 million;
the Transition Period  $nil).
    
    Brookstreet may be deemed to be a related party because Dr. Matthews directly or
indirectly wholly owns that company. During fiscal 2006, we paid $0.2 million to
Brookstreet for accommodations and meeting space (2004  $0.1 million; 2005  less than
$0.05 million; the Transition Period  $nil).
    
    The Celtic Manor Resort Limited may be deemed to be a related party because Dr. Matthews
directly or indirectly wholly owns that company. During fiscal 2006, we paid $0.1 million
to The Celtic Manor for accommodations and meeting space (2004  $0.3 million; 2005  $0.3
million; the Transition Period  $nil).
    
    Bridgewater Systems Corporation may be deemed to be a related party because Dr. Matthews
directly or indirectly owns approximately 18% of that company. During fiscal 2006 we sold
$0.1 million of communications equipment to Bridgewater (2004  $nil; 2005  $nil; the
Transition Period  $nil).
  
    
    a summary of the nature of the relationship with the related party and the significant
commercial terms of the transaction such as price and total value;
    
    the parties to the transaction;
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
    
    an outline of the benefits to us of the transaction;
    
    whether terms are at market and whether they were negotiated at arms length; and
    
    for related party transactions involving our officers or directors, whether there has
been any loss of a corporate opportunity.
   Registration Rights
  
 C. Interests of Experts and Counsel
  
 Item 8. Financial Information
 
 A. Consolidated Statements and Other Financial Information
  Legal Proceedings
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Dividend Policy
  - 98 -




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B. Significant Changes
  
 Item 9. The Offer and Listing
 
 A. Offer and Listing Details
 Securities Act of 1933
 
 B. Plan of distribution
  
 C. Markets
  
 D. Selling shareholders
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E. Dilution
  
 F. Expenses of the issue
  
 Item 10. Additional Information
 
 A. Share Capital
  
 B. Memorandum and Articles of Incorporation
    
    
    amendments to By-Law No. 1A which reflect our current corporate governance structure and
enhanced practices including an increase in the quorum requirement for meetings of
shareholders as well as current provisions of the CBCA; and
    
    amendments to our articles of incorporation to (a) increase the minimum number of
directors from one (1) to three (3) and the maximum number of directors from ten (10) to
fifteen (15) in order to support any future increases in the size of the board of
directors, and (b) to change our name from Mitel Networks Corporation to Mitel
Corporation.
   Meetings of Shareholders
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Directors
  - 101 -




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- 102 -




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Share Capital
       Series A Preferred Shares
 Liquidation Preference
 - 103 -




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
    
    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 Preferred Shares plus declared but
unpaid dividends, the holders of Series A Preferred 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 Preferred Shares plus declared but unpaid dividends,
then the maximum amount per Series A Preferred Share that the holders are entitled to
receive shall be the sum of two times the original issue price of the Series A Preferred
Shares plus declared but unpaid dividends.
 Voting
 Conversion
  Anti-Dilution Protection
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Redemption
 Series B Preferred Shares
  Wesley Clover Warrants:
  Warrants
  Exercise Events
      - 105 -




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1 4
 1 4
  Additional Warrants
  
 C. Material Contracts
  Sale of Shares in Edict
  Sale and Lease-Back of Caldicot Property
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Senior Secured Convertible Note Transaction
  Convertible Notes :
 Conversion
 Default
 - 107 -




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Fundamental Changes
 Make-Whole Premium
 Noteholder Warrants:
 2005 Registration Rights Agreement:
 - 108 -




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
    
    General Registration Rights. Promptly following the closing of a Qualified IPO,
we have agreed to prepare and file a resale shelf registration statement with respect to
the registrable common shares (the common shares issuable upon conversion of the
convertible notes and the 16,500,000 common shares issuable upon exercise of the noteholder
warrants) under this agreement and use our reasonable best efforts to cause the resale
shelf registration statement to become effective within 180 days to permit resales by the
holders upon the expiry of the lock-up period. If the resale shelf registration statement
has not been declared effective by the SEC within 180 days following completion of a
Qualified IPO, we will be required to make additional interest payments on any outstanding
convertible notes held by the holders who asked to have their registrable shares included
in the resale shelf registration statement.
    
    Piggyback Registration Rights. If the resale shelf registration statement has
not been declared effective, and we register any other securities for public sale on
another registration statement, the holders will have the right to include their common
shares in the other registration statement. After we complete a Qualified IPO, we will not
register any shares for the benefit of any person other than ourselves before we register
the registrable shares held by the holders under the resale shelf registration statement.
 Pledge, Security and Guarantee
 Collateral Agency Agreement
 Edgestone Equity Financing
 Subscription Agreement between Mitel and EdgeStone:
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
    
    Issued and sold to Edgestone 20,000,000 Series A Preferred Shares at a purchase price of
CDN$1.00 per share.
    
    Issued and sold to Edgestone, for the aggregate price of CDN$1.00, a warrant (the
Series 1 Warrant) to purchase up to 5,000,000 common shares at an exercise price of
CDN$1.25 per share.
    
    Issued and sold to Edgestone, for the aggregate price of CDN$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 we are
required to repurchase a certain number of common shares and the Series B 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 our then outstanding common shares 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 CDN$1.00;
by (b) the then applicable fair market value of a common share.
   
    
    20,448,875 common shares held by Wesley Clover, which had been issued by us in October
2003 upon the conversion of certain promissory notes previously issued by us in favor of
Wesley Clover, were exchanged on a one-to-two basis for an aggregate of 40,897,750 Series B
Preferred Shares;
    
    4,000,000 common shares held by PTIC were exchanged on a one-to-four basis for
16,000,000 Series B Preferred Shares; and
    
    5,445,775 common shares, issued in October 2003 upon the conversion of mandatory
convertible debentures previously issued by us in favor of certain existing investors, were
exchanged on a one-to-two basis for 10,163,238 Series B Preferred Shares.
 
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Shareholders Agreement:
   
    
    If we have not completed an initial public offering by May 1, 2007, Zarlink shall have
the right, exercisable for 90 days after May 1, 2007, to require us 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 C$2.85 per share.
    
    If we has not completed an initial public offering by May 1, 2007, PTIC shall have the
right, exercisable for 90 days after May 1, 2007, to require us to repurchase all or any
portion of the 16,000,000 Series B Preferred 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 conversion of them). The purchase price shall be with respect to
each Series B Preferred Shares, C$1.00 per share (subject to appropriate adjustments) and,
with respect to each common share issued on the conversion of a Series B Preferred Share,
equal to C$1.00 divided by the number of common shares issued upon conversion of such
Series B Preferred 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.
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
    
    If either of Zarlink or PTIC exercises its put rights as described above, EdgeStone
shall also have the right to require us to repurchase all but not less than all of the
Series A Preferred Shares then held by EdgeStone, for a purchase price equal to the sum of
(i) C$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 Preferred Shares then held by EdgeStone. Following the
purchase of such Series A Preferred Shares from EdgeStone by us 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 Edgestone equity financing, to require
us 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 we 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.
  2004 Registration Rights Agreement
  
    
    Demand Registration Rights.At any time after 180 days following the closing
date of an initial public offering, the holders of at least 10,000,000 of the common shares
having registration rights (as adjusted for share splits, consolidation and other similar
events) can request that we register all or a portion of their shares, so long as the
minimum offering amount for any demand registration is C$8,000,000 (or C$5,000,000 in the
case of a short-form registration statement on Form F-3 or S-3). We will not be required to
file more than one registration statement pursuant to these demand registration rights
within any 12 month period and will be required to file no more than two registration
statements in response to these demand registration rights.
    
    Piggyback Registration Rights. Holders have the right to include their shares in
a Qualified IPO. Additionally, if we register any securities for public sale after a
Qualified IPO pursuant to any registration statement, including pursuant to the 2005
Registration Rights Agreement, the holders will have the right to include their common
shares in the registration statement.
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Agreements with Related Parties
  Agreements with Key Employees
  Agreements with Others
 Derivative contract between us and JPMorgan Chase Bank, N.A. :
 Union Agreement between Mitel Networks Inc. and the Internation Brotherhood of Electrical
Workers (IBEW) :
 TPC Agreement, as amended:
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Agreement between Mr. Peter Charbonneau and Dr. Matthews
  
 D. Exchange Controls
 Competition Act
  Investment
Canada Act
 Investment Canada Act Investment Canada Act Investment Canada Act Investment Canada Act Investment Canada
Act Investment Canada Act
 - 114 -




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Investment Canada Act
 
    
    the acquisition of our common shares by a person in the ordinary course of that persons
business as a trader or dealer in securities;
    
    the acquisition or control of us in connection with the realization of security granted
for a loan or other financial assistance and not for any purpose related to the provisions
of the Investment Canada Act; and
    
    the acquisition or control of us by reason of an amalgamation, merger, consolidation or
corporate reorganization following which the ultimate direct or indirect control in fact of
us, through the ownership of voting interests, remains unchanged.
  
 E. Taxation
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Taxation of Dividends
  - 116 -




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Taxation of Dispositions
  Passive Foreign Investment Company Considerations
   - 117 -




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
    
    a qualified electing fund election (a QEF election), as defined in the Code, to be
taxed currently on your pro rata portion of our ordinary earnings and net capital gain,
whether or not such earnings or gain is distributed in the form of dividends or otherwise,
or
    
    a mark-to-market election and thereby agree for the year of the election and each
subsequent tax year to recognize ordinary gain or loss (but only to the extent of prior
ordinary gain) based on the increase or decrease in market value for such taxable year.
Your tax basis in our common shares would be adjusted to reflect any such income or loss
amounts.
   Conversion of Canadian Dollars
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Information Reporting and Backup Withholding
  
    
    dividend payments or other taxable distributions made to you within the United States,
and
    
    the payment of proceeds to you from the sale of common shares effected at a United
States office of a broker unless you come within certain categories of exempt recipients.
  
    
    fail to provide an accurate taxpayer identification number,
    
    are notified by the IRS that you have failed to report all interest and dividends
required to be shown on your United States federal income tax returns, or
    
    in certain circumstances, fail to comply with other applicable requirements of the
backup withholding rules.
    Income Tax Act
  - 119 -




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Taxation of Dividends
  Disposition of Common Shares
   
 F. Dividends and Paying Agents
  - 120 -




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G. Statement by Experts
  
 H. Documents on Display
 Securities Exchange Act
of 1934
    
 I. Subsidiary Information
  
 Item 11. Quantitative and Qualitative Disclosures about Market Risk
  Equity Price Risk:
  - 121 -




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Foreign Currency Risk:
   Interest Rate Risk:
    
 Item 12. Description of Securities Other than Equity Securities
  - 122 -




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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
 Securities Exchange Act of 1934
   
 Item 16. [Reserved]
 
 A. Audit Committee Financial Expert
  
 B. Code of Ethics
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C. Principal Accountant and Fees
  Fiscal 2006
    
    Fiscal 2005$
    
    $Audit Fees
    
    
    741,259
    
    
    
    323,907Audit-Related Fees
    
    
    85,561
    
    
    
    71,637Tax and Other Fees
    
    
    205,889
    
    
    
    115,536Total
    
    
    1,032,709
    
    
    
    511,080
    Audit committee pre-approval process:
   
 D. Exemptions from the Listing Standards for Audit Committees
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E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
  (a) Total

    
    
    
    (c) Total Number of Shares
    
    (d) Maximum Number (or ApproximateNumber of

    
    (b) Average
    
    (or Units) Purchased as Part
    
    Dollar Value) of Shares (or Units)Shares (or

    
    Price Paid per
    
    of Publicly Announced Plans
    
    that may yet be Purchased Under thePeriod
    
    Units) Purchased

    
    Share (or Units)
    
    or Programs
    
    Plans or ProgramsMay 1 to May 31, 2005
    
    17,398
    
    
    C$4.00
    
    
    
    4,105
    
    
    C$1.00June 1 to June 30, 2005
    
    4,177
    
    
    C$1.00
    
    
    
    July 1 to July 31, 2005
    
    2,404
    
    
    C$4.00
    
    
    
    577
    
    
    C$1.00August 1 to August 31, 2005
    
    
    
    


    
    
    
    September 1 to September 30, 2005
    
    6,415
    
    
    C$4.00
    
    
    
    October 1 to October 31, 2005
    
    2,970
    
    
    C$4.00
    
    
    
    November 1 to November 30, 2005
    
    
    
    

    
    
    
    December 1 to December 31, 2005
    
    
    
    

    
    
    
    January 1 to January 31, 2006
    
    
    
    

    
    
    
    February 1 to February 28, 2006
    
    
    
    

    
    
    
    March 1 to March 31, 2006
    
    
    
    

    
    
    
    April 1 to April 30, 2006
    
    
    
    

    
    
    
    May 1 to May 31, 2006
    
    
    
    

    
    
    
    June 1 to June 30, 2006
    
    1,733
    
    
    C$4.00
    
    
    
    July 1 to July 31, 2006
    
    
    
    

    
    
    
    August 1 to August 31, 2006
    
    
    
    

    
    
    
    September 1 to September 30, 2006
    
    
    
    

    
    
    
    TOTAL
    
    39,779
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PART III
 
 Item 17. Financial Statements
  
 Item 18. Financial Statements
  
 Item 19. Exhibits
 1.
    
    Articles of Incorporation and bylaws as currently in effect:
 1.1
    
    Articles of Incorporation and amendments thereto prior to April 22, 2004(4)1.2
    
    Articles of Amendment dated April 22, 2004(4)1.3
    
    Articles of Amendment dated April 23, 2004(4)1.4
    
    Articles of Amendment dated October 12, 20061.5
    
    Bylaws(4), as amended on September 7, 2006
 2.
    
    Instruments defining the rights of holders of equity securities being registered:
 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, Articles of Amendment
dated April 23, 2004 described above in Exhibit 1.3 and Articles of Amendment dated
October 12, 2006 described above in Exhibit 1.42.2
    
    Specimen Common Share certificate(1)2.3
    
    Specimen Series A Share certificate(4)2.4
    
    Specimen Series B Share certificate(4)2.5
    
    Securities Purchase Agreement between Mitel and the Noteholders, dated April
27, 2005++2.6
    
    Form of Note (See Exhibit 2.5 above)
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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(5)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(5)2.10
    
    Charge Over Book Debts and Cash at Bank 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++2.11
    
    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(5)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(5)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(5)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(5)2.15
    
    Deed of Guarantee and Subordination between MNIL, MNOL and BNY, dated July 15,
2005(5)2.16
    
    Intellectual Property Security Agreement between Mitel and BNY, effective from
April 27, 2005(5)2.17
    
    Class A Convertible Preferred Share Subscription Agreement between Mitel and EdgeStone dated April 23, 2004++2.18
    
    Form of Warrant (See Exhibit 2.17 above)2.19
    
    Securities Purchase Agreement between Mitel and Wesley Clover Corporation dated September 21, 2006++2.20
    
    Form of Warrant (See Exhibit 2.19 above)
 4.
    
    Material contracts:
 4.1
    
    Cap/Floor Collar Transaction Agreement between Mitel and JPMorgan Chase Bank
N.A. dated October 3, 2005(5)4.2
    
    ISDA Master Agreement between Mitel and JPMorgan Chase Bank N.A. dated
September 25, 2005(5)
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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(5)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)4.7
    
    Registration Rights Agreement between Mitel and the Noteholders, dated April
27, 2005(5)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 a
secured party, and also in its capacity as Collateral Agent (now BNY) on behalf of the
Noteholders), dated April 27, 2005 (See Exhibit 2.10 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)
 
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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 dated October 1, 2004++4.19
    
    Deferred Share Unit Plan (DSU Plan) for Executives effective December 9,
2004(5)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(2), as amended on June 26, 20064.21
    
    Class A Convertible Preferred Share Subscription Agreement between Mitel and
EdgeStone dated April 23, 2004 (see Exhibit 2.17 above)++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(2)4.23
    
    Receivables Purchase Agreement between Mitel, MNI and MNSI, and The Canada
Trust Company, effective date of
April 16,
2004++(4)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(4)++, as amended
July 24, 2004(4), as further amended February 7, 2005(5)4.25
    
    Loan Agreement between MNL and Export Development Canada dated March 4, 2003,
as amended(3)4.26
    
    Chattel Mortgage Loan Agreement between MNL and Barclays Bank PLC dated October
22, 2001(1)4.27
    
    Chattel Mortgage Loan Agreement between MNL and Barclays Bank PLC dated April
25, 2003(3)4.28
    
    Business Overdraft and Ancillary Facility Agreement between MNL and Barclays
Bank PLC dated August 30, 2002(3)4.29
    
    Supply Agreement between Mitel and its subsidiaries and BreconRidge and its
subsidiaries dated August 30, 2001(1)+, and related amendment dated February 27, 2003(3)+
 
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4.30
    
    Amendment to the Supply Agreement between Mitel and its subsidiaries and
BreconRidge and its subsidiaries dated
February 27,
2003(3)4.31
    
    Sublease Agreement between Mitel and BreconRidge dated August 31, 2001 and
First Amendment of Sublease Agreement between Mitel and BreconRidge dated May 31,
2002(1)+4.32
    
    Supply Agreement between Mitel and Zarlink (formerly Mitel Corporation) dated
February 16, 2001 and related amendment dated October 24, 2001(1)+, amended
by Amending Agreement dated April 23, 2004(4)4.33
    
    Intellectual Property License Agreement between Mitel and Zarlink (formerly
Mitel Corporation) dated February 16,
2001(1)+4.34
    
    Amendment to the Intellectual Property License Agreement between Mitel and
Zarlink dated October 24, 2001(1)4.35
    
    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(1)4.36
    
    Lease Agreement between Mitel and MRPC dated March 27, 2001(1)4.37
    
    Strategic Alliance Agreement between Mitel and March Networks dated September
21, 2001(1), as amended September 20, 2003(4), and September 20,
2004(5)4.38
    
    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(1)+, as amended on March 27, 2003(4), May 2, 2004, September 16, 2004, June
27, 2005, and October 3, 2005, respectively4.39
    
    CIBC Warrant, dated April 29,
2004(7), as amended4.40
    
    Employee Stock Option Plan, dated March 6, 2001, as amended(6)4.41
    
    2004 U.S. Employee Stock Purchase Plan(8)4.42
    
    Form of Global Mitel Employment Agreement(7)4.43
    
    2006 Equity Incentive Plan4.44
    
    Employment Contract, dated February 21, 2005, between Mitel and Kevin
Bowyer(7)
 
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4.45
    
    Letter agreement, dated March 1, 2002, between Terence H. Matthews and Paul
Butcher (the Butcher Letter Agreement)(9)4.46
    
    Amendment No. 1 to the Butcher Letter Agreement, dated May 1,
2006(9)4.47
    
    Letter agreement, dated March 1, 2002, between Terence H. Matthews and Donald
Smith (the Smith Letter Agreement)(9)4.48
    
    Amendment No. 1 to the Smith Letter Agreement, dated May 1, 2006(9)4.49
    
    Letter agreement, dated May 1, 2006, between Terence H. Matthews and Peter D.
Charbonneau(9)4.50
    
    Securities Purchase Agreement between Mitel and Wesley Clover Corporation dated
September 21, 2006 (see Exhibit 2.19 above)++4.51
    
    Share Charge between MNHL and Highbridge (as a secured party, and also in its
capacity as Collateral Agent (now BNY) on behalf of the Noteholders), dated June 7,
20054.52
    
    Tri-Party Agreement between MNOL, MNIL and MNL dated June 30,
20054.53
    
    Real Property Loan Facility between MNL and Barclays Bank PLC dated December
13, 2001, secured by a legal charge dated January 24, 2002(1)
 8.1
    
    Subsidiaries of Mitel Networks Corporation12.1
    
    Certification by CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 200212.2
    
    Certification by CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 200213.1
    
    Certification by CEO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 - 131 -




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13.2
    
    Certification by CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 (1)
    
    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.(2)
    
    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.(3)
    
    Filed on August 1, 2003 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.(4)
    
    Filed on August 31, 2004 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.(5)
    
    Filed on October 24, 2005 as an exhibit to the annual report on Form 20-F of Mitel for the year ended April 24,
2005 and the transition period ended April 30, 2005 and
incorporated therein by reference.(6)
    
    Filed as an exhibit to the Form S-8 of the Registrant, dated March 6, 2006, filed with
the Commission on March 6, 2006 and incorporated therein by reference.(7)
    
    Filed as an exhibit to the Form F-1 of the Registrant, dated May 9, 2006, filed with
the Commission on May 9, 2006 and incorporated therein by reference.(8)
    
    Filed as an exhibit to the Form S-8 of the Registrant, dated November 29, 2004, filed
with the Commission on November 29, 2004 and incorporated therein by reference.(9)
    
    Filed as an exhibit to Amendment No. 1 to the Schedule 13D (the Registrant as issuer)
filed with the Commission on May 5, 2006 by Terence H. Matthews, Wesley Clover Corporation and
Celtic Tech Jet Limited and incorporated therein by reference.+
    
    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 and have been
filed separately with the Securities and Exchange Commission. 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-8Financial 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-49
 - 132 -




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##### Table of Contents



SIGNATURE
  MITEL NETWORKS CORPORATION/s/ Donald W. SmithName:
    Donald W. SmithTitle:
    Chief Executive Officer  - 133 -




---



##### Table of Contents






INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


|                                                                                                                                                                                             |  |  |     | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | --- | 
|MITEL NETWORKS CORPORATION                                                                                                                                                                   |  |  |     | 
|Consolidated Financial Statements                                                                                                                                                            |  |  |     | 
|Report of Independent Registered Chartered
    Accountants                                                                                                                                   |  |  | F-2 | 
|Consolidated Balance Sheets as of
    April 24, 2005, April 30, 2005 and April 30,
    2006                                                                                                  |  |  | F-3 | 
|Consolidated Statements of Operations for
    the fiscal years ended April 25, 2004, April 24, 2005
    and April 30, 2006 and for the six-day period ended
    April 30, 2005               |  |  | F-4 | 
|Consolidated Statements of
    Shareholders Deficiency for the fiscal years ended
    April 25, 2004, April 24, 2005 and April 30, 2006
    and for the six-day period ended April 30, 2005 |  |  | F-5 | 
|Consolidated Statements of Cash Flows for
    the fiscal years ended April 25, 2004, April 24, 2005
    and April 30, 2006 and for the six-day period ended
    April 30, 2005               |  |  | F-7 | 
|Notes to the Consolidated Financial
    Statements                                                                                                                                           |  |  | F-8 | 

F-1



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##### Table of Contents






REPORT OF INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS
















|                                                              |  |                                             
|------------------------------------------------------------- |  | --------------------------------------------
|                                                              |  | /s/ Deloitte & Touche
    LLP               
|Ottawa, Canada                                                |  | Deloitte & Touche LLP                       
|June 28, 2006 except for note 28,which is at
October 27, 2006 |  | Independent Registered Chartered Accountants

F-2



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##### Table of Contents



Mitel Networks Corporation


(incorporated under the laws of Canada)





Consolidated Balance Sheets


(in millions, except share amounts)


|                                                                                                                                                                                                                                                                                                          |                                                                                                                              |           |        |        |           |   |       |           |   |   |        |        |   | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------- | --------- | ------ | ------ | --------- | - | ----- | --------- | - | - | ------ | ------ | - | 
|                                                                                                                                                                                                                                                                                                          |                                                                                                                              | April 24, |        |        | April 30, |   |       | April 30, |   |  
|                                                                                                                                                                                                                                                                                                          |                                                                                                                              | 2005      |        |        | 2005      |   |       | 2006      |   |  
|                                                                                                                                                                                                                                                                                                          |                                                                                                                              |           |        |        |           |   |       |           |   |  
|ASSETS                                                                                                                                                                                                                                                                                                   
|Current assets:                                                                                                                                                                                                                                                                                           |                                                                                                                              |           |        |        |           |   |       |           |   |   |        |        |  
|                                                                                                                                                                                                                                                                                                          | Cash and cash equivalents                                                                                                    |           | $      | 9.7    |           |   | $     | 46.6      |   |   | $      | 35.7   |   | 
|                                                                                                                                                                                                                                                                                                          | Restricted cash                                                                                                              |           |        |       |           |   |       | 1.0       |   |   |        | 1.7    |   | 
|                                                                                                                                                                                                                                                                                                          | Accounts receivable (net of allowance of $3.0, $3.0, and $2.5,
    respectively)                                             |           |        | 71.1   |           |   |       | 66.9      |   |   |        | 79.7   |   | 
|                                                                                                                                                                                                                                                                                                          | Due from related parties                                                                                                     |           |        | 0.7    |           |   |       | 0.7       |   |   |        | 0.4    |   | 
|                                                                                                                                                                                                                                                                                                          | Inventories                                                                                                                  |           |        | 17.1   |           |   |       | 17.4      |   |   |        | 23.6   |   | 
|                                                                                                                                                                                                                                                                                                          | Deferred tax asset                                                                                                           |           |        |       |           |   |       |          |   |   |        | 0.7    |   | 
|                                                                                                                                                                                                                                                                                                          | Income tax receivable                                                                                                        |           |        | 1.4    |           |   |       | 1.4       |   |   |        |       |   | 
|                                                                                                                                                                                                                                                                                                          | Other current assets                                                                                                         |           |        | 27.2   |           |   |       | 28.4      |   |   |        | 24.7   |   | 
|                                                                                                                                                                                                                                                                                                          |                                                                                                                              |           |        |        |           |   |       |           |   |  
|                                                                                                                                                                                                                                                                                                          |                                                                                                                              |           | 127.2  |        |           |   | 162.4 |           |   |   | 166.5  |        |  
|Long-term receivables                                                                                                                                                                                                                                                                                     |                                                                                                                              |           | 0.4    |        |           |   | 0.4   |           |   |   | 0.4    |        |  
|Property and equipment                                                                                                                                                                                                                                                                                    |                                                                                                                              |           | 20.9   |        |           |   | 20.6  |           |   |   | 17.4   |        |  
|Goodwill                                                                                                                                                                                                                                                                                                  |                                                                                                                              |           | 6.2    |        |           |   | 6.0   |           |   |   | 6.8    |        |  
|Intangible and other assets                                                                                                                                                                                                                                                                               |                                                                                                                              |           | 1.9    |        |           |   | 5.9   |           |   |   | 6.6    |        |  
|Deferred tax asset                                                                                                                                                                                                                                                                                        |                                                                                                                              |           |       |        |           |   |      |           |   |   | 2.1    |        |  
|                                                                                                                                                                                                                                                                                                          |                                                                                                                              |           |        |        |           |   |       |           |   |  
|                                                                                                                                                                                                                                                                                                          |                                                                                                                              | $         | 156.6  |        |           | $ | 195.3 |           |   | $ | 199.8  |        |  
|                                                                                                                                                                                                                                                                                                          |                                                                                                                              |           |        |        |           |   |       |           |   |  
|                                                                                                                                                                                                                                                                                                         
|LIABILITIES, REDEEMABLE SHARES AND SHAREHOLDERS
    DEFICIENCY                                                                                                                                                                                                                                          
|Current liabilities:                                                                                                                                                                                                                                                                                      |                                                                                                                              |           |        |        |           |   |       |           |   |   |        |        |  
|                                                                                                                                                                                                                                                                                                          | Bank indebtedness                                                                                                            |           | $      | 15.8   |           |   | $     | 1.2       |   |   | $      | 2.1    |   | 
|                                                                                                                                                                                                                                                                                                          | Accounts payable and accrued liabilities                                                                                     |           |        | 53.6   |           |   |       | 55.8      |   |   |        | 73.3   |   | 
|                                                                                                                                                                                                                                                                                                          | Income and other taxes payable                                                                                               |           |        | 2.2    |           |   |       | 2.2       |   |   |        | 1.7    |   | 
|                                                                                                                                                                                                                                                                                                          | Deferred revenue                                                                                                             |           |        | 25.5   |           |   |       | 25.9      |   |   |        | 23.1   |   | 
|                                                                                                                                                                                                                                                                                                          | Due to related parties                                                                                                       |           |        | 15.9   |           |   |       | 14.0      |   |   |        | 24.2   |   | 
|                                                                                                                                                                                                                                                                                                          | Current portion of long-term debt                                                                                            |           |        | 2.8    |           |   |       | 2.8       |   |   |        | 1.6    |   | 
|                                                                                                                                                                                                                                                                                                          |                                                                                                                              |           |        |        |           |   |       |           |   |  
|                                                                                                                                                                                                                                                                                                          |                                                                                                                              |           | 115.8  |        |           |   | 101.9 |           |   |   | 126.0  |        |  
|Long-term debt                                                                                                                                                                                                                                                                                            |                                                                                                                              |           | 11.8   |        |           |   | 11.8  |           |   |   | 2.5    |        |  
|Long-term portion of lease termination obligations                                                                                                                                                                                                                                                        |                                                                                                                              |           | 8.4    |        |           |   | 8.3   |           |   |   | 5.5    |        |  
|Convertible notes                                                                                                                                                                                                                                                                                         |                                                                                                                              |           |       |        |           |   | 46.6  |           |   |   | 48.7   |        |  
|Derivative instruments                                                                                                                                                                                                                                                                                    |                                                                                                                              |           | 38.0   |        |           |   | 37.4  |           |   |   | 75.9   |        |  
|Deferred gain                                                                                                                                                                                                                                                                                             |                                                                                                                              |           |       |        |           |   |      |           |   |   | 5.5    |        |  
|Pension liability                                                                                                                                                                                                                                                                                         |                                                                                                                              |           | 25.4   |        |           |   | 25.1  |           |   |   | 40.1   |        |  
|                                                                                                                                                                                                                                                                                                          |                                                                                                                              |           |        |        |           |   |       |           |   |  
|                                                                                                                                                                                                                                                                                                          |                                                                                                                              |           | 199.4  |        |           |   | 231.1 |           |   |   | 304.2  |        |  
|                                                                                                                                                                                                                                                                                                          |                                                                                                                              |           |        |        |           |   |       |           |   |  
|Commitments and contingencies                                                                                                                                                                                                                                                                             |                                                                                                                              |           |        |        |           |   |       |           |   |   |        |        |  
|Redeemable common shares, without par value : 10,000,000 shares
    authorized; issued and outstanding at April 24, 2005,
    April 30, 2005 and April 30, 2006                                                                                                                                           |                                                                                                                              |           | 18.2   |        |           |   | 18.2  |           |   |   | 18.7   |        |  
|Convertible, redeemable preferred shares, without par
    value  unlimited shares authorized; issued and
    outstanding: Series A: 20,000,000 shares at April 24,
    2005, April 30, 2005 and April 30, 2006;
    Series B: 67,789,300 shares at April 24, 2005,
    April 30, 2005 and April 30, 2006 |                                                                                                                              |           | 39.0   |        |           |   | 39.1  |           |   |   | 45.5   |        |  
|                                                                                                                                                                                                                                                                                                          |                                                                                                                              |           |        |        |           |   |       |           |   |  
|                                                                                                                                                                                                                                                                                                          |                                                                                                                              |           | 57.2   |        |           |   | 57.3  |           |   |   | 64.2   |        |  
|                                                                                                                                                                                                                                                                                                          |                                                                                                                              |           |        |        |           |   |       |           |   |  
|Shareholders deficiency:                                                                                                                                                                                                                                                                                 |                                                                                                                              |           |        |        |           |   |       |           |   |   |        |        |  
|                                                                                                                                                                                                                                                                                                          | Common shares, without par value  unlimited shares
    authorized;                                                          |           |        |        |           |   |       |           |   |   |        |        |   | 
|                                                                                                                                                                                                                                                                                                          | 107,149,933, 107,149,933 and 107,302,322 issued and outstanding
    at April 24, 2005, April 30, 2005 and April 30,
    2006 |           |        | 187.6  |           |   |       | 187.6     |   |   |        | 188.8  |   | 
|                                                                                                                                                                                                                                                                                                          | Warrants                                                                                                                     |           |        | 40.2   |           |   |       | 47.9      |   |   |        | 47.9   |   | 
|                                                                                                                                                                                                                                                                                                          | Deferred stock-based compensation                                                                                            |           |        | (0.4   | )         |   |       | (0.4      | ) |   |        | (0.1   | ) | 
|                                                                                                                                                                                                                                                                                                          | Accumulated deficit                                                                                                          |           |        | (302.3 | )         |   |       | (304.0    | ) |   |        | (355.5 | ) | 
|                                                                                                                                                                                                                                                                                                          | Accumulated other comprehensive loss                                                                                         |           |        | (25.1  | )         |   |       | (24.2     | ) |   |        | (49.7  | ) | 
|                                                                                                                                                                                                                                                                                                          |                                                                                                                              |           |        |        |           |   |       |           |   |  
|                                                                                                                                                                                                                                                                                                          |                                                                                                                              |           | (100.0 | )      |           |   | (93.1 | )         |   |   | (168.6 | )      |  
|                                                                                                                                                                                                                                                                                                          |                                                                                                                              |           |        |        |           |   |       |           |   |  
|                                                                                                                                                                                                                                                                                                          |                                                                                                                              | $         | 156.6  |        |           | $ | 195.3 |           |   | $ | 199.8  |        |  
|                                                                                                                                                                                                                                                                                                          |                                                                                                                              |           |        |        |           |   |       |           |   |  









F-3



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##### Table of Contents



Mitel Networks Corporation


(incorporated under the laws of Canada)





Consolidated Statements of Operations


(in millions, except share and per share amounts)


|                                                        |                                                 |                   |       |       |                |   |       |            |             |   |           |     |             |   |       |       |             |  
|------------------------------------------------------- | ----------------------------------------------- | ----------------- | ----- | ----- | -------------- | - | ----- | ---------- | ----------- | - | --------- | --- | ----------- | - | ----- | ----- | ----------- | -
|                                                        |                                                 | Years Ended       |       |       |                |   |      
|                                                        |                                                 |                   |       |       | Six Days Ended |   |       | Year Ended |            
|                                                        |                                                 | April 25,         |       |       | April 24,      |   |       | April 30,  |             |   | April 30, |    
|                                                        |                                                 | 2004              |       |       | 2005           |   |       | 2005       |             |   | 2006      |    
|                                                        |                                                 |                   |       |       |                |   |       |            |             |   |           |    
|Revenues:                                               |                                                 |                   |       |       |                |   |       |            |             |   |           |     |             |   |       |      
|                                                        | Products                                        |                   | $     | 207.1 |                |   | $     | 207.7      |             |   | $         | 1.7 |             |   | $     | 260.5 |            
|                                                        | Services                                        |                   |       | 133.6 |                |   |       | 134.5      |             |   |           | 1.5 |             |   |       | 126.6 |            
|                                                        |                                                 |                   |       |       |                |   |       |            |             |   |           |    
|                                                        |                                                 |                   | 340.7 |       |                |   | 342.2 |            |             |   | 3.2       |     |             |   | 387.1 |      
|                                                        |                                                 |                   |       |       |                |   |       |            |             |   |           |    
|Cost of revenues:                                       |                                                 |                   |       |       |                |   |       |            |             |   |           |     |             |   |       |      
|                                                        | Products                                        |                   |       | 125.7 |                |   |       | 132.0      |             |   |           | 1.6 |             |   |       | 149.1 |            
|                                                        | Services                                        |                   |       | 77.2  |                |   |       | 81.2       |             |   |           | 0.8 |             |   |       | 76.6  |            
|                                                        |                                                 |                   |       |       |                |   |       |            |             |   |           |    
|                                                        |                                                 |                   | 202.9 |       |                |   | 213.2 |            |             |   | 2.4       |     |             |   | 225.7 |      
|                                                        |                                                 |                   |       |       |                |   |       |            |             |   |           |    
|Gross margin                                            |                                                 |                   | 137.8 |       |                |   | 129.0 |            |             |   | 0.8       |     |             |   | 161.4 |      
|                                                        |                                                 |                   |       |       |                |   |       |            |             |   |           |    
|Expenses:                                               |                                                 |                   |       |       |                |   |       |            |             |   |           |     |             |   |       |      
|                                                        | Selling, general and administrative             |                   |       | 111.4 |                |   |       | 114.9      |             |   |           | 1.8 |             |   |       | 120.7 |            
|                                                        | Research and development                        |                   |       | 36.2  |                |   |       | 41.4       |             |   |           | 0.7 |             |   |       | 44.1  |            
|                                                        | Special charges                                 |                   |       | 11.7  |                |   |       | 10.6       |             |   |           |    |             |   |       | 5.7   |            
|                                                        | Loss (gain) on sale of manufacturing operations |                   |       | 0.6   |                |   |       | 3.4        |             |   |           |    |             |   |       | (0.9  | )          
|                                                        | Amortization of acquired intangibles            |                   |       | 0.2   |                |   |       |           |             |   |           |    |             |   |       |      |            
|                                                        | Gain on sale of assets                          |                   |       |      |                |   |       |           |             |   |           |    |             |   |       | (1.5  | )          
|                                                        |                                                 |                   |       |       |                |   |       |            |             |   |           |    
|                                                        |                                                 |                   | 160.1 |       |                |   | 170.3 |            |             |   | 2.5       |     |             |   | 168.1 |      
|                                                        |                                                 |                   |       |       |                |   |       |            |             |   |           |    
|Operating loss                                          |                                                 |                   | (22.3 | )     |                |   | (41.3 | )          |             |   | (1.7      | )   |             |   | (6.7  | )    
|Interest expense                                        |                                                 |                   | (4.3  | )     |                |   | (2.6  | )          |             |   |          |     |             |   | (7.6  | )    
|Fair value adjustment on derivatives instruments        |                                                 |                   |      |       |                |   | (5.3  | )          |             |   | (0.1      | )   |             |   | (32.6 | )    
|Beneficial conversion feature on convertible debentures |                                                 |                   | (3.1  | )     |                |   |      |            |             |   |          |     |             |   |      |      
|Other income (expense), net                             |                                                 |                   | (0.6  | )     |                |   | 0.4   |            |             |   | 0.2       |     |             |   | 0.4   |      
|                                                        |                                                 |                   |       |       |                |   |       |            |             |   |           |    
|Loss before income taxes                                |                                                 |                   | (30.3 | )     |                |   | (48.8 | )          |             |   | (1.6      | )   |             |   | (46.5 | )    
|Current income tax expense (recovery)                   |                                                 |                   | 2.0   |       |                |   | 0.8   |            |             |   |          |     |             |   | 0.9   |      
|Deferred income tax recovery                            |                                                 |                   | (1.7  | )     |                |   |      |            |             |   |          |     |             |   | (2.8  | )    
|                                                        |                                                 |                   |       |       |                |   |       |            |             |   |           |    
|Net loss                                                |                                                 | $                 | (30.6 | )     |                | $ | (49.6 | )          |             | $ | (1.6      | )   |             | $ | (44.6 | )    
|                                                        |                                                 |                   |       |       |                |   |       |            |             |   |           |    
|Net loss per common share:                              |                                                 |                   |       |       |                |   |       |            |             |   |           |     |             |   |       |      
|                                                        |                                                 | Basic and diluted |       | $     | (0.26          | ) |       | $          | (0.49       | ) |           | $   | (0.01       | ) |       | $     | (0.44       | )
|                                                        |                                                 |                   |       |       |                |   |       |            |             |   |           |    
|Weighted-average number of common shares outstanding    |                                                 |                   |       |       |                |   |       |            |             |   |           |     |             |   |       |      
|                                                        |                                                 | Basic and diluted |       |       | 127,831,211    |   |       |            | 113,792,829 |   |           |     | 117,149,933 |   |       |       | 117,230,198 |  
|                                                        |                                                 |                   |       |       |                |   |       |            |             |   |           |    



F-4



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##### Table of Contents



Mitel Networks Corporation


(incorporated under the laws of Canada)





Consolidated Statements of Shareholders Deficiency


(in millions, except share amounts)


|                                                                                           |                                                                                   |               |             |            |        |   |             |          |  |             |              |       |               |         |       |               |               |   |        |            |  |   |       |      |   |   |        |      |  
|------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------------- | ------------- | ----------- | ---------- | ------ | - | ----------- | -------- |  | ----------- | ------------ | ----- | ------------- | ------- | ----- | ------------- | ------------- | - | ------ | ---------- |  | - | ----- | ---- | - | - | ------ | ---- | -
|                                                                                           |                                                                                   |               |             |            |        |   |             |          |  | Accumulated |              |       |              
|                                                                                           |                                                                                   | Common Shares |             |            |        |   | Deferred    |          |  |             |              | Other |               |         | Total |              
|                                                                                           |                                                                                   |               |             |            |        |   | Stock-based |          |  | Accumulated |              |       | Comprehensive |         |       | Shareholders |              
|                                                                                           |                                                                                   | Shares        |             |            | Amount |   |             | Warrants |  |             | Compensation |       |               | Deficit |       |               | Income (Loss) |   |        | Deficiency | 
|                                                                                           |                                                                                   |               |             |            |        |   |             |          |  |             |              |       |               |         |       |               |               |   |        |            | 
|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  | )   
|                                                                                           |                                                                                   |               |             |            |        |   |             |          |  |             |              |       |               |         |       |               |               |   |        |            | 
|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 | )   
|                                                                                           |                                                                                   |               |             |            |        |   |             |          |  |             |              |       |               |         |       |               |               |   |        |            | 





F-5



---



##### Table of Contents



Mitel Networks Corporation


(incorporated under the laws of Canada)


Consolidated Statements of Shareholders
Deficiency  (Continued)


(in millions, except share amounts)


|                                                                |                                          |               |             |         |        |   |             |          |  |             |              |       |               |         |       |               |               |   |        |            |  |   |       |       |   |   |        |       |  
|--------------------------------------------------------------- | ---------------------------------------- | ------------- | ----------- | ------- | ------ | - | ----------- | -------- |  | ----------- | ------------ | ----- | ------------- | ------- | ----- | ------------- | ------------- | - | ------ | ---------- |  | - | ----- | ----- | - | - | ------ | ----- | -
|                                                                |                                          |               |             |         |        |   |             |          |  | Accumulated |              |       |              
|                                                                |                                          | Common Shares |             |         |        |   | Deferred    |          |  |             |              | Other |               |         | Total |              
|                                                                |                                          |               |             |         |        |   | Stock-based |          |  | Accumulated |              |       | Comprehensive |         |       | Shareholders |              
|                                                                |                                          | Shares        |             |         | Amount |   |             | Warrants |  |             | Compensation |       |               | Deficit |       |               | Income (Loss) |   |        | Deficiency | 
|                                                                |                                          |               |             |         |        |   |             |          |  |             |              |       |               |         |       |               |               |   |        |            | 
|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  | )    
|                                                                |                                          |               |             |         |        |   |             |          |  |             |              |       |               |         |       |               |               |   |        |            | 
|Common shares issued:                                           |                                          |               |             |         |        |   |             |          |  |             |              |       |               |         |       |               |               |   |        |            |  |   |       |       |   |   |        |      
|                                                                | Exercise of stock options                |               |             | 58,174  |        |   |             | 0.2      |  |             |              |      |               |         |       |              |               |   |        |           |  |   |       |      |   |   |        | 0.2   |  
|                                                                | Professional services received           |               |             | 132,261 |        |   |             | 0.1      |  |             |              |      |               |         |       |              |               |   |        |           |  |   |       |      |   |   |        | 0.1   |  
|Fair value adjustment relating to stock option plan             |                                          |               |            |         |        |   | (0.3        | )        |  |             |             |       |               |         | 0.3   |               |               |   |       |            |  |   |      |       |   |   |       |      
|Share purchase loan repayments                                  |                                          |               |            |         |        |   | 1.1         |          |  |             |             |       |               |         |      |               |               |   |       |            |  |   |      |       |   |   | 1.1    |      
|Shares repurchased                                              |                                          |               | (38,046     | )       |        |   |            |          |  |             |             |       |               |         |      |               |               |   |       |            |  |   |      |       |   |   |       |      
|Deferred stock-based compensation                               |                                          |               |            |         |        |   | 0.1         |          |  |             |             |       |               |         | (0.1  | )             |               |   |       |            |  |   |      |       |   |   |       |      
|Amortization of deferred stock-based compensation               |                                          |               |            |         |        |   |            |          |  |             |             |       |               |         | 0.1   |               |               |   |       |            |  |   |      |       |   |   | 0.1    |      
|Accretion of interest on redeemable common and preferred shares |                                          |               |            |         |        |   |            |          |  |             |             |       |               |         |      |               |               |   | (6.9   | )          |  |   |      |       |   |   | (6.9   | )    
|                                                                |                                          |               |             |         |        |   |             |          |  |             |              |       |               |         |       |               |               |   |        |            | 
|                                                                |                                          |               | 107,302,322 |         |        | $ | 188.8       |          |  | $           | 47.9         |       |               | $       | (0.1  | )             |               | $ | (310.9 | )          |  | $ | (24.2 | )     |   | $ | (98.5  | )    
|                                                                |                                          |               |             |         |        |   |             |          |  |             |              |       |               |         |       |               |               |   |        |            | 
|Net loss                                                        |                                          |               |            |         |        |   |            |          |  |             |             |       |               |         |      |               |               |   | (44.6  | )          |  |   |      |       |   |   | (44.6  | )    
|Other comprehensive income:                                     |                                          |               |             |         |        |   |             |          |  |             |              |       |               |         |       |               |               |   |        |            |  |   |       |       |   |   |        |      
|                                                                | Foreign currency translation adjustments |               |             |        |        |   |             |         |  |             |              |      |               |         |       |              |               |   |        |           |  |   |       | (10.9 | ) |   |        | (10.9 | )
|                                                                | Minimum pension liability adjustments    |               |             |        |        |   |             |         |  |             |              |      |               |         |       |              |               |   |        |           |  |   |       | (14.6 | ) |   |        | (14.6 | )
|                                                                |                                          |               |             |         |        |   |             |          |  |             |              |       |               |         |       |               |               |   |        |            | 
|Comprehensive loss                                              |                                          |               |            |         |        |   |            |          |  |             |             |       |               |         |      |               |               |   | (44.6  | )          |  |   | (25.5 | )     |   |   | (70.1  | )    
|                                                                |                                          |               |             |         |        |   |             |          |  |             |              |       |               |         |       |               |               |   |        |            | 
|Balance at April 30, 2006                                       |                                          |               | 107,302,322 |         |        | $ | 188.8       |          |  | $           | 47.9         |       |               | $       | (0.1  | )             |               | $ | (355.5 | )          |  | $ | (49.7 | )     |   | $ | (168.6 | )    
|                                                                |                                          |               |             |         |        |   |             |          |  |             |              |       |               |         |       |               |               |   |        |            | 





F-6



---



##### Table of Contents



Mitel Networks Corporation


(incorporated under the laws of Canada)





Consolidated Statements of Cash Flows


(in millions)


|                                                             |                                                                              |                                                          |      |       |           |   |       |           |      |   |           |       |      |   |       |       |      |  
|------------------------------------------------------------ | ---------------------------------------------------------------------------- | -------------------------------------------------------- | ---- | ----- | --------- | - | ----- | --------- | ---- | - | --------- | ----- | ---- | - | ----- | ----- | ---- | -
|                                                             |                                                                              | Year Ended                                               |      |       | Six Days  |   |       | Year      |     
|                                                             |                                                                              |                                                          |      |       | Ended     |   |       | Ended     |     
|                                                             |                                                                              | April 25,                                                |      |       | April 24, |   |       | April 30, |      |   | April 30, |      
|                                                             |                                                                              | 2004                                                     |      |       | 2005      |   |       | 2005      |      |   | 2006      |      
|                                                             |                                                                              |                                                          |      |       |           |   |       |           |      |   |           |      
|CASH PROVIDED BY (USED IN)                                   |                                                                              |                                                          |      |       |           |   |       |           |      |   |           |       |      |   |       |      
|Operating activities:                                        |                                                                              |                                                          |      |       |           |   |       |           |      |   |           |       |      |   |       |      
|                                                             | Net loss                                                                     |                                                          | $    | (30.6 | )         |   | $     | (49.6     | )    |   | $         | (1.6  | )    |   | $     | (44.6 | )   
|                                                             | Adjustments to reconcile net loss to net cash from operating
    activities: |                                                          |      |       |           |   |       |           |      |   |           |       |      |   |       |       |     
|                                                             |                                                                              | Amortization and depreciation                            |      |       | 11.8      |   |       |           | 8.9  |   |           |       | 0.2  |   |       |       | 10.2 |  
|                                                             |                                                                              | Amortization of deferred gain                            |      |       |          |   |       |           |     |   |           |       |     |   |       |       | (0.3 | )
|                                                             |                                                                              | Fair value adjustment on derivative instruments          |      |       |          |   |       |           | 5.3  |   |           |       | 0.1  |   |       |       | 32.6 |  
|                                                             |                                                                              | Beneficial conversion feature on convertible debentures  |      |       | 3.1       |   |       |           |     |   |           |       |     |   |       |       |     |  
|                                                             |                                                                              | Accretion of convertible notes to redemption value       |      |       |          |   |       |           |     |   |           |       |     |   |       |       | 1.5  |  
|                                                             |                                                                              | Stock-based compensation                                 |      |       | 0.2       |   |       |           |     |   |           |       |     |   |       |       | 0.3  |  
|                                                             |                                                                              | Deferred income taxes                                    |      |       | (1.5      | ) |       |           |     |   |           |       |     |   |       |       | (2.8 | )
|                                                             |                                                                              | Special charges                                          |      |       | 0.3       |   |       |           |     |   |           |       |     |   |       |       |     |  
|                                                             |                                                                              | Loss (gain) on sale of manufacturing operations          |      |       | 0.6       |   |       |           | 3.4  |   |           |       |     |   |       |       | (0.9 | )
|                                                             |                                                                              | Loss (gain) on sale of business and assets               |      |       | 0.1       |   |       |           |     |   |           |       |     |   |       |       | (1.5 | )
|                                                             |                                                                              | Unrealized foreign exchange loss (gain)                  |      |       | (2.9      | ) |       |           | (2.0 | ) |           |       | (0.9 | ) |       |       | 2.1  |  
|                                                             |                                                                              | Non-cash movements in provisions                         |      |       | 5.1       |   |       |           | 5.5  |   |           |       |     |   |       |       | 4.2  |  
|                                                             |                                                                              | Change in non-cash operating assets and liabilities, net |      |       | 24.6      |   |       |           | (3.3 | ) |           |       | 1.0  |   |       |       | (3.1 | )
|                                                             |                                                                              |                                                          |      |       |           |   |       |           |      |   |           |      
|Net cash provided by (used in) operating activities          |                                                                              |                                                          | 10.8 |       |           |   | (31.8 | )         |      |   | (1.2      | )     |      |   | (2.3  | )    
|                                                             |                                                                              |                                                          |      |       |           |   |       |           |      |   |           |      
|Investing activities:                                        |                                                                              |                                                          |      |       |           |   |       |           |      |   |           |       |      |   |       |      
|                                                             | Additions to capital and intangible assets                                   |                                                          |      | (3.7  | )         |   |       | (4.5      | )    |   |           | (0.1  | )    |   |       | (8.8  | )   
|                                                             | (Increase) decrease in restricted cash                                       |                                                          |      |      |           |   |       | 0.9       |      |   |           | (1.0  | )    |   |       | (0.5  | )   
|                                                             | Proceeds on sale of assets                                                   |                                                          |      |      |           |   |       |          |      |   |           |      |      |   |       | 12.4  |     
|                                                             | Realized foreign exchange loss on hedging activities                         |                                                          |      | (6.7  | )         |   |       | (8.4      | )    |   |           |      |      |   |       | (8.0  | )   
|                                                             | Realized foreign exchange gain on hedging activities                         |                                                          |      | 4.1   |           |   |       | 6.2       |      |   |           |      |      |   |       | 8.6   |     
|                                                             |                                                                              |                                                          |      |       |           |   |       |           |      |   |           |      
|Net cash used in investing activities                        |                                                                              |                                                          | (6.3 | )     |           |   | (5.8  | )         |      |   | (1.1      | )     |      |   | 3.7   |      
|                                                             |                                                                              |                                                          |      |       |           |   |       |           |      |   |           |      
|Financing activities:                                        |                                                                              |                                                          |      |       |           |   |       |           |      |   |           |       |      |   |       |      
|                                                             | Increase (decrease) in bank indebtedness                                     |                                                          |      | (19.0 | )         |   |       | 8.9       |      |   |           | (14.6 | )    |   |       | 0.7   |     
|                                                             | Deferred financing costs                                                     |                                                          |      |      |           |   |       |          |      |   |           | (0.4  | )    |   |       | (1.8  | )   
|                                                             | Proceeds from issuance of convertible notes                                  |                                                          |      |      |           |   |       |          |      |   |           | 54.3  |      |   |       |      |     
|                                                             | Proceeds from issuance of convertible, redeemable preferred
    shares       |                                                          |      | 15.0  |           |   |       |          |      |   |           |      |      |   |       |      |     
|                                                             | Repayment of related party loans payable                                     |                                                          |      | (1.0  | )         |   |       |          |      |   |           |      |      |   |       |      |     
|                                                             | Repayment of long-term debt                                                  |                                                          |      | (5.2  | )         |   |       | (4.4      | )    |   |           |      |      |   |       | (11.9 | )   
|                                                             | Proceeds from issuance of warrants                                           |                                                          |      | 9.8   |           |   |       | 12.4      |      |   |           |      |      |   |       |      |     
|                                                             | Proceeds from issuance of common shares                                      |                                                          |      | 0.1   |           |   |       | 2.4       |      |   |           |      |      |   |       | 0.2   |     
|                                                             | Proceeds from repayments of employee share purchase loans                    |                                                          |      | 0.4   |           |   |       | 1.1       |      |   |           |      |      |   |       | 1.1   |     
|                                                             | Share issue costs                                                            |                                                          |      | (2.1  | )         |   |       | (0.3      | )    |   |           |      |      |   |       |      |     
|                                                             |                                                                              |                                                          |      |       |           |   |       |           |      |   |           |      
|Net cash provided by (used in) financing activities          |                                                                              |                                                          | (2.0 | )     |           |   | 20.1  |           |      |   | 39.3      |       |      |   | (11.7 | )    
|                                                             |                                                                              |                                                          |      |       |           |   |       |           |      |   |           |      
|Effect of exchange rate changes on cash and cash equivalents |                                                                              |                                                          | 1.9  |       |           |   | 0.5   |           |      |   | (0.1      | )     |      |   | (0.6  | )    
|                                                             |                                                                              |                                                          |      |       |           |   |       |           |      |   |           |      
|Increase (decrease) in cash and cash equivalents             |                                                                              |                                                          | 4.4  |       |           |   | (17.0 | )         |      |   | 36.9      |       |      |   | (10.9 | )    
|Cash and cash equivalents, beginning of period               |                                                                              |                                                          | 22.3 |       |           |   | 26.7  |           |      |   | 9.7       |       |      |   | 46.6  |      
|                                                             |                                                                              |                                                          |      |       |           |   |       |           |      |   |           |      
|Cash and cash equivalents, end of period                     |                                                                              | $                                                        | 26.7 |       |           | $ | 9.7   |           |      | $ | 46.6      |       |      | $ | 35.7  |      
|                                                             |                                                                              |                                                          |      |       |           |   |       |           |      |   |           |      



F-7



---



##### Table of Contents



Mitel Networks Corporation


(incorporated under the laws of Canada)





Notes to the Consolidated Financial Statements


(in millions, except share and per share amounts)




|   |                                    
|-- | -----------------------------------
|1. | Background and Nature of Operations



Canada Business
Corporations Act




|   |                    
|-- | -------------------
|2. | Accounting Policies







13a-10












F-8



---



##### Table of Contents





Reporting Currency


Foreign Currency
Translation weighted-average


Foreign Currency
Translation












Indirect channels




F-9



---



##### Table of Contents







Direct channels
















F-10



---



##### Table of Contents













first-in, first-out




Accounting for the Impairment or Disposal of Long-Lived
Assets






straight-line


F-11



---



##### Table of Contents





Goodwill and Other Intangible
Assets






as-if-converted-to-common Accounting for Derivative Instruments
and Hedging Activities












F-12



---



##### Table of Contents







high-quality,




Stock-Based


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


|                                                                     |  |            |         |   |              |   |         |            |  |   |           |   |  |   |         |  
|-------------------------------------------------------------------- |  | ---------- | ------- | - | ------------ | - | ------- | ---------- |  | - | --------- | - |  | - | ------- | -
|                                                                     |  | Year Ended |         |   |              |   |        
|                                                                     |  |            |         |   | 6 Days Ended |   |         | Year Ended | 
|                                                                     |  | April 25,  |         |   | April 24,    |   |         | April 30,  |  |   | April 30, |  
|                                                                     |  | 2004       |         |   | 2005         |   |         | 2005       |  |   | 2006      |  
|                                                                     |  |            |         |   |              |   |         |            |  |   |           |  
|Net loss available to common shareholders, as reported
    (Note 22) |  | $          | (33.4   | ) |              | $ | (55.2   | )          |  | $ | (1.7      | ) |  | $ | (51.5   | )
|Estimated additional stock-based compensation                        |  |            | (1.6    | ) |              |   | (1.5    | )          |  |   |          |   |  |   | (1.9    | )
|                                                                     |  |            |         |   |              |   |         |            |  |   |           |  
|Pro forma net loss available to common shareholders                  |  | $          | (35.0   | ) |              | $ | (56.7   | )          |  | $ | (1.7      | ) |  | $ | (53.4   | )
|                                                                     |  |            |         |   |              |   |         |            |  |   |           |  
|Net loss per share, as reported  basic and diluted                  |  | $          | (0.26   | ) |              | $ | (0.49   | )          |  | $ | (0.01     | ) |  | $ | (0.44   | )
|                                                                     |  |            |         |   |              |   |         |            |  |   |           |  
|Pro forma net loss per share  basic and diluted                     |  | $          | (0.27   | ) |              | $ | (0.50   | )          |  | $ | (0.01     | ) |  | $ | (0.46   | )
|                                                                     |  |            |         |   |              |   |         |            |  |   |           |  
|Risk-free interest rate                                              |  |            | 3.7     | % |              |   | 3.8     | %          |  |   | 3.8       | % |  |   | 3.6     | %
|Dividends                                                            |  |            | 0       | % |              |   | 0       | %          |  |   | 0         | % |  |   | 0       | %
|Expected life of the options                                         |  |            | 5 years |   |              |   | 5 years |            |  |   | 5 years   |   |  |   | 5 years |  







F-13



---



##### Table of Contents



















Inventory Costs






F-14



---



##### Table of Contents





,
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,








F-15



---



##### Table of Contents











|   |                           
|-- | --------------------------
|3. | Related Party Transactions



Disposal of manufacturing
operations






F-16



---



##### Table of Contents









Leased properties








Financing




Other




F-17



---



##### Table of Contents







4.   Special Charges








F-18



---



##### Table of Contents





|                                          |                         |           |     |       |             |   |     |             |   |   |       |      |   |       |     |      |   |   |     |       |  
|----------------------------------------- | ----------------------- | --------- | --- | ----- | ----------- | - | --- | ----------- | - | - | ----- | ---- | - | ----- | --- | ---- | - | - | --- | ----- | -
|                                          |                         |           |     | Lease |             |   |     |             |   |   |      
|                                          |                         | Workforce |     |       | Termination |   |     | Assets      |   |   | Legal |      |   |      
|Description                               |                         | Reduction |     |       | Obligation  |   |     | Written Off |   |   | Costs |      |   | Total |    
|                                          |                         |           |     |       |             |   |     |             |   |   |       |      |   |       |    
|Balance of provision 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 provision as of April 24, 2005 |                         | $         | 2.0 |       |             | $ | 5.7 |             |   | $ |      |      |   | $     |    |      |   | $ | 7.7 |      
|                                          |                         |           |     |       |             |   |     |             |   |   |       |      |   |       |    
|Transition Period:                        |                         |           |     |       |             |   |     |             |   |   |       |      |   |       |     |      |   |   |     |      
|                                          | Cash payments           |           |     | (0.2  | )           |   |     |            |   |   |       |     |   |       |     |     |   |   |     | (0.2  | )
|                                          | Foreign currency impact |           |     |      |             |   |     | (0.1        | ) |   |       |     |   |       |     |     |   |   |     | (0.1  | )
|                                          |                         |           |     |       |             |   |     |             |   |   |       |      |   |       |    
|Balance of provision as of April 30, 2005 |                         | $         | 1.8 |       |             | $ | 5.6 |             |   | $ |      |      |   | $     |    |      |   | $ | 7.4 |      
|                                          |                         |           |     |       |             |   |     |             |   |   |       |      |   |       |    
|Fiscal 2006:                              |                         |           |     |       |             |   |     |             |   |   |       |      |   |       |     |      |   |   |     |      
|                                          | Charges                 |           |     | 5.7   |             |   |     | 0.8         |   |   |       |     |   |       |     |     |   |   |     | 6.5   |  
|                                          | Adjustments             |           |     |      |             |   |     | (0.8        | ) |   |       |     |   |       |     |     |   |   |     | (0.8  | )
|                                          | Cash payments           |           |     | (6.0  | )           |   |     | (1.3        | ) |   |       |     |   |       |     |     |   |   |     | (7.3  | )
|                                          | Foreign currency impact |           |     | 0.2   |             |   |     | (0.3        | ) |   |       |     |   |       |     |     |   |   |     | (0.1  | )
|                                          |                         |           |     |       |             |   |     |             |   |   |       |      |   |       |    
|Balance of provision as of April 30, 2006 |                         | $         | 1.7 |       |             | $ | 4.0 |             |   | $ |      |      |   | $     |    |      |   | $ | 5.7 |      
|                                          |                         |           |     |       |             |   |     |             |   |   |       |      |   |       |    

5.   Segment Information


General description






Disclosures about Segments of an
Enterprise and Related Information .


F-19



---



##### Table of Contents





Business segments




|                  |                              |               |   |        |      |  |   |      |      |  |         |           |   |           |   |      |       |  |   |        |   |  |   |        |  
|----------------- | ---------------------------- | ------------- | - | ------ | ---- |  | - | ---- | ---- |  | ------- | --------- | - | --------- | - | ---- | ----- |  | - | ------ | - |  | - | ------ | -
|                  |                              |               |   | Canada |      |  |   |      |      |  |         |           |  
|                  |                              |               |   | and    |      |  |   |      | Asia |  |         | Corporate |   |           |  
|                  |                              | United States |   |        | CALA |  |   | EMEA |      |  | Pacific |           |   | and Other |   |      | Total | 
|                  |                              |               |   |        |      |  |   |      |      |  |         |           |   |           |   |      |       | 
|Fiscal 2004       |                              |               |   |        |      |  |   |      |      |  |         |           |   |           |   |      |       |  |   |        |   |  |   |       
|                  | Revenue                      |               | $ | 161.4  |      |  | $ | 33.4 |      |  | $       | 140.5     |   |           | $ | 5.4  |       |  | $ |       |   |  | $ | 340.7  |  
|                  |                              |               |   |        |      |  |   |      |      |  |         |           |   |           |   |      |       | 
|                  | Contribution margin          |               |   | 60.8   |      |  |   | 7.9  |      |  |         | 34.9      |   |           |   | 0.1  |       |  |   |       |   |  |   | 103.7  |  
|                  | Shared and unallocated costs |               |   |       |      |  |   |     |      |  |         |          |   |           |   |     |       |  |   | (126.0 | ) |  |   | (126.0 | )
|                  |                              |               |   |        |      |  |   |      |      |  |         |           |   |           |   |      |       | 
|                  | Operating earnings (loss)    |               | $ | 60.8   |      |  | $ | 7.9  |      |  | $       | 34.9      |   |           | $ | 0.1  |       |  | $ | (126.0 | ) |  | $ | (22.3  | )
|                  |                              |               |   |        |      |  |   |      |      |  |         |           |   |           |   |      |       | 
|Fiscal 2005       |                              |               |   |        |      |  |   |      |      |  |         |           |   |           |   |      |       |  |   |        |   |  |   |       
|                  | Revenue                      |               | $ | 153.5  |      |  | $ | 37.2 |      |  | $       | 145.5     |   |           | $ | 6.0  |       |  | $ |       |   |  | $ | 342.2  |  
|                  |                              |               |   |        |      |  |   |      |      |  |         |           |   |           |   |      |       | 
|                  | Contribution margin          |               |   | 59.5   |      |  |   | 13.7 |      |  |         | 39.7      |   |           |   |     |       |  |   |        |   |  |   | 112.9  |  
|                  | Shared and unallocated costs |               |   |       |      |  |   |     |      |  |         |          |   |           |   |     |       |  |   | (154.2 | ) |  |   | (154.2 | )
|                  |                              |               |   |        |      |  |   |      |      |  |         |           |   |           |   |      |       | 
|                  | Operating earnings (loss)    |               | $ | 59.5   |      |  | $ | 13.7 |      |  | $       | 39.7      |   |           | $ |     |       |  | $ | (154.2 | ) |  | $ | (41.3  | )
|                  |                              |               |   |        |      |  |   |      |      |  |         |           |   |           |   |      |       | 
|Transition Period |                              |               |   |        |      |  |   |      |      |  |         |           |   |           |   |      |       |  |   |        |   |  |   |       
|                  | Revenue                      |               | $ | 1.8    |      |  | $ | 0.4  |      |  | $       | 1.0       |   |           | $ |     |       |  | $ |       |   |  | $ | 3.2    |  
|                  |                              |               |   |        |      |  |   |      |      |  |         |           |   |           |   |      |       | 
|                  | Contribution margin          |               |   | 0.5    |      |  |   |     |      |  |         | (0.3      | ) |           |   | (0.1 | )     |  |   |       |   |  |   | 0.1    |  
|                  | Shared and unallocated costs |               |   |       |      |  |   |     |      |  |         |          |   |           |   |     |       |  |   | (1.8   | ) |  |   | (1.8   | )
|                  |                              |               |   |        |      |  |   |      |      |  |         |           |   |           |   |      |       | 
|                  | Operating earnings (loss)    |               | $ | 0.5    |      |  | $ |     |      |  | $       | (0.3      | ) |           | $ | (0.1 | )     |  | $ | (1.8   | ) |  | $ | (1.7   | )
|                  |                              |               |   |        |      |  |   |      |      |  |         |           |   |           |   |      |       | 
|Fiscal 2006       |                              |               |   |        |      |  |   |      |      |  |         |           |   |           |   |      |       |  |   |        |   |  |   |       
|                  | Revenue                      |               | $ | 178.5  |      |  | $ | 43.6 |      |  | $       | 156.3     |   |           | $ | 8.7  |       |  | $ |       |   |  | $ | 387.1  |  
|                  |                              |               |   |        |      |  |   |      |      |  |         |           |   |           |   |      |       | 
|                  | Contribution margin          |               |   | 73.9   |      |  |   | 17.1 |      |  |         | 52.1      |   |           |   | 0.6  |       |  |   |       |   |  |   | 143.7  |  
|                  | Shared and unallocated costs |               |   |       |      |  |   |     |      |  |         |          |   |           |   |     |       |  |   | (150.4 | ) |  |   | (150.4 | )
|                  |                              |               |   |        |      |  |   |      |      |  |         |           |   |           |   |      |       | 
|                  | Operating earnings (loss)    |               | $ | 73.9   |      |  | $ | 17.1 |      |  | $       | 52.1      |   |           | $ | 0.6  |       |  | $ | (150.4 | ) |  | $ | (6.7   | )
|                  |                              |               |   |        |      |  |   |      |      |  |         |           |   |           |   |      |       | 

F-20



---



##### Table of Contents



Product information




|          |                                  |      |       |       |      |            |       |        |  |   |      |     |  |   |       |       | 
|--------- | -------------------------------- | ---- | ----- | ----- | ---- | ---------- | ----- | ------ |  | - | ---- | --- |  | - | ----- | ----- | 
|          |                                  |      |       |       |      | Transition |       |        | 
|          |                                  | 2004 |       |       | 2005 |            |       | Period |  |   | 2006 |    
|          |                                  |      |       |       |      |            |       |        |  |   |      |    
|Products: |                                  |      |       |       |      |            |       |        |  |   |      |     |  |   |       |      
|          | Platforms and desktop appliances |      | $     | 168.1 |      |            | $     | 165.1  |  |   | $    | 1.3 |  |   | $     | 204.3 | 
|          | Applications                     |      |       | 23.9  |      |            |       | 23.5   |  |   |      | 0.3 |  |   |       | 34.2  | 
|          | Other(1)                         |      |       | 15.1  |      |            |       | 19.1   |  |   |      | 0.1 |  |   |       | 22.0  | 
|          |                                  |      |       |       |      |            |       |        |  |   |      |    
|          |                                  |      | 207.1 |       |      |            | 207.7 |        |  |   | 1.7  |     |  |   | 260.5 |      
|          |                                  |      |       |       |      |            |       |        |  |   |      |    
|Services: |                                  |      |       |       |      |            |       |        |  |   |      |     |  |   |       |      
|          | Maintenance and support          |      |       | 95.4  |      |            |       | 85.3   |  |   |      | 1.2 |  |   |       | 80.9  | 
|          | Installation                     |      |       | 15.8  |      |            |       | 22.1   |  |   |      | 0.1 |  |   |       | 24.6  | 
|          | Managed services                 |      |       | 10.6  |      |            |       | 10.9   |  |   |      | 0.2 |  |   |       | 9.2   | 
|          | Professional services            |      |       | 11.8  |      |            |       | 16.2   |  |   |      |    |  |   |       | 11.9  | 
|          |                                  |      |       |       |      |            |       |        |  |   |      |    
|          |                                  |      | 133.6 |       |      |            | 134.5 |        |  |   | 1.5  |     |  |   | 126.6 |      
|          |                                  |      |       |       |      |            |       |        |  |   |      |    
|Total     |                                  | $    | 340.7 |       |      | $          | 342.2 |        |  | $ | 3.2  |     |  | $ | 387.1 |      
|          |                                  |      |       |       |      |            |       |        |  |   |      |    






|    |                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Other products include mainly OEM products representing
    approximately four percent, six percent, three percent and six
    percent of total revenue in fiscal 2004, fiscal 2005, the
    Transition Period and fiscal 2006 respectively.

Geographic
information




|                        |  |      |       |  |      |            |       |        |  |   |      |  |  |   |       | 
|----------------------- |  | ---- | ----- |  | ---- | ---------- | ----- | ------ |  | - | ---- |  |  | - | ----- | 
|                        |  |      |       |  |      | Transition |       |        | 
|                        |  | 2004 |       |  | 2005 |            |       | Period |  |   | 2006 | 
|                        |  |      |       |  |      |            |       |        |  |   |      | 
|Canada                  |  | $    | 25.2  |  |      | $          | 26.5  |        |  | $ | 0.3  |  |  | $ | 30.9  | 
|United States           |  |      | 162.8 |  |      |            | 155.3 |        |  |   | 1.8  |  |  |   | 178.9 | 
|United Kingdom          |  |      | 124.2 |  |      |            | 127.3 |        |  |   | 1.0  |  |  |   | 130.2 | 
|Other foreign countries |  |      | 28.5  |  |      |            | 33.1  |        |  |   | 0.1  |  |  |   | 47.1  | 
|                        |  |      |       |  |      |            |       |        |  |   |      | 
|                        |  | $    | 340.7 |  |      | $          | 342.2 |        |  | $ | 3.2  |  |  | $ | 387.1 | 
|                        |  |      |       |  |      |            |       |        |  |   |      | 



|                        |  |                |      |  |          |   |                |              |  |   |     | 
|----------------------- |  | -------------- | ---- |  | -------- | - | -------------- | ------------ |  | - | --- | 
|                        |  | April 24, 2005 |     
|                        |  |                |     
|                        |  | Property and   |      |  |          |   | Intangible and |             
|                        |  | Equipment      |      |  | Goodwill |   |                | Other Assets | 
|                        |  |                |      |  |          |   |                |              | 
|Canada                  |  | $              | 9.5  |  |          | $ | 3.8            |              |  | $ | 1.9 | 
|United States           |  |                | 0.9  |  |          |   | 0.8            |              |  |   |    | 
|United Kingdom          |  |                | 10.2 |  |          |   | 1.6            |              |  |   |    | 
|Other foreign countries |  |                | 0.3  |  |          |   |               |              |  |   |    | 
|                        |  |                |      |  |          |   |                |              | 
|                        |  | $              | 20.9 |  |          | $ | 6.2            |              |  | $ | 1.9 | 
|                        |  |                |      |  |          |   |                |              | 

F-21



---



##### Table of Contents



|                        |  |                |      |  |                |   |                |              |  |              |           |  |  |          |                |  |              |   |     |  |  |   |     | 
|----------------------- |  | -------------- | ---- |  | -------------- | - | -------------- | ------------ |  | ------------ | --------- |  |  | -------- | -------------- |  | ------------ | - | --- |  |  | - | --- | 
|                        |  | April 30, 2005 |      |  | April 30, 2006 |  
|                        |  |                |      |  |                |  
|                        |  | Property and   |      |  |                |   | Intangible and |              |  | Property and |           |  |  |          | Intangible and | 
|                        |  | Equipment      |      |  | Goodwill       |   |                | Other Assets |  |              | Equipment |  |  | Goodwill |                |  | Other Assets |  
|                        |  |                |      |  |                |   |                |              |  |              |           |  |  |          |                |  |              |  
|Canada                  |  | $              | 9.3  |  |                | $ | 3.6            |              |  | $            | 5.9       |  |  | $        | 10.4           |  |              | $ | 4.2 |  |  | $ | 6.6 | 
|United States           |  |                | 0.9  |  |                |   | 0.9            |              |  |              |          |  |  |          | 1.0            |  |              |   | 0.9 |  |  |   |    | 
|United Kingdom          |  |                | 10.1 |  |                |   | 1.5            |              |  |              |          |  |  |          | 5.0            |  |              |   | 1.7 |  |  |   |    | 
|Other foreign countries |  |                | 0.3  |  |                |   |               |              |  |              |          |  |  |          | 1.0            |  |              |   |    |  |  |   |    | 
|                        |  |                |      |  |                |   |                |              |  |              |           |  |  |          |                |  |              |  
|                        |  | $              | 20.6 |  |                | $ | 6.0            |              |  | $            | 5.9       |  |  | $        | 17.4           |  |              | $ | 6.8 |  |  | $ | 6.6 | 
|                        |  |                |      |  |                |   |                |              |  |              |           |  |  |          |                |  |              |  

Concentrations






6.   Divestitures


Sale of Edict Training
Ltd.




F-22



---



##### Table of Contents





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

Sale of U.K. land and
building


6-month 1 2


7.   Securitization of Accounts Receivable








F-23



---



##### Table of Contents





|                                    |                                  |                |      |      |                |   |                |   |  |   |   |   | 
|----------------------------------- | -------------------------------- | -------------- | ---- | ---- | -------------- | - | -------------- | - |  | - | - | - | 
|                                    |                                  | Year Ended     |      |      | Six Days Ended |   | Year Ended    
|                                    |                                  | April 24, 2005 |      |      | April 30, 2005 |   | April 30, 2006
|                                    |                                  |                |      |      |                |   |               
|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 Current Assets




|                  |  |           |      |  |           |   |      |           |  |   |      | 
|----------------- |  | --------- | ---- |  | --------- | - | ---- | --------- |  | - | ---- | 
|                  |  | April 24, |      |  | April 30, |   |      | April 30, | 
|                  |  | 2005      |      |  | 2005      |   |      | 2006      | 
|                  |  |           |      |  |           |   |      |           | 
|Prepaid expenses  |  | $         | 14.9 |  |           | $ | 15.7 |           |  | $ | 13.6 | 
|Other receivables |  |           | 12.3 |  |           |   | 12.7 |           |  |   | 9.5  | 
|Deferred charges  |  |           |     |  |           |   |     |           |  |   | 1.6  | 
|                  |  |           |      |  |           |   |      |           | 
|                  |  | $         | 27.2 |  |           | $ | 28.4 |           |  | $ | 24.7 | 
|                  |  |           |      |  |           |   |      |           | 



9.   Inventories


|               |  |           |      |  |           |   |      |           |  |   |      | 
|-------------- |  | --------- | ---- |  | --------- | - | ---- | --------- |  | - | ---- | 
|               |  | April 24, |      |  | April 30, |   |      | April 30, | 
|               |  | 2005      |      |  | 2005      |   |      | 2006      | 
|               |  |           |      |  |           |   |      |           | 
|Raw materials  |  | $         | 0.7  |  |           | $ | 0.7  |           |  | $ | 0.9  | 
|Finished goods |  |           | 16.4 |  |           |   | 16.7 |           |  |   | 22.7 | 
|               |  |           |      |  |           |   |      |           | 
|               |  | $         | 17.1 |  |           | $ | 17.4 |           |  | $ | 23.6 | 
|               |  |           |      |  |           |   |      |           | 

F-24



---



##### Table of Contents



10. Property and Equipment


|                               |           |           |      |      |           |   |      |           |  |   |      |      | 
|------------------------------ | --------- | --------- | ---- | ---- | --------- | - | ---- | --------- |  | - | ---- | ---- | 
|                               |           | April 24, |      |      | April 30, |   |      | April 30, | 
|                               |           | 2005      |      |      | 2005      |   |      | 2006      | 
|                               |           |           |      |      |           |   |      |           | 
|Cost:                          |           |           |      |      |           |   |      |           |  |   |      |     
|                               | Land      |           | $    | 0.6  |           |   | $    | 0.6       |  |   | $    |     | 
|                               | Buildings |           |      | 5.0  |           |   |      | 5.0       |  |   |      |     | 
|                               | Equipment |           |      | 61.6 |           |   |      | 61.0      |  |   |      | 68.8 | 
|                               |           |           |      |      |           |   |      |           | 
|                               |           |           | 67.2 |      |           |   | 66.6 |           |  |   | 68.8 |     
|                               |           |           |      |      |           |   |      |           | 
|Less accumulated depreciation: |           |           |      |      |           |   |      |           |  |   |      |     
|                               | Buildings |           |      | 0.4  |           |   |      | 0.4       |  |   |      |     | 
|                               | Equipment |           |      | 45.9 |           |   |      | 45.6      |  |   |      | 51.4 | 
|                               |           |           |      |      |           |   |      |           | 
|                               |           |           | 46.3 |      |           |   | 46.0 |           |  |   | 51.4 |     
|                               |           |           |      |      |           |   |      |           | 
|                               |           | $         | 20.9 |      |           | $ | 20.6 |           |  | $ | 17.4 |     
|                               |           |           |      |      |           |   |      |           | 



11. Goodwill


|                                 |  |           |     |  |           |   |      |           |  |   |     | 
|-------------------------------- |  | --------- | --- |  | --------- | - | ---- | --------- |  | - | --- | 
|                                 |  | April 24, |     |  | April 30, |   |      | April 30, | 
|                                 |  | 2005      |     |  | 2005      |   |      | 2006      | 
|                                 |  |           |     |  |           |   |      |           | 
|Balance, beginning of the period |  | $         | 5.6 |  |           | $ | 6.2  |           |  | $ | 6.0 | 
|Foreign currency impact          |  |           | 0.6 |  |           |   | (0.2 | )         |  |   | 0.8 | 
|                                 |  |           |     |  |           |   |      |           | 
|Balance, end of the period       |  | $         | 6.2 |  |           | $ | 6.0  |           |  | $ | 6.8 | 
|                                 |  |           |     |  |           |   |      |           | 



12. Intangible and Other Assets


|                               |                               |           |     |     |           |   |     |           |  |   |     |     | 
|------------------------------ | ----------------------------- | --------- | --- | --- | --------- | - | --- | --------- |  | - | --- | --- | 
|                               |                               | April 24, |     |     | April 30, |   |     | April 30, | 
|                               |                               | 2005      |     |     | 2005      |   |     | 2006      | 
|                               |                               |           |     |     |           |   |     |           | 
|Cost:                          |                               |           |     |     |           |   |     |           |  |   |     |    
|                               | Patents, trademarks and other |           | $   | 3.5 |           |   | $   | 3.6       |  |   | $   | 5.4 | 
|                               | Deferred debt issue costs     |           |     |    |           |   |     | 3.9       |  |   |     | 4.5 | 
|                               |                               |           |     |     |           |   |     |           | 
|                               |                               |           | 3.5 |     |           |   | 7.5 |           |  |   | 9.9 |    
|                               |                               |           |     |     |           |   |     |           | 
|Less accumulated amortization: |                               |           |     |     |           |   |     |           |  |   |     |    
|                               | Patents, trademarks and other |           |     | 1.6 |           |   |     | 1.6       |  |   |     | 2.5 | 
|                               | Deferred debt issue costs     |           |     |    |           |   |     |          |  |   |     | 0.8 | 
|                               |                               |           |     |     |           |   |     |           | 
|                               |                               |           | 1.6 |     |           |   | 1.6 |           |  |   | 3.3 |    
|                               |                               |           |     |     |           |   |     |           | 
|                               |                               | $         | 1.9 |     |           | $ | 5.9 |           |  | $ | 6.6 |    
|                               |                               |           |     |     |           |   |     |           | 

F-25



---



##### Table of Contents







|    |                  
|--- | -----------------
|13. | Bank Indebtedness









|    |                                         
|--- | ----------------------------------------
|14. | Accounts Payable and Accrued Liabilities

|                                             |  |           |      |  |           |   |      |           |  |   |      | 
|-------------------------------------------- |  | --------- | ---- |  | --------- | - | ---- | --------- |  | - | ---- | 
|                                             |  | April 24, |      |  | April 30, |   |      | April 30, | 
|                                             |  | 2005      |      |  | 2005      |   |      | 2006      | 
|                                             |  |           |      |  |           |   |      |           | 
|Trade payable                                |  | $         | 18.0 |  |           | $ | 14.9 |           |  | $ | 21.0 | 
|Employee-related payables                    |  |           | 9.3  |  |           |   | 11.1 |           |  |   | 11.6 | 
|Restructuring, warranty and other provisions |  |           | 6.3  |  |           |   | 6.2  |           |  |   | 5.7  | 
|Other accrued liabilities                    |  |           | 20.0 |  |           |   | 23.6 |           |  |   | 35.0 | 
|                                             |  |           |      |  |           |   |      |           | 
|                                             |  | $         | 53.6 |  |           | $ | 55.8 |           |  | $ | 73.3 | 
|                                             |  |           |      |  |           |   |      |           | 

F-26



---



##### Table of Contents





|    |               
|--- | --------------
|15. | Long-Term Debt

|                                                                                                                                                                                                                                                                                                                     |  |           |      |  |           |   |      |           |  |   |     | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------- | ---- |  | --------- | - | ---- | --------- |  | - | --- | 
|                                                                                                                                                                                                                                                                                                                     |  | April 24, |      |  | April 30, |   |      | April 30, | 
|                                                                                                                                                                                                                                                                                                                     |  | 2005      |      |  | 2005      |   |      | 2006      | 
|                                                                                                                                                                                                                                                                                                                     |  |           |      |  |           |   |      |           | 
|Capital leases, at interest rates varying from 1.3% to 11.8%,
    payable in monthly installments, with maturity dates ranging
    from 28 to 36 months, secured by the leased assets                                                                                                                                |  | $         | 3.2  |  |           | $ | 3.2  |           |  | $ | 4.1 | 
|Chattel mortgage loan, bearing interest at 6.3%, payable in
    monthly installments and due in April 2006, secured by
    certain U.K. equipment                                                                                                                                                                    |  |           | 0.6  |  |           |   | 0.6  |           |  |   |    | 
|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 U.K. real estate
    properties |  |           | 10.8 |  |           |   | 10.8 |           |  |   |    | 
|                                                                                                                                                                                                                                                                                                                     |  |           |      |  |           |   |      |           | 
|                                                                                                                                                                                                                                                                                                                     |  |           | 14.6 |  |           |   | 14.6 |           |  |   | 4.1 | 
|Less: current portion                                                                                                                                                                                                                                                                                                |  |           | 2.8  |  |           |   | 2.8  |           |  |   | 1.6 | 
|                                                                                                                                                                                                                                                                                                                     |  |           |      |  |           |   |      |           | 
|                                                                                                                                                                                                                                                                                                                     |  | $         | 11.8 |  |           | $ | 11.8 |           |  | $ | 2.5 | 
|                                                                                                                                                                                                                                                                                                                     |  |           |      |  |           |   |      |           | 







|    |                  
|--- | -----------------
|16. | Convertible Notes



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

semi-annually Make-Whole Make-Whole Pre-IPO Post-IPO Make-Whole


F-27



---



##### Table of Contents



Lock-Up


and


pari passu






|                                                   |  |           |      |   |           |   |      | 
|-------------------------------------------------- |  | --------- | ---- | - | --------- | - | ---- | 
|                                                   |  | April 30, |      |   | April 30, |  
|                                                   |  | 2005      |      |   | 2006      |  
|                                                   |  |           |      |   |           |  
|Balance, beginning of period                       |  | $         |     |   |           | $ | 46.6 | 
|Proceeds on issuance of convertible notes          |  |           | 55.0 |   |           |   |     | 
|Less: amount allocated to warrants                 |  |           | (7.7 | ) |           |   |     | 
|Accretion of convertible notes to redemption value |  |           |     |   |           |   | 1.5  | 
|Foreign currency impact                            |  |           | (0.7 | ) |           |   | 0.6  | 
|                                                   |  |           |      |   |           |  
|Balance, end of period                             |  | $         | 46.6 |   |           | $ | 48.7 | 
|                                                   |  |           |      |   |           |  

F-28



---



##### Table of Contents



Convertible
Debentures








17. Commitments and Guarantees


Operating leases




|               |               |      |   |      |      |            |   |        |  |  |      |     |  |  |   |      | 
|-------------- | ------------- | ---- | - | ---- | ---- | ---------- | - | ------ |  |  | ---- | --- |  |  | - | ---- | 
|               |               |      |   |      |      | Transition |   |        | 
|               |               | 2004 |   |      | 2005 |            |   | Period |  |  | 2006 |    
|               |               |      |   |      |      |            |   |        |  |  |      |    
|Rental expense |               |      |   |      |      |            |   |        |  |  |      |     |  |  |   |     
|               | Arms-length   |      | $ | 8.6  |      |            | $ | 8.3    |  |  | $    |    |  |  | $ | 8.1  | 
|               | Related party |      |   | 6.7  |      |            |   | 5.9    |  |  |      | 0.1 |  |  |   | 6.5  | 
|               |               |      |   |      |      |            |   |        |  |  |      |    
|               | Total         |      | $ | 15.3 |      |            | $ | 14.2   |  |  | $    | 0.1 |  |  | $ | 14.6 | 
|               |               |      |   |      |      |            |   |        |  |  |      |    
|Rental income  |               |      |   |      |      |            |   |        |  |  |      |     |  |  |   |     
|               | Arms-length   |      | $ | 0.1  |      |            | $ | 0.6    |  |  | $    |    |  |  | $ | 0.2  | 
|               | Related party |      |   | 4.3  |      |            |   | 3.6    |  |  |      |    |  |  |   | 2.8  | 
|               |               |      |   |      |      |            |   |        |  |  |      |    
|               | Total         |      | $ | 4.4  |      |            | $ | 4.2    |  |  | $    |    |  |  | $ | 3.0  | 
|               |               |      |   |      |      |            |   |        |  |  |      |    



|            |  |                       |      |  |                     |   |      |             |  |   |               |  |  |   |     | 
|----------- |  | --------------------- | ---- |  | ------------------- | - | ---- | ----------- |  | - | ------------- |  |  | - | --- | 
|            |  | Future Lease Payments |      |  | Future Lease Income |  
|            |  |                       |      |  |                     |  
|Fiscal year |  | Arms-length           |      |  | Related Party       |   |      | Arms-length |  |   | Related Party | 
|            |  |                       |      |  |                     |   |      |             |  |   |               | 
|2007        |  | $                     | 7.6  |  |                     | $ | 8.0  |             |  | $ |              |  |  | $ | 0.9 | 
|2008        |  |                       | 6.4  |  |                     |   | 8.0  |             |  |   | 0.1           |  |  |   | 0.2 | 
|2009        |  |                       | 5.1  |  |                     |   | 8.0  |             |  |   | 0.1           |  |  |   | 0.2 | 
|2010        |  |                       | 3.7  |  |                     |   | 8.0  |             |  |   |              |  |  |   | 0.2 | 
|2011        |  |                       | 3.0  |  |                     |   | 6.7  |             |  |   |              |  |  |   | 0.1 | 
|Thereafter  |  |                       | 9.2  |  |                     |   |     |             |  |   |              |  |  |   |    | 
|            |  |                       |      |  |                     |   |      |             |  |   |               | 
|Total       |  | $                     | 35.0 |  |                     | $ | 38.7 |             |  | $ | 0.2           |  |  | $ | 1.6 | 
|            |  |                       |      |  |                     |   |      |             |  |   |               | 

F-29



---



##### Table of Contents



Capital expenditures




Guarantees


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






|                             |  |           |      |   |           |   |     |           |  |   |      |  
|---------------------------- |  | --------- | ---- | - | --------- | - | --- | --------- |  | - | ---- | -
|                             |  | April 24, |      |   | April 30, |   |     | April 30, | 
|                             |  | 2005      |      |   | 2005      |   |     | 2006      | 
|                             |  |           |      |   |           |   |     |           | 
|Balance, beginning of period |  | $         | 2.1  |   |           | $ | 2.6 |           |  | $ | 2.6  |  
|Warranty costs incurred      |  |           | (1.0 | ) |           |   |    |           |  |   | (1.8 | )
|Warranties issued            |  |           | 1.0  |   |           |   |    |           |  |   | 1.0  |  
|Other                        |  |           | 0.5  |   |           |   |    |           |  |   | 0.2  |  
|                             |  |           |      |   |           |   |     |           | 
|Balance, end of period       |  | $         | 2.6  |   |           | $ | 2.6 |           |  | $ | 2.0  |  
|                             |  |           |      |   |           |   |     |           | 









Research and Development Expenditures




18. Contingencies




F-30



---



##### Table of Contents





19. Redeemable Common Shares








|                                    |  |           |      |  |           |   |      |           |  |   |      | 
|----------------------------------- |  | --------- | ---- |  | --------- | - | ---- | --------- |  | - | ---- | 
|                                    |  | April 24, |      |  | April 30, |   |      | April 30, | 
|                                    |  | 2005      |      |  | 2005      |   |      | 2006      | 
|                                    |  |           |      |  |           |   |      |           | 
|Balance, beginning of the period    |  | $         | 17.8 |  |           | $ | 18.2 |           |  | $ | 18.2 | 
|Interest accreted during the period |  |           | 0.4  |  |           |   |     |           |  |   | 0.5  | 
|                                    |  |           |      |  |           |   |      |           | 
|Balance, end of period              |  | $         | 18.2 |  |           | $ | 18.2 |           |  | $ | 18.7 | 
|                                    |  |           |      |  |           |   |      |           | 

20. Convertible, Redeemable Preferred Shares


Series A Preferred
Shares








F-31



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##### Table of Contents









Series B Preferred
Shares






F-32



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##### Table of Contents













|                                     |                                                 |          |     |   |          |   |      |       |   |   |      |      |  
|------------------------------------ | ----------------------------------------------- | -------- | --- | - | -------- | - | ---- | ----- | - | - | ---- | ---- | -
|                                     |                                                 | Series A |     |   | Series B |   |      | Total |  
|                                     |                                                 |          |     |   |          |   |      |       |  
|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 |     
|                                     |                                                 |          |     |   |          |   |      |       |  
|Fiscal 2006                          |                                                 |          |     |   |          |   |      |       |   |   |      |     
|Accreted interest                    |                                                 |          | 1.6 |   |          |   | 4.8  |       |   |   | 6.4  |     
|                                     |                                                 |          |     |   |          |   |      |       |  
|Carrying value as of April 30, 2006  |                                                 | $        | 8.6 |   |          | $ | 36.9 |       |   | $ | 45.5 |     
|                                     |                                                 |          |     |   |          |   |      |       |  

F-33



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##### Table of Contents



21. Warrants




|                                                                            |                                                                |           |      |      |           |   |      |           |  |   |      |      | 
|--------------------------------------------------------------------------- | -------------------------------------------------------------- | --------- | ---- | ---- | --------- | - | ---- | --------- |  | - | ---- | ---- | 
|                                                                            |                                                                | April 24, |      |      | April 30, |   |      | April 30, | 
|                                                                            |                                                                | 2005      |      |      | 2005      |   |      | 2006      | 
|                                                                            |                                                                |           |      |      |           |   |      |           | 
|i)   Warrants issued/issuable in connection with
    government funding     |                                                                |           |      |      |           |   |      |           |  |   |      |     
|                                                                            | Balance at beginning of the period                             |           | $    | 28.7 |           |   | $    | 39.1      |  |   | $    | 39.1 | 
|                                                                            | Government funding received in period  warrants issued        |           |      | 1.9  |           |   |      |          |  |   |      |     | 
|                                                                            | Government funding received in period  no warrants
    issued |           |      | 7.2  |           |   |      |          |  |   |      |     | 
|                                                                            | Accrued government funding receivable  no warrants
    issued |           |      | 1.3  |           |   |      |          |  |   |      |     | 
|                                                                            |                                                                |           |      |      |           |   |      |           | 
|Balance at end of the period                                                |                                                                |           | 39.1 |      |           |   | 39.1 |           |  |   | 39.1 |     
|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  |           |  |   | 7.7  |     
|                                                                            |                                                                |           |      |      |           |   |      |           | 
|Total warrants outstanding                                                  |                                                                | $         | 40.2 |      |           | $ | 47.9 |           |  | $ | 47.9 |     
|                                                                            |                                                                |           |      |      |           |   |      |           | 



| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | i) | During fiscal 2003, the Company, in conjunction with the Partner
    Company and the Funding Company, signed an agreement for funding
    from the Canadian Government (the TPC Agreement) for up to C$60.0 of the Funding
    Companys, the Partner Companys and the
    Companys research and development activities over a
    three-year period. Pursuant to the terms of the agreement, in
    exchange for funding received from the Government of Canada, the
    Company has committed to issue warrants to Her Majesty the Queen
    in Right of Canada exercisable into common shares for no
    additional consideration. The number of warrants to be issued on
    September 30 in each of 2003, 2004 and 2005 is determined based
    on the funding received and the fair market value of the common
    shares at the date of issuance. The warrants have no expiry date.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | As at April 25, 2004 the Company had issued warrants to
    acquire 12,986,968 common shares pursuant to the above
    agreement. During fiscal 2005, an additional 13,862,943 warrants
    were issued at the then fair value of C$1.00 per share, of which
    11,481,109 warrants related to $8.7 of government funding that
    was receivable and received during fiscal 2004, and the
    remaining 2,381,834 relate to funding received during fiscal
    2005. As at April 24, 2005 a total of 26,849,911 warrants
    had been issued pursuant to the above agreement. Warrants
    relating to the $7.2 of government funding received in fiscal
    2005 were issued in Fiscal 2006 in accordance with the terms of
    the agreement. Since the Company had reached its maximum funding
    limit in fiscal 2005, no additional funding was received and no
    additional warrants were issued in fiscal 2006. The remaining
    $1.3 of government funding recorded in fiscal 2005 continues to
    be receivable at April 30, 2006.



| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ii)  | In connection with the issuance of Series A Preferred
    Shares in fiscal 2004, the Company issued to the holders of the
    Series A Preferred Shares warrants to acquire 5,000,000
    common shares of the Company. The warrants are exercisable at
    C$1.25 per common share and have a seven year life. The warrants
    were valued using the Black-Scholes option pricing model with
    the following assumptions: seven year life, interest rate of
    4.37 percent, volatility of forty percent and no dividends.
    The warrants are automatically exercisable based on a formula in
    connection with a Qualified IPO.
|
| | iii) | In connection with the issuance of Series A Preferred
    Shares in fiscal 2004, the Company issued warrants to the
    placement agent to acquire 1,000,000 common shares of the
    Company, as consideration for services rendered in connection
    with the financing transaction and accounted for them as an
    issue cost. The fair value of the warrants was estimated based
    on the fair value of                                                                                                                                                                                                                          

F-34



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##### Table of Contents



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     | services received. The warrants are exercisable at C$1.00 per
    share and have a five year life. The warrants expire in
    connection with a Qualified IPO.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| | iv) | As described in Note 16, in connection with the issuance of
    the Senior Secured Convertible Notes on April 27, 2005, the
    Company issued to the holders warrants to acquire 16,500,000
    common shares of the Company. The warrants are exercisable at
    any time on or after the earliest of the date of effectiveness
    of a Qualified IPO, the date of effectiveness of any other
    public offering of the common shares or upon and following a
    fundamental change. The warrants are exercisable at a price per
    share equal to the lower of (i) USD $1.50 and (ii) the
    arithmetic average of the closing sales prices of the
    Companys shares during the first 10 trading days following
    the date of expiry of any lock-up restrictions entered into by
    the Company in connection with a Qualified IPO. The warrants
    expire the later of (i) the 4th anniversary of the issuance
    date and (ii) if a Qualified IPO occurs prior to the 4th
    anniversary, the 1st anniversary of the effective date of the
    Qualified IPO. The Holder may elect, in lieu of making the cash
    payment upon exercise of the warrants, to receive the net
    number of common shares which equates to the excess of the
    fair value of the common shares over its exercise price. The
    relative fair value of the warrants on the date of issuance of
    $7.7 was allocated from the proceeds on the issuance of the
    convertible notes and has been recorded as a component of
    shareholders deficiency. The warrants were valued using
    the Black-Scholes option pricing model with the following
    assumptions: five year life, interest rate of 3.83 percent,
    volatility of one hundred percent and no dividends.

22. Share Capital






Equity offerings






Share Purchase Loans




F-35



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##### Table of Contents





Stock Option Plan








|                                                                                                                  |           |             |            |             |             |   |      |           |          |  |            |            |   |   |      |      | 
|----------------------------------------------------------------------------------------------------------------- | --------- | ----------- | ---------- | ----------- | ----------- | - | ---- | --------- | -------- |  | ---------- | ---------- | - | - | ---- | ---- | 
|                                                                                                                  |           | Fiscal 2004 |            |             | Fiscal 2005 |  
|                                                                                                                  |           |             |            |             |             |  
|                                                                                                                  |           |             |            | Weighted    |             |   |      |           | Weighted | 
|                                                                                                                  |           |             |            | Average     |             |   |      |           | Average  | 
|                                                                                                                  |           | Number of   |            |             | Exercise    |   |      | Number of |          |  | Exercise   |           
|                                                                                                                  |           | Shares      |            |             | Price       |   |      | Shares    |          |  | Price      |           
|                                                                                                                  |           |             |            |             |             |   |      |           |          |  |            |           
|Outstanding options:                                                                                              |           |             |            |             |             |   |      |           |          |  |            |            |   |   |      |     
|Balance, beginning of period:                                                                                     |           |             | 16,037,154 |             |             | $ | 2.59 |           |          |  | 4,482,264  |            |   | $ | 2.77 |     
|                                                                                                                  | Granted   |             |            | 1,337,087   |             |   | $    | 1.76      |          |  |            | 15,220,873 |   |   | $    | 0.81 | 
|                                                                                                                  | Exercised |             |            | (5,950      | )           |   | $    | 2.57      |          |  |            |           |   |   | $    |     | 
|                                                                                                                  | Forfeited |             |            | (1,527,436  | )           |   | $    | 2.58      |          |  |            | (725,856   | ) |   | $    | 1.54 | 
|                                                                                                                  | Expired   |             |            | (985,289    | )           |   | $    | 2.69      |          |  |            | (497,279   | ) |   | $    | 2.84 | 
|                                                                                                                  | Cancelled |             |            | (10,373,302 | )           |   | $    | 2.51      |          |  |            |           |   |   | $    |     | 
|                                                                                                                  |           |             |            |             |             |   |      |           |          |  |            |           
|Balance, end of period:                                                                                           |           |             | 4,482,264  |             |             | $ | 2.50 |           |          |  | 18,480,002 |            |   | $ | 1.22 |     
|                                                                                                                  |           |             |            |             |             |   |      |           |          |  |            |           
|Number of options exercisable                                                                                     |           |             | 2,462,636  |             |             | $ | 2.59 |           |          |  | 3,017,863  |            |   | $ | 2.82 |     
|                                                                                                                  |           |             |            |             |             |   |      |           |          |  |            |           
|Weighted average fair value of options granted during the period
    using the minimum value option pricing model |           |             |            |             |             | $ | 0.29 |           |          |  |            |            |   | $ | 0.15 |     
|                                                                                                                  |           |             |            |             |             |   |      |           |          |  |            |           

F-36



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##### Table of Contents



|                                                                                                                |           |                   |            |          |             |   |      |           |          |  |            |            |   |   |      |      | 
|--------------------------------------------------------------------------------------------------------------- | --------- | ----------------- | ---------- | -------- | ----------- | - | ---- | --------- | -------- |  | ---------- | ---------- | - | - | ---- | ---- | 
|                                                                                                                |           | Transition Period |            |          | Fiscal 2006 |  
|                                                                                                                |           |                   |            |          |             |  
|                                                                                                                |           |                   |            | Weighted |             |   |      |           | Weighted | 
|                                                                                                                |           |                   |            | Average  |             |   |      |           | Average  | 
|                                                                                                                |           | Number of         |            |          | Exercise    |   |      | Number of |          |  | Exercise   |           
|                                                                                                                |           | Shares            |            |          | Price       |   |      | Shares    |          |  | Price      |           
|                                                                                                                |           |                   |            |          |             |   |      |           |          |  |            |           
|Outstanding options:                                                                                            |           |                   |            |          |             |   |      |           |          |  |            |            |   |   |      |     
|Balance, beginning of period:                                                                                   |           |                   | 18,480,002 |          |             | $ | 1.20 |           |          |  | 18,456,249 |            |   | $ | 1.34 |     
|                                                                                                                | Granted   |                   |            |         |             |   | $    |          |          |  |            | 5,227,233  |   |   | $    | 0.90 | 
|                                                                                                                | Exercised |                   |            |         |             |   | $    |          |          |  |            | (58,174    | ) |   | $    | 2.81 | 
|                                                                                                                | Forfeited |                   |            | (15,153  | )           |   | $    | 1.69      |          |  |            | (879,766   | ) |   | $    | 1.27 | 
|                                                                                                                | Expired   |                   |            | (8,600   | )           |   | $    | 2.96      |          |  |            | (2,077,004 | ) |   | $    | 3.07 | 
|                                                                                                                |           |                   |            |          |             |   |      |           |          |  |            |           
|Balance, end of period:                                                                                         |           |                   | 18,456,249 |          |             | $ | 1.19 |           |          |  | 20,668,538 |            |   | $ | 1.06 |     
|                                                                                                                |           |                   |            |          |             |   |      |           |          |  |            |           
|Number of options exercisable                                                                                   |           |                   | 3,102,973  |          |             | $ | 2.78 |           |          |  | 4,947,519  |            |   | $ | 1.48 |     
|                                                                                                                |           |                   |            |          |             |   |      |           |          |  |            |           
|Weighted average fair value of options granted during the year
    using the minimum value option pricing model |           |                   |            |          |             | $ |     |           |          |  |            |            |   | $ | 0.14 |     
|                                                                                                                |           |                   |            |          |             |   |      |           |          |  |            |           



|               |  |                   |            |           |                   |  |           |           |           |  |             |  |  |  |           | 
|-------------- |  | ----------------- | ---------- | --------- | ----------------- |  | --------- | --------- | --------- |  | ----------- |  |  |  | --------- | 
|               |  | April 30, 2006    |           
|               |  |                   |           
|               |  | Total outstanding |            |           | Total exercisable | 
|               |  |                   |            |           |                   | 
|               |  |                   |            | Weighted- |                   |  |           |           | Weighted- | 
|               |  |                   |            | Average   |                   |  |           |           | Average   | 
|               |  |                   |            | Remaining |                   |  |           |           | Remaining | 
|               |  | Number of         |            |           | Contractual       |  |           | Number of |           |  | Contractual | 
|Exercise Price |  | Shares            |            |           | Life              |  |           | Shares    |           |  | Life        | 
|               |  |                   |            |           |                   |  |           |           |           |  |             | 
|$0.89          |  |                   | 18,759,480 |           |                   |  | 3.6 years |           |           |  | 3,598,095   |  |  |  | 3.4 years | 
|$1.04          |  |                   | 246,883    |           |                   |  | 4.9 years |           |           |  | 1,250       |  |  |  | 4.9 years | 
|$1.79          |  |                   | 164,500    |           |                   |  | 2.6 years |           |           |  | 82,750      |  |  |  | 2.6 years | 
|$2.45          |  |                   | 724,500    |           |                   |  | 1.6 years |           |           |  | 492,249     |  |  |  | 1.6 years | 
|$3.57          |  |                   | 773,175    |           |                   |  | 0.7 years |           |           |  | 773,175     |  |  |  | 0.7 years | 
|               |  |                   |            |           |                   |  |           |           |           |  |             | 
|               |  |                   | 20,668,538 |           |                   |  |           |           |           |  | 4,947,519   |  |  |  |           | 
|               |  |                   |            |           |                   |  |           |           |           |  |             | 

F-37



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##### Table of Contents



Earnings (loss) per
share




|                                                                                           |  |      |             |   |      |            |             |        |  |   |             |   |  |   |             |  
|------------------------------------------------------------------------------------------ |  | ---- | ----------- | - | ---- | ---------- | ----------- | ------ |  | - | ----------- | - |  | - | ----------- | -
|                                                                                           |  |      |             |   |      | Transition |             |        | 
|                                                                                           |  | 2004 |             |   | 2005 |            |             | Period |  |   | 2006        |  
|                                                                                           |  |      |             |   |      |            |             |        |  |   |             |  
|Net loss, as reported                                                                      |  | $    | (30.6       | ) |      | $          | (49.6       | )      |  | $ | (1.6        | ) |  | $ | (44.6       | )
|Stock-based dividend                                                                       |  |      | (0.1        | ) |      |            |            |        |  |   |            |   |  |   |            |  
|Accreted interest on redeemable shares                                                     |  |      | (1.3        | ) |      |            | (5.6        | )      |  |   | (0.1        | ) |  |   | (6.9        | )
|Deemed dividend relating to beneficial conversion feature on
    Series A preferred shares |  |      | (1.4        | ) |      |            |            |        |  |   |            |   |  |   |            |  
|                                                                                           |  |      |             |   |      |            |             |        |  |   |             |  
|Net loss available to common shareholders                                                  |  | $    | (33.4       | ) |      | $          | (55.2       | )      |  | $ | (1.7        | ) |  | $ | (51.5       | )
|                                                                                           |  |      |             |   |      |            |             |        |  |   |             |  
|Weighted average number of common shares outstanding during the
    period                 |  |      |             |   |      |            |             |        |  |   |             |   |  |   |             |  
|Loss per common share  basic and diluted                                                  |  |      | 127,831,211 |   |      |            | 113,792,829 |        |  |   | 117,149,933 |   |  |   | 117,230,198 |  
|                                                                                           |  |      |             |   |      |            |             |        |  |   |             |  
|                                                                                           |  | $    | (0.26       | ) |      | $          | (0.49       | )      |  | $ | (0.01       | ) |  | $ | (0.44       | )
|                                                                                           |  |      |             |   |      |            |             |        |  |   |             |  

anti-dilutive:


|                                         |  |      |            |  |      |            |             |        |  |  |             |  |  |  |             | 
|---------------------------------------- |  | ---- | ---------- |  | ---- | ---------- | ----------- | ------ |  |  | ----------- |  |  |  | ----------- | 
|                                         |  |      |            |  |      | Transition |             |        | 
|(Number of shares)                       |  | 2004 |            |  | 2005 |            |             | Period |  |  | 2006        | 
|                                         |  |      |            |  |      |            |             |        |  |  |             | 
|Stock options                            |  |      | 19,888     |  |      |            |            |        |  |  |            |  |  |  | 1,624,155   | 
|Warrants                                 |  |      | 11,278,329 |  |      |            | 28,475,127  |        |  |  | 28,686,974  |  |  |  | 37,695,141  | 
|Convertible debentures                   |  |      | 2,029,111  |  |      |            |            |        |  |  |            |  |  |  |            | 
|Convertible, redeemable preferred shares |  |      | 477,047    |  |      |            | 87,789,300  |        |  |  | 87,789,300  |  |  |  | 82,820,094  | 
|                                         |  |      |            |  |      |            |             |        |  |  |             | 
|                                         |  |      | 13,804,375 |  |      |            | 116,264,427 |        |  |  | 116,476,274 |  |  |  | 122,139,390 | 
|                                         |  |      |            |  |      |            |             |        |  |  |             | 



Stock-based
Compensation


Black-Scholes five-year non-employees


F-38



---



##### Table of Contents







Performance-Based Stock
Options




Deferred Share Unit
Plans




23. Other Income (Expense), Net


|                                       |  |      |      |   |      |            |      |        |  |   |      |  |  |   |      |  
|-------------------------------------- |  | ---- | ---- | - | ---- | ---------- | ---- | ------ |  | - | ---- |  |  | - | ---- | -
|                                       |  |      |      |   |      | Transition |      |        | 
|                                       |  | 2004 |      |   | 2005 |            |      | Period |  |   | 2006 | 
|                                       |  |      |      |   |      |            |      |        |  |   |      | 
|Foreign exchange gains (losses), net   |  | $    | (1.0 | ) |      | $          | (0.1 | )      |  | $ | 0.2  |  |  | $ | (0.6 | )
|Interest income                        |  |      | 0.4  |   |      |            | 0.5  |        |  |   |     |  |  |   | 0.7  |  
|Amortization of gain on sale of assets |  |      |     |   |      |            |     |        |  |   |     |  |  |   | 0.3  |  
|                                       |  |      |      |   |      |            |      |        |  |   |      | 
|                                       |  | $    | (0.6 | ) |      | $          | 0.4  |        |  | $ | 0.2  |  |  | $ | 0.4  |  
|                                       |  |      |      |   |      |            |      |        |  |   |      | 

F-39



---



##### Table of Contents



24. Income Taxes




|                               |           |          |       |       |      |            |       |        |      |   |      |      |   |   |       |       |      |  
|------------------------------ | --------- | -------- | ----- | ----- | ---- | ---------- | ----- | ------ | ---- | - | ---- | ---- | - | - | ----- | ----- | ---- | -
|                               |           |          |       |       |      | Transition |       |        |     
|                               |           | 2004     |       |       | 2005 |            |       | Period |      |   | 2006 |     
|                               |           |          |       |       |      |            |       |        |      |   |      |     
|Loss before income taxes:      |           |          |       |       |      |            |       |        |      |   |      |      |   |   |       |      
|                               | Canadian  |          | $     | (10.0 | )    |            | $     | (24.8  | )    |   | $    | (0.2 | ) |   | $     | (35.0 | )   
|                               | Foreign   |          |       | (20.3 | )    |            |       | (24.0  | )    |   |      | (1.4 | ) |   |       | (11.5 | )   
|                               |           |          |       |       |      |            |       |        |      |   |      |     
|                               |           | $        | (30.3 | )     |      | $          | (48.8 | )      |      | $ | (1.6 | )    |   | $ | (46.5 | )    
|                               |           |          |       |       |      |            |       |        |      |   |      |     
|Income tax (expense) recovery: |           |          |       |       |      |            |       |        |      |   |      |      |   |   |       |      
|                               | Current:  |          |       |       |      |            |       |        |      |   |      |      |   |   |       |       |     
|                               |           | Canadian |       | $     |     |            |       | $      | 0.8  |   |      | $    |  |   |       | $     | 1.2  |  
|                               |           | Foreign  |       |       | (2.0 | )          |       |        | (1.6 | ) |      |      |  |   |       |       | (2.1 | )
|                               |           |          |       |       |      |            |       |        |      |   |      |     
|                               |           |          | (2.0  | )     |      |            | (0.8  | )      |      |   |     |      |   |   | (0.9  | )    
|                               | Deferred: |          |       |       |      |            |       |        |      |   |      |      |   |   |       |       |     
|                               |           | Canadian |       | $     |     |            |       | $      |     |   |      | $    |  |   |       | $     |     |  
|                               |           | Foreign  |       |       | 1.7  |            |       |        |     |   |      |      |  |   |       |       | 2.8  |  
|                               |           |          |       |       |      |            |       |        |      |   |      |     
|                               |           | $        | (0.3  | )     |      | $          | (0.8  | )      |      | $ |     |      |   | $ | 1.9   |      
|                               |           |          |       |       |      |            |       |        |      |   |      |     



|                                                              |  |      |      |   |      |            |       |        |  |   |      |   |  |   |       |  
|------------------------------------------------------------- |  | ---- | ---- | - | ---- | ---------- | ----- | ------ |  | - | ---- | - |  | - | ----- | -
|                                                              |  |      |      |   |      | Transition |       |        | 
|                                                              |  | 2004 |      |   | 2005 |            |       | Period |  |   | 2006 |  
|                                                              |  |      |      |   |      |            |       |        |  |   |      |  
|Expected tax rate                                             |  |      | 36.3 | % |      |            | 36.0  | %      |  |   | 36.0 | % |  |   | 36.0  | %
|                                                              |  |      |      |   |      |            |       |        |  |   |      |  
|Expected tax benefit                                          |  | $    | 12.8 |   |      | $          | 17.5  |        |  | $ | 0.6  |   |  | $ | 16.7  |  
|Foreign tax rate differences                                  |  |      | (9.1 | ) |      |            | (7.9  | )      |  |   | (0.5 | ) |  |   | (7.4  | )
|Tax effect of temporary differences and losses not recognized |  |      | (5.9 | ) |      |            | (12.2 | )      |  |   | (0.1 | ) |  |   | (1.6  | )
|Use of losses not previously recognized                       |  |      |     |   |      |            | 9.3   |        |  |   |     |   |  |   | 5.2   |  
|Permanent differences                                         |  |      | 0.1  |   |      |            | (7.0  | )      |  |   |     |   |  |   | (12.4 | )
|Tax refunds and other adjustments related to prior years      |  |      | 1.8  |   |      |            | (0.5  | )      |  |   |     |   |  |   | 1.4   |  
|                                                              |  |      |      |   |      |            |       |        |  |   |      |  
|Income tax (expense) recovery                                 |  | $    | (0.3 | ) |      | $          | (0.8  | )      |  | $ |     |   |  | $ | 1.9   |  
|                                                              |  |      |      |   |      |            |       |        |  |   |      |  

F-40



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##### Table of Contents





|                                                                          |                                             |           |        |      |           |   |        |           |  |   |       |      |  
|------------------------------------------------------------------------- | ------------------------------------------- | --------- | ------ | ---- | --------- | - | ------ | --------- |  | - | ----- | ---- | -
|                                                                          |                                             | April 24, |        |      | April 30, |   |        | April 30, | 
|                                                                          |                                             | 2005      |        |      | 2005      |   |        | 2006      | 
|                                                                          |                                             |           |        |      |           |   |        |           | 
|Assets:                                                                   |                                             |           |        |      |           |   |        |           |  |   |       |     
|                                                                          | Net operating loss carryforwards            |           | $      | 75.1 |           |   | $      | 74.3      |  |   | $     | 55.5 |  
|                                                                          | Allowance for doubtful accounts             |           |        | 2.3  |           |   |        | 2.3       |  |   |       | 3.0  |  
|                                                                          | Inventory                                   |           |        | 0.9  |           |   |        | 0.9       |  |   |       | (0.5 | )
|                                                                          | Restructuring and other accrued liabilities |           |        | 3.3  |           |   |        | 3.3       |  |   |       | 5.1  |  
|                                                                          | Pension                                     |           |        | 7.9  |           |   |        | 7.8       |  |   |       | 2.7  |  
|                                                                          | Lease obligations and long-term debt        |           |        | 1.1  |           |   |        | 1.1       |  |   |       | 1.3  |  
|                                                                          | Property and equipment                      |           |        | 3.8  |           |   |        | 3.6       |  |   |       | 6.8  |  
|                                                                          | Intangible and other assets                 |           |        | 7.1  |           |   |        | 7.1       |  |   |       | 10.4 |  
|                                                                          |                                             |           |        |      |           |   |        |           | 
|Total deferred tax assets                                                 |                                             |           | 101.5  |      |           |   | 100.4  |           |  |   | 84.3  |     
|                                                                          |                                             |           |        |      |           |   |        |           | 
|Deferred tax liabilities                                                  |                                             |           |       |      |           |   |       |           |  |   |      |     
|                                                                          |                                             |           |        |      |           |   |        |           | 
|Total gross deferred tax assets net of total deferred tax
    liabilities |                                             |           | 101.5  |      |           |   | 100.4  |           |  |   | 84.3  |     
|Valuation allowance                                                       |                                             |           | (101.5 | )    |           |   | (100.4 | )         |  |   | (81.5 | )   
|                                                                          |                                             |           |        |      |           |   |        |           | 
|Total deferred tax assets                                                 |                                             | $         |       |      |           | $ |       |           |  | $ | 2.8   |     
|                                                                          |                                             |           |        |      |           |   |        |           | 





|               |  |                |       |  |                |  |      |                |  |  |         |  |  |        |      |  |         |  |       |  |  |  |      | 
|-------------- |  | -------------- | ----- |  | -------------- |  | ---- | -------------- |  |  | ------- |  |  | ------ | ---- |  | ------- |  | ----- |  |  |  | ---- | 
|               |  | April 24, 2005 |       |  | April 30, 2005 |  |      | April 30, 2006 | 
|               |  |                |       |  |                |  |      |                | 
|               |  | Tax            |       |  | Tax            |  |      | Tax            |  |  | Tax     |  |  | Tax    |      |  | Tax     | 
|Year of Expiry |  | Losses         |       |  | Credits        |  |      | Losses         |  |  | Credits |  |  | Losses |      |  | Credits | 
|               |  |                |       |  |                |  |      |                |  |  |         |  |  |        |      |  |         | 
|2006           |  |                |      |  |                |  |     |                |  |  |        |  |  |        |     |  |         |  |      |  |  |  |     | 
|2007           |  |                |      |  |                |  |     |                |  |  |        |  |  |        |     |  |         |  |      |  |  |  |     | 
|2008           |  |                | 5.3   |  |                |  |     |                |  |  | 4.8     |  |  |        |     |  |         |  | 0.6   |  |  |  |     | 
|2009           |  |                | 3.8   |  |                |  |     |                |  |  | 3.0     |  |  |        |     |  |         |  |      |  |  |  |     | 
|2010           |  |                | 52.0  |  |                |  |     |                |  |  | 51.0    |  |  |        |     |  |         |  | 32.6  |  |  |  |     | 
|2011           |  |                | 65.6  |  |                |  |     |                |  |  | 65.6    |  |  |        |     |  |         |  | 58.3  |  |  |  |     | 
|2012-2022      |  |                | 119.6 |  |                |  | 20.4 |                |  |  | 118.5   |  |  |        | 20.3 |  |         |  | 136.3 |  |  |  | 24.6 | 
|Indefinite     |  |                | 74.3  |  |                |  |     |                |  |  | 74.3    |  |  |        |     |  |         |  | 44.7  |  |  |  |     | 
|               |  |                |       |  |                |  |      |                |  |  |         |  |  |        |      |  |         | 
|Total          |  |                | 320.6 |  |                |  | 20.4 |                |  |  | 317.2   |  |  |        | 20.3 |  |         |  | 272.5 |  |  |  | 24.6 | 
|               |  |                |       |  |                |  |      |                |  |  |         |  |  |        |      |  |         | 







F-41



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##### Table of Contents





25. Pension Plans








F-42



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##### Table of Contents



United Kingdom Defined
Benefit Pension Plan




|                                    |                                                  |           |       |       |           |   |       |           |   |   |       |       |  
|----------------------------------- | ------------------------------------------------ | --------- | ----- | ----- | --------- | - | ----- | --------- | - | - | ----- | ----- | -
|                                    |                                                  | April 24, |       |       | April 30, |   |       | April 30, |  
|                                    |                                                  | 2005      |       |       | 2005      |   |       | 2006      |  
|                                    |                                                  |           |       |       |           |   |       |           |  
|Change in accrued pension benefits: |                                                  |           |       |       |           |   |       |           |   |   |       |      
|                                    | Benefit obligation at beginning of period        |           | $     | 103.4 |           |   | $     | 103.4     |   |   | $     | 121.8 |  
|                                    | Service cost                                     |           |       | 1.8   |           |   |       | 1.8       |   |   |       | 1.1   |  
|                                    | Interest cost                                    |           |       | 5.9   |           |   |       | 5.9       |   |   |       | 6.2   |  
|                                    | Plan participants contributions                 |           |       | 1.5   |           |   |       | 1.5       |   |   |       | 1.2   |  
|                                    | Actuarial loss                                   |           |       | 1.3   |           |   |       | 1.3       |   |   |       | 41.0  |  
|                                    | Benefits paid                                    |           |       | (0.9  | )         |   |       | (0.9      | ) |   |       | (2.3  | )
|                                    | Foreign exchange                                 |           |       | 8.8   |           |   |       | 8.6       |   |   |       | (4.9  | )
|                                    |                                                  |           |       |       |           |   |       |           |  
|                                    | Benefit obligation at end of period              |           |       | 121.8 |           |   |       | 121.6     |   |   |       | 164.1 |  
|                                    |                                                  |           |       |       |           |   |       |           |  
|Change in plan assets:              |                                                  |           |       |       |           |   |       |           |   |   |       |      
|                                    | Fair value of plan assets at beginning of period |           |       | 66.1  |           |   |       | 66.1      |   |   |       | 82.8  |  
|                                    | Actual return on plan assets                     |           |       | 7.8   |           |   |       | 7.8       |   |   |       | 22.3  |  
|                                    | Employer contributions                           |           |       | 2.6   |           |   |       | 2.6       |   |   |       | 3.6   |  
|                                    | Employee contributions                           |           |       | 1.5   |           |   |       | 1.5       |   |   |       | 1.2   |  
|                                    | Benefits paid                                    |           |       | (0.9  | )         |   |       | (0.9      | ) |   |       | (2.3  | )
|                                    | Foreign exchange                                 |           |       | 5.8   |           |   |       | 5.8       |   |   |       | (3.4  | )
|                                    |                                                  |           |       |       |           |   |       |           |  
|                                    | Fair value of plan assets at end of period       |           |       | 82.9  |           |   |       | 82.9      |   |   |       | 104.2 |  
|                                    |                                                  |           |       |       |           |   |       |           |  
|Funded status                       |                                                  |           | (38.9 | )     |           |   | (38.7 | )         |   |   | (59.9 | )    
|Unrecognized net actuarial loss     |                                                  |           | 13.5  |       |           |   | 13.6  |           |   |   | 19.8  |      
|                                    |                                                  |           |       |       |           |   |       |           |  
|Net pension benefit liability       |                                                  | $         | (25.4 | )     |           | $ | (25.1 | )         |   | $ | (40.1 | )    
|                                    |                                                  |           |       |       |           |   |       |           |  



|                               |  |           |       |  |           |   |       |           |  |   |       | 
|------------------------------ |  | --------- | ----- |  | --------- | - | ----- | --------- |  | - | ----- | 
|                               |  | April 24, |       |  | April 30, |   |       | April 30, | 
|                               |  | 2005      |       |  | 2005      |   |       | 2006      | 
|                               |  |           |       |  |           |   |       |           | 
|Projected benefit obligation   |  | $         | 121.8 |  |           | $ | 121.6 |           |  | $ | 164.1 | 
|Accumulated benefit obligation |  |           | 108.3 |  |           |   | 108.0 |           |  |   | 144.3 | 
|Fair value of plan assets      |  |           | 82.9  |  |           |   | 82.9  |           |  |   | 104.2 | 



|                                            |  |      |      |   |      |            |      |        |  |      |   |  |  |   |      |  
|------------------------------------------- |  | ---- | ---- | - | ---- | ---------- | ---- | ------ |  | ---- | - |  |  | - | ---- | -
|                                            |  |      |      |   |      | Transition |      |       
|                                            |  | 2004 |      |   | 2005 |            |      | Period |  | 2006 |  
|                                            |  |      |      |   |      |            |      |        |  |      |  
|Current service cost  defined contribution |  | $    | 1.5  |   |      | $          | 1.7  |        |  | $    |  |  |  | $ | 1.9  |  
|Current service cost  defined benefit      |  |      | 3.6  |   |      |            | 1.8  |        |  |      |  |  |  |   | 1.1  |  
|Interest cost                               |  |      | 5.1  |   |      |            | 5.9  |        |  |      |  |  |  |   | 6.2  |  
|Expected return on plan assets              |  |      | (3.9 | ) |      |            | (5.5 | )      |  |      |  |  |  |   | (6.1 | )
|Recognized actuarial loss                   |  |      | 1.3  |   |      |            | 1.3  |        |  |      |  |  |  |   | 1.1  |  
|                                            |  |      |      |   |      |            |      |        |  |      |   | 
|Net periodic benefit cost                   |  | $    | 7.6  |   |      | $          | 5.2  |        |  | $    |  |  |  | $ | 4.2  |  
|                                            |  |      |      |   |      |            |      |        |  |      |   | 

F-43



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##### Table of Contents





|                                            |  |           |          |  |           |  |          |           |  |  |          | 
|------------------------------------------- |  | --------- | -------- |  | --------- |  | -------- | --------- |  |  | -------- | 
|                                            |  | April 24, |          |  | April 30, |  |          | April 30, | 
|                                            |  | 2005      |          |  | 2005      |  |          | 2006      | 
|                                            |  |           |          |  |           |  |          |           | 
|Discount rate                               |  |           | 5.5%     |  |           |  | 5.5%     |           |  |  | 5.0%     | 
|Compensation increase rate                  |  |           | 2.5%     |  |           |  | 2.5%     |           |  |  | 2.75%    | 
|Investment returns assumption               |  |           | 7.75%    |  |           |  | 7.75%    |           |  |  | 7.25%    | 
|Inflation rate                              |  |           | 2.50%    |  |           |  | 2.50%    |           |  |  | 2.75%    | 
|Average remaining service life of employees |  |           | 20 years |  |           |  | 20 years |           |  |  | 21 years | 

Estimated Future Benefit
Payments




|          |  |                  |      | 
|--------- |  | ---------------- | ---- | 
|          |  | Benefit Payments |     
|          |  |                  |     
|2007      |  |                  | 1.3  | 
|2008      |  |                  | 1.4  | 
|2009      |  |                  | 1.5  | 
|2010      |  |                  | 1.7  | 
|2011      |  |                  | 1.8  | 
|2012-2016 |  |                  | 11.2 | 

Contributions




Plan Assets




|         |  |        |    |   |        |  |    |        |  |  |    |  
|-------- |  | ------ | -- | - | ------ |  | -- | ------ |  |  | -- | -
|         |  | 2005   |    |   | 2006   |  |    | 2007   | 
|         |  | Actual |    |   | Actual |  |    | Target | 
|         |  |        |    |   |        |  |    |        | 
|Equities |  |        | 79 | % |        |  | 81 | %      |  |  | 80 | %
|Bonds    |  |        | 20 | % |        |  | 18 | %      |  |  | 20 | %
|Cash     |  |        | 1  | % |        |  | 1  | %      |  |  |   |  



26. Financial Instruments


Fair value




F-44



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##### Table of Contents







|                      |  |                |      |  |                |   |      |                |  |   |       |  |  |          |      |  |       |   |      |  |  |   |      | 
|--------------------- |  | -------------- | ---- |  | -------------- | - | ---- | -------------- |  | - | ----- |  |  | -------- | ---- |  | ----- | - | ---- |  |  | - | ---- | 
|                      |  | April 24, 2005 |      |  | April 30, 2005 |   |      | April 30, 2006 | 
|                      |  |                |      |  |                |   |      |                | 
|                      |  | Carrying       |      |  | Fair           |   |      | Carrying       |  |   | Fair  |  |  | Carrying |      |  | Fair  |  
|                      |  | Amount         |      |  | Value          |   |      | Amount         |  |   | Value |  |  | Amount   |      |  | Value |  
|                      |  |                |      |  |                |   |      |                |  |   |       |  |  |          |      |  |       |  
|Long-term receivables |  | $              | 0.4  |  |                | $ | 0.4  |                |  | $ | 0.4   |  |  | $        | 0.4  |  |       | $ | 0.4  |  |  | $ | 0.4  | 
|Long-term debt        |  | $              | 14.6 |  |                | $ | 14.6 |                |  | $ | 14.6  |  |  | $        | 14.6 |  |       | $ | 4.1  |  |  | $ | 4.1  | 
|Convertible notes     |  | $              |     |  |                | $ |     |                |  | $ | 46.6  |  |  | $        | 55.4 |  |       | $ | 48.7 |  |  | $ | 55.1 | 

Credit risk




Interest rate risk


Inter-Bank


Foreign currency risk




F-45



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##### Table of Contents





Non-derivative and
off-balance sheet instruments




F-46



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##### Table of Contents





|    |                                    
|--- | -----------------------------------
|27. | Supplementary Cash Flow Information

|                                                     |                                                                                            |      |      |      |      |            |      |        |   |   |      |      |   |   |      |       |  
|---------------------------------------------------- | ------------------------------------------------------------------------------------------ | ---- | ---- | ---- | ---- | ---------- | ---- | ------ | - | - | ---- | ---- | - | - | ---- | ----- | -
|                                                     |                                                                                            |      |      |      |      | Transition |      |        |  
|                                                     |                                                                                            | 2004 |      |      | 2005 |            |      | Period |   |   | 2006 |     
|                                                     |                                                                                            |      |      |      |      |            |      |        |   |   |      |     
|Change in non-cash operating assets and liabilities: |                                                                                            |      |      |      |      |            |      |        |   |   |      |      |   |   |      |      
|                                                     | Accounts receivable                                                                        |      | $    | (5.2 | )    |            | $    | 7.5    |   |   | $    | 4.0  |   |   | $    | (12.4 | )
|                                                     | Other receivables                                                                          |      |      | 7.3  |      |            |      | (7.3   | ) |   |      | (0.9 | ) |   |      | 5.2   |  
|                                                     | Inventories                                                                                |      |      | 8.4  |      |            |      | (4.2   | ) |   |      | (0.6 | ) |   |      | (8.0  | )
|                                                     | Income tax receivable                                                                      |      |      |     |      |            |      |       |   |   |      |     |   |   |      | 1.2   |  
|                                                     | Long-term receivables                                                                      |      |      | 0.4  |      |            |      |       |   |   |      |     |   |   |      | (0.1  | )
|                                                     | Accounts payable and accrued liabilities                                                   |      |      | 0.9  |      |            |      | 6.6    |   |   |      | (0.6 | ) |   |      | 8.7   |  
|                                                     | Long term portion of lease termination obligations                                         |      |      | 2.6  |      |            |      | (1.2   | ) |   |      |     |   |   |      | (2.3  | )
|                                                     | Deferred revenue                                                                           |      |      | 0.7  |      |            |      | (2.8   | ) |   |      | 0.5  |   |   |      | (2.5  | )
|                                                     | Change in Pension liability                                                                |      |      | 1.6  |      |            |      | 0.9    |   |   |      |     |   |   |      | (1.7  | )
|                                                     | Due to related parties                                                                     |      |      | 5.1  |      |            |      | 0.5    |   |   |      | (1.5 | ) |   |      | 9.5   |  
|                                                     | Income and other taxes payable                                                             |      |      | 2.8  |      |            |      | (3.3   | ) |   |      | 0.1  |   |   |      | (0.7  | )
|                                                     |                                                                                            |      |      |      |      |            |      |        |   |   |      |     
|                                                     |                                                                                            | $    | 24.6 |      |      | $          | (3.3 | )      |   | $ | 1.0  |      |   | $ | (3.1 | )    
|                                                     |                                                                                            |      |      |      |      |            |      |        |   |   |      |     
|Interest payments                                    |                                                                                            | $    | 3.8  |      |      | $          | 1.8  |        |   | $ |     |      |   | $ | 2.6  |      
|                                                     |                                                                                            |      |      |      |      |            |      |        |   |   |      |     
|Income tax payments                                  |                                                                                            | $    |     |      |      | $          | 3.5  |        |   | $ |     |      |   | $ | 1.4  |      
|                                                     |                                                                                            |      |      |      |      |            |      |        |   |   |      |     
|Disclosure of non-cash activities during the period: |                                                                                            |      |      |      |      |            |      |        |   |   |      |      |   |   |      |      
|                                                     | Credit note received in exchange for sale of Edict                                         |      | $    |     |      |            | $    |       |   |   | $    |     |   |   | $    | 0.3   |  
|                                                     | 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                                                    |      | $    | (3.5 | )    |            | $    | 2.4    |   |   | $    |     |   |   | $    | (15.0 | )
|                                                     | Warrants issued in connection with financing                                               |      | $    | 1.0  |      |            | $    |       |   |   | $    | 7.7  |   |   | $    |      |  
|                                                     | 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                            |      | $    | 1.3  |      |            | $    | 5.6    |   |   | $    | 0.1  |   |   | $    | 6.9   |  
|                                                     | Common shares issued in exchange for employee loans                                        |      | $    |     |      |            | $    | 1.3    |   |   | $    |     |   |   | $    |      |  



|    |                  
|--- | -----------------
|28. | Subsequent Events



F-47



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##### Table of Contents















F-48



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##### Table of Contents



SCHEDULE II
VALUATION OF QUALIFYING ACCOUNTS
AS AT APRIL 24, 2005 and April 30, 2005
(in millions of United States dollars)
 AdditionsBalance,
    
    
    
    
    
    Charged to
    
    
    
    
    
    Balance,Beginning of
    
    Charged to
    
    other
    
    
    
    
    
    End ofDescription
    
    Period
    
    expenses
    
    accounts
    
    Deductions
    
    PeriodAllowance for doubtful accountsFiscal 2004
    
    
    2.7
    
    
    
    1.4
    
    
    
    
    
    (1.4
    )
    
    
    2.7Fiscal 2005
    
    
    2.7
    
    
    
    1.4
    
    
    
    
    
    (1.1
    )
    
    
    3.0Transition Period
    
    
    3.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.0Fiscal 2006
    
    
    3.0
    
    
    
    0.6
    
    
    
    
    
    (1.1
    )
    
    
    2.5