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CONSOLIDATED FINANCIAL STATEMENTS
 CONNECT M1-A1 HOLDINGS LIMITED
(FORMERLY YORKSHIRE LINK (HOLDINGS) LIMITED)
 AND SUBSIDIARY
 March 31, 2006
 3




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Report of Independent Auditors
         4




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CONNECT M1-A1 HOLDINGS LIMITED AND SUBSIDIARY
 CONSOLIDATED BALANCE SHEET
(£ in thousands, except per share amounts)
 March 31,2006AssetsCurrent assets:Cash and cash equivalents
    
    £
    322Restricted cash
    
    
    11,600Accounts receivable
    
    
    268Unbilled accounts receivable
    
    
    4,414Receivable from shareholders
    
    
    853Inventory  consumable supplies
    
    
    253Prepaid expenses
    
    
    372Total current assets
    
    
    18,082Machinery and equipment, net of accumulated depreciation of £12,509
    
    
    17,010Investment in concession, net of accumulated depreciation of £58,735
    
    
    208,861Other assets:Loans receivable from shareholders
    
    
    18,578Deferred finance costs
    
    
    4,441Total assets
    
    £
    266,972Liabilities and shareholders deficitCurrent liabilities:Accounts payable
    
    £
    3,057Accrued expenses
    
    
    698Current portion of long-term debt
    
    
    17,221Total current liabilities
    
    
    20,976Long-term liabilitiesLong-term debt, net of current portion
    
    
    258,869Deferred taxes
    
    
    6,722Fair value of interest rate swaps
    
    
    15,727Total long-term liabilities
    
    
    281,318Total liabilities
    
    
    302,294Shareholders deficit:Common stock, .01 par value; 10,000,000 shares authorized;
3,000,000 shares issued and outstanding
    
    
    3,000Paid in capital
    
    
    1,700Accumulated deficit
    
    
    (29,240
    )Accumulated other comprehensive loss
    
    
    (10,782
    )Total shareholders deficit
    
    
    (35,322
    )Total liabilities and shareholders deficit
    
    £
    266,972
  5




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CONNECT M1-A1 HOLDINGS LIMITED AND SUBSIDIARY
 CONSOLIDATED STATEMENT OF OPERATIONS
(£ in thousands)
 Year EndedMarch 31, 2006Revenue
    
    £
    47,625Depreciation expense
    
    
    (10,121
    )Costs of revenue
    
    
    (2,525
    )Gross margin
    
    
    34,979General and administrative expenses
    
    
    (298
    )Operating income
    
    
    34,681Other (expense) income:Interest expense
    
    
    (20,837
    )Interest income
    
    
    1,980Loss from interest rate swaps
    
    
    (3,924
    )Total other expense
    
    
    (22,781
    )Income before income taxes
    
    
    11,900Income tax expense
    
    
    4,147Net income
    
    £
    7,753
  6




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CONNECT M1-A1 HOLDINGS LIMITED AND SUBSIDIARY
 CONSOLIDATED STATEMENT OF SHAREHOLDERS
DEFICIT AND OTHER COMPREHENSIVE INCOME (LOSS)
(£ in thousands, except number of shares)
 AccumulatedOther
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Paid in
    
    
    Accumulated
    
    
    Comprehensive
    
    
    
    
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Loss
    
    
    Total
    
    
    IncomeBalance as of March 31, 2005
    
    
    3,000,000
    
    
    £
    3,000
    
    
    £
    847
    
    
    £
    (29,693
    )
    
    £
    (11,506
    )
    
    £
    (37,352
    )Capital contribution
    
    
    
    
    
    
    
    
    
    
    853
    
    
    
    
    
    
    
    
    
    
    
    853Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,753
    
    
    
    
    
    
    
    7,753
    
    
    £
    7,753Amortization of premium on
derivatives created on adoption
of SFAS 133 (£1,034 net of tax
of £310)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    724
    
    
    
    724
    
    
    
    724Dividends paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,300
    )
    
    
    
    
    
    
    (7,300
    )
    
    
    Balance as of March 31, 2006
    
    
    3,000,000
    
    
    £
    3,000
    
    
    £
    1,700
    
    
    £
    (29,240
    )
    
    £
    (10,782
    )
    
    £
    (35,322
    )
    
    £
    8,477
  7




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CONNECT M1-A1 HOLDINGS LIMITED AND SUBSIDIARY
 CONSOLIDATED STATEMENT OF CASH FLOWS
(£ in thousands)
 Year EndedMarch 31, 2006Operating activitiesNet income
    
    £
    7,753Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation
    
    
    10,121Amortization of deferred finance costs
    
    
    330Redemption premium
    
    
    496Accretion of interest on receivable from shareholders
    
    
    (933
    )Amortization of other comprehensive income
    
    
    1,034Deferred taxes
    
    
    2,968Change in fair value of interest rate swaps
    
    
    (645
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    (218
    )Unbilled receivables
    
    
    426Prepaid expenses
    
    
    (97
    )Inventory
    
    
    6Accounts payable
    
    
    337Accrued expenses
    
    
    383Net cash provided by operating activities
    
    
    21,961Investing activitiesRestricted cash
    
    
    800Net cash provided by investing activities
    
    
    800Financing activitiesRepayment of long-term debt
    
    
    (16,138
    )Contributions from shareholders
    
    
    656Cash dividends paid
    
    
    (7,300
    )Net cash used in financing activities
    
    
    (22,782
    )Net decrease in cash and cash equivalents
    
    
    (21
    )Cash and cash equivalents, beginning of year
    
    
    343Cash and cash equivalents, end of year
    
    £
    322Supplemental disclosuresIncome tax paid (cash)
    
    £
    1,006Interest paid (cash):Interest rate swaps
    
    £
    3,534Senior debt
    
    
    18,009Subordinated debt
    
    
    1,711£
    23,254
  8




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CONNECT M1-A1 HOLDINGS LIMITED AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2006
 1. Description of Business and Basis of Presentation
    
    
    the performance obligations under the Concession Agreement become impossible
without the exercise of a statutory power by the Transport Secretary;
    
    the Transport Secretary chooses not to exercise that power following a
request by the Connect M1-A1; and
    
    Connect M1-A1 and the Transport Secretary fail to agree on an alternative
means of performance within a period of 90 days.
   2. Summary of Significant Accounting Policies
 Principles of Consolidation
  Use of Estimates
 9




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CONNECT M1-A1 HOLDINGS LIMITED AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 2. Summary of Significant Accounting Policies (continued)
  Cash and Cash Equivalents
  Inventories
  Investment in Concession
     Property and Equipment
   Deferred Finance Costs
  Impairment of Long-Lived Assets
  10




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CONNECT M1-A1 HOLDINGS LIMITED AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 2. Summary of Significant Accounting Policies (continued)
  Income Taxes
   Revenue Recognition
    Accounting for Derivative Instruments and Hedging Activities
 Accounting for Derivative Instruments and
Hedging Activities
  11




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CONNECT M1-A1 HOLDINGS LIMITED AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 2. Summary of Significant Accounting Policies (continued)
  Loans Receivable from Shareholders
  3. Restricted Cash
  4. Long-Term Debt
  March 31,2006Senior Bank Loan
    
    £
    181,308European Investment Bank Loan
    
    
    76,608Junior Subordinated Loan from Shareholders
    
    
    5,709Subordinated Loan from Shareholders
    
    
    9,400Redemption Premium on Subordinated Loan from Shareholders
    
    
    3,065276,090Less current portion of long-term debt
    
    
    17,221£
    258,869
  March 31,20062007
    
    £
    16,8962008
    
    
    19,2322009
    
    
    22,0222010
    
    
    19,3832011
    
    
    20,370Thereafter
    
    
    175,122£
    273,025
  Senior Bank Loan
  12




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CONNECT M1-A1 HOLDINGS LIMITED AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 4. Long-Term Debt (continued)
 European Investment Bank (EIB) Loan
  Junior Subordinated Loan from Shareholders
  Subordinated Loan from Shareholders
    5. Related Party Transactions
 Loans Receivable from Shareholders
  13




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CONNECT M1-A1 HOLDINGS LIMITED AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 5. Related Party Transactions (continued)
   Management and Other Services
    6. Income Taxes
  Year EndedMarch 31, 2006Current
    
    £
    326Deferred
    
    
    3,821£
    4,147
  Year EndedMarch 31, 2006Tax at U.K. statutory rate of 30% per year
    
    £
    3,570Additional taxable revenues
    
    
    577Income tax expense
    
    £
    4,147
  March 31,2006Accelerated capital allowances
    
    £
    (16,565
    )Unrealized trading losses
    
    
    5,125Interest rate swaps
    
    
    4,718Deferred tax liability
    
    £
    (6,722
    )
   14




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CONNECT M1-A1 HOLDINGS LIMITED AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 7. Fair Value of Financial Instruments
   
    
    Loans receivable from Shareholders  The fair value of these loans is
determined by discounting future cash flows at the reporting date using the long-term
zero coupon rate plus 0.75% per year at the reporting date. As of March 31, 2006, the
weighted average discount rate used was 5.29% per year.
    
    Long-term debt  The fair value of long-term debt is estimated based on the
discounted future cash flows using currently available interest rates for similar
instruments. A margin was applied ranging between 0.48% per year for the EIB Loan to
3.27% per year for both of the Subordinated Loans.
 FAIR
    
    CARRYINGVALUE
    
    VALUEMarch 31,
    
    March 31,2006
    
    2006(in thousands)
    
    (in thousands)European Investment Bank loan
    
    £
    95,532
    
    
    £
    76,608Junior Subordinated Debt
    
    £
    9,086
    
    
    £
    5,709Commercial Subordinated Debt
    
    £
    13,656
    
    
    £
    12,465Loans receivable from Shareholders
    
    £
    22,128
    
    
    £
    18,578
   
    
    The first arrangement is an interest rate swap, which has a notional amount of £10.3 million as of March 31, 2006 and expires on March 31, 2014. Under this agreement, the fixed rate payable is 9.63% per year.
    
    The second arrangement is an interest rate swap, which has a notional amount of £14.8 million as of March 31, 2006 and expires on March 31, 2014. Under this agreement, the fixed rate payable is 9.45% per year.
    
    The third arrangement is an interest rate swap, which has a notional amount of £17.0 million as of March 31, 2006 and expires on March 31, 2014. Under this agreement, the fixed rate payable is 9.45% per year.
    
    The fourth arrangement is an interest rate swap, which has a notional amount
of £17.0 million as of March 31, 2006 and expires on March 31, 2014. Under this
agreement, the fixed rate payable is 9.45% per year.
    
    The fifth arrangement is an interest rate swap, which has a notional amount
of £67.9 million as of March 31, 2006 and expires on March 31, 2024. Under this
agreement, the fixed rate payable is 5.68% per year.
  15




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CONNECT M1-A1 HOLDINGS LIMITED AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 8. Commitments and Contingencies
 Litigation
   Letter of Credit Facilities
   EIF Guarantee
  Periodic Maintenance
  Transfer Pricing
  9. Subsequent Event
  16