Document:

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                       Bright Station Annual Report 1999

                                                                    EXHIBIT 10.3

Annual Report 1999

                            [GRAPHICS APPEAR HERE]

                                              (Bright Station logo appears here)

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Annual Report 1999

www.brightstation.com
Technology born for business

01

Contents

02     Cross Reference Guide for Form 20-F
03     Description of Business
14     Operating and Financial Review
18     Board of Directors and Company Secretary
19     Corporate Governance and
       Internal Financial Control
22     Report of the Directors
24     Statement of Directors' Responsibilities
25     Auditors' Report to the Shareholders
26     Consolidated Profit and Loss Account
27     Consolidated Balance Sheet
28     Company Balance Sheet
29     Consolidated Cash Flow Statement
30     Notes to the Financial Statements
71     Shareholder Information
76     Selected Financial Data
78     Five Year Financial Summary
79     Accounting Glossary
80     Proposed LTIP, Subsidiary Share Option Schemes
       and Employee Benefit Trust
85     Notice of Annual General Meeting
87     Shareholder Contacts
88     Information for Investors
IBC    Principal Offices
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Annual Report 1999

www.brightstation.com
Technology born for business

02

Cross Reference Guide for Form 20-F

The information in this document that is referenced below is included in the
Annual Report on Form 20-F for 1999 (1999 Form 20-F) filed with the United
States Securities and Exchange Commission (SEC). References below to major
headings include all information under such major headings, including
subheadings. References below to subheadings include only the information
contained under such subheadings. Graphs are not included unless specifically
identified below. The 1999 Form 20-F filed with the SEC may contain modified
information and may be updated from time to time. The 1999 Form 20-F has not
been approved or disapproved by the SEC nor has the SEC passed upon the adequacy
of the 1999 Form 20-F.

Item                                                                       Page
1        Description of business
         Description of business                                               3
2        Description of property
         Description of business
           Description of property                                            13
3        Legal proceedings
         Notes relating to the financial statements
            Note 32 Contingent liabilities                                    69
4        Control of registrant
         Report of the Directors
           Substantial shareholdings                                          22
         Notes relating to the financial statements
           Note 7 Directors' emoluments and interests in Ordinary shares
             Interests in Ordinary shares                                     38
5        Nature of trading market
         Shareholder information
           Nature of trading market                                           71
6        Exchange controls and other limitations affecting security holders
         Shareholder information
           Exchange controls and other limitations affecting
           security holders                                                   72
7        Taxation
         Shareholder information
           Taxation                                                           72
8        Selected financial data
         Selected financial data                                              76
9        Management's discussion and analysis of financial
         condition and results of operations
         Operating and financial review                                       14
         Report of the Directors
           Year 2000                                                          23
9A       Quantitative and qualitative disclosures about market risk
           Notes relating to the financial statements
           Note 33 Financial instruments                                      69
10       Directors and officers of registrant
         Report of the Directors
           Directors and their interests                                      22
11       Compensation of Directors and officers
         Notes relating to the financial statements
           Note 7 Directors' emoluments and interests in
           Ordinary shares                                                    37
12       Options to purchase securities from registrant or subsidiaries
         Notes relating to the financial statements
           Note 7 Directors' emoluments and interests in Ordinary shares
              Options over Ordinary shares                                    39
           Note 18 Share capital                                              51
13       Interest of management in certain transactions
         Notes relating to the financial statements
           Note 31 Subsequent events                                          68
14       Description of securities to be registered                          N/A
15       Defaults upon senior securities                                     N/A
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16       Changes in securities and changes in security
         for registered securities                                           N/A
17       Financial statements                                                N/A
         See item 19 for a full list of financial statements included
         as part of this Report
18       Financial statements                                                N/A
19       Financial statements
         Auditor's report to the Shareholders of Bright Station plc           25
         Consolidated profit and loss account for the year
         ended 31 December 1999                                               26
         Consolidated balance sheet as at 31 December 1999                    27
         Company balance sheet as at 31 December 1999                         28
         Consolidated cash flow statement for the year ended
         31 December 1999                                                     29
         Notes to the financial statements                                    30

Cautionary statement regarding forward-looking statements

In order to utilise the "Safe Harbor" provisions of the United States Private
Securities Litigation Reform Act of 1995, Bright Station is providing the
following cautionary statement. This Annual Report and Accounts and 1999 Form
20-F contains certain forward-looking statements with respect to the financial
condition, results of operations and business of Bright Station and certain of
the plans and objectives of Bright Station with respect to these items. In
particular, among other statements, certain statements contained in the Annual
Report and Accounts and certain statements contained in the 1999 Form 20-F,
including the statements in "Item 1 Description of business" with regards to
strategic vision, management objectives, trends in market shares, market
standing and product volumes, certain statements in "Item 3 Legal proceedings"
contained in note 32 to notes relating to the accounts, the statements in "Item
9 Management's Discussion and Analysis of Financial Condition and Results of
Operations" with regard to economic outlook, trends in results of operations,
margins, overall market trends, debt levels, risk management, market risk,
exchange rates, year 2000 and Euro are forward-looking in nature. By their
nature, forward-looking statements involve risk and uncertainty because they
relate to events and depend on circumstances that will occur in the future.
There are a number of factors that could cause actual results and developments
to differ materially from those expressed in such forward-looking statements
including among other things, changes in demand for the Group's products
worldwide, changes in the cost of raw materials, changes in interest rates,
fluctuations in foreign currencies, risk of litigation, the impact of changes in
worldwide and national economies and global production capacity.
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Annual Report 1999

www.brightstation.com
Technology born for business

03

Description of Business

Overview

The Company was incorporated and registered in England and Wales in February
1985 as a private limited company and, in February 1994, reregistered as a
public limited company with the name M.A.I.D plc ("M.A.I.D"). On 14 November
1997, M.A.I.D acquired Knight-Ridder Information, Inc. and Knight-Ridder
Information AG (collectively, "KRII") from Knight-Ridder, Inc. (the
"Acquisition"), and M.A.I.D changed its name to The Dialog Corporation plc ("The
Dialog Corporation"). On 4 May 2000, The Dialog Corporation completed a
refinancing and restructuring through the sale of its Information Services
Division (the "ISD"), which has historically accounted for approximately 95% of
its revenues, to The Thomson Corporation ("Thomson") for $275 million
(approximately (pound)173 million) in cash (the "Restructuring"). Net proceeds
of the sale approximated $269 million (approximately (pound)169 million). The
proceeds of the sale to Thomson enabled the Company to repay in full all of its
outstanding senior and high yield debt which totalled approximately $275
million. See "The Restructuring" below.

         In conjunction with the Restructuring, The Dialog Corporation changed
its name to Bright Station plc (the "Company"). In addition, in conjunction with
the Restructuring: (i) the Company formed a strategic alliance with Thomson
which resulted in Thomson licensing and acting as a reseller for the
technologies of the Company and the Company acting as a reseller of Thomson's
content; (ii) Thomson subscribed for 9,297,290 new Ordinary shares in the
Company for a cash consideration of (pound)15.9 million, giving Thomson a
holding of 5.4 of the enlarged issued share capital of the Company; and (iii)
Jiyu Holdings subscribed for 7,038,123 new Ordinary shares in the Company for
(pound)12.0 million in cash, giving Jiyu 4.1% of the enlarged issued share
capital of the Company.

         The Company's registered office is The Communications Building, 48
Leicester Square, London WC2H 7DB, England, and its telephone number is
+44-20-7930-6900. The Company's web site is www.brightstation.com. As used
herein, the "Company" or the "Group" refers to both Bright Station plc and its
subsidiaries for periods after the consummation of the Restructuring and The
Dialog Corporation plc and its subsidiaries for periods prior to the
Restructuring.

Background

The Company was founded with the objective to develop and operate the first
specialised online database of market research reports in response to the needs
of the advertising and marketing industries. The first database, delivered via a
DOS platform, was developed using M.A.I.D's InfoSort indexing system, and
launched in the UK in October 1985.

         M.A.I.D's principal online business information service, Profound, was
launched in June 1995 to provide users - business professionals as well as
information specialists such as corporate librarians - with a powerful, easy to
use, personal computer-based tool to search for and retrieve information from
over 5,000 diverse content publishers.

         In August 1997, the Company acquired 70% of Muscat Limited ("Muscat").
Muscat's sophisticated linguistic inference technology provides enhanced
searching capabilities and permits intelligent and natural language queries on
unstructured databases, using a probabilistic strategy that matches ideas rather
than just matching words.

         On 14 November 1997, the Acquisition of KRII was completed and The
Dialog Corporation plc was formed. The Acquisition price of $434 million was
funded by a combination of equity ($161.5 million), senior debt ($92.5 million)
and high-yield notes ($180 million). KRII was one of the world's largest
providers of online professional information services, with long standing
relationships with over 20,000 corporations, government organisations and
academic institutions in the US and in over 120 countries world-wide. Through
its core businesses, the US-based Dialog, Canadian-based Infomart and
European-based DataStar services, KRII was a world leader in its core market of
providing online services to research libraries in corporate, government and
academic institutions.

1998 and 1999 witnessed the following highlights for the Company:

- In March 1998, the Company was awarded a five-year contract by the British
Government's Department of Trade and Industry ("DTI") to launch and operate - on
behalf of the DTI - the UK's first ever Internet-based, government-supported
National Exporters Database and Export Sales Leads Service. Bright Station plc
will continue to operate the service, at www.tradeuk.com, which utilises
InfoSort indexing technology and Muscat search technology.

- A suite of powerful information systems, Dialog Select (www.dialogselect.com),
was launched in July 1998. This product range was developed for business
professionals, and is available via the Internet.

- In August 1998, the Company also won a substantial five-year contract from the
British Broadcasting Corporation ("BBC") to provide and run an electronic news
cuttings service delivering essential information to BBC staff, which the
Company will continue to operate as News Information Online ("NEON").

- In October 1998, the Company exercised its option to purchase Responsive
Database Services, Inc. ("RDS") for $2.85 million ((pound)1.7 million). RDS
develops and produces business information and social science databases that are
available to users such as business professionals, public, academic and
specialist libraries through online information services, CD-ROM and the
Internet.

- The Company also strengthened its eCommerce strategy through the acquisition
of Write Works Limited ("Write Works") in November 1998. Write Works, based in
Oxford, England, had developed the UK's first online purchasing and management
control system for businesses. Following the acquisition, the Company's
eCommerce business supplies service, OfficeShopper (www.officeshopper.com), was
launched in December 1998. The Company acquired 100% of the share capital of
Write Works, for an initial consideration of (pound)2.2 million paid in shares
and cash and further consideration of up to a maximum of (pound)3.8 million
(comprised of (pound)2.8 million in cash and shares to the value of (pound)1.0
million) payable on the achievement of certain earnings targets over the first
two years of the agreement.

- In February 1999, the Company restructured its operations into three
divisions:

         - the Information Services Division (the "ISD") - containing the
         Company's traditional online information products and services;

         - the Web Solutions Division (the "WSD") - containing technology
         patents and resources; selling and promoting the
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Annual Report 1999
Description of Business

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         InfoSort structuring and Muscat natural language search technologies
         for deployment in client organisations for the management of both
         internal and external data, and incorporation into other Internet-based
         services.

- the eCommerce Division (the "ECD") - to sell and promote the OfficeShopper
service, and to leverage the underlying eCommerce technologies to provide
eCommerce software solutions.

- Also in February 1999, the Company announced the disposal of its assets held
for resale, the CARL Corporation and The UnCover Company, to Ward Shaw, the
senior member of the management team of both companies, for a consideration of
$2.25 million ((pound)1.35 million). Of the consideration, $1 million was
satisfied in cash, with the balance payable through a loan note, repayable by
January 2001.

- In connection with a new term facility of $25 million agreed between the
Company and Chase Manhattan Bank International Limited ("Chase") on 17 May 1999,
the Company issued to Chase between May 1999 and November 1999 a total of 3
million warrants to subscribe for Ordinary shares in the Company. 1.5 million of
those warrants entitle Chase to subscribe for Ordinary shares at any time before
11 October 2002 (the "2002 Warrants"). The remaining 1.5 million warrants
entitle Chase to subscribe for Ordinary shares at any time up to 14 May 2004
(the "2004 Warrants"). The 2002 Warrants and the 2004 Warrants are exercisable
at a subscription price of 90.6 pence per Ordinary share.

- In June 1999, the Company announced a major strategic alliance with Fujitsu
Limited of Japan, encompassing the rights to sell the Company's online
information services, and licences to utilise in-house and develop a Japanese
version of the Company's InfoSort structuring technology. The first product
utilising this version of InfoSort, called Jsort, was unveiled towards the end
of 1999.

- In August 1999, the Company launched its new eCommerce software sales
business, Sparza Solutions, together with details of Sparza's first major client
win, Spicers Limited.

- End-user Internet portals were introduced in October 1999, in conjunction with
an alliance with Netscape Communications, enabling the ISD to accept credit card
payments for the first time.

- The ISD launched the world's first Web-based trade statistics resource,
TradStat Web (www.tradstatweb.com), in November 1999.

- On 12 November 1999, warrants to subscribe for an aggregate of 6 million
Ordinary shares (the "2009 Warrants") were issued to the Company's senior
lenders (the "Banks") in consideration of the Banks agreeing to relax the
covenant arrangements in connection with the refinancing of the Company's senior
debt. The 2009 Warrants may be exercised, in whole or in part, at any time,
during the period commencing on 12 November 1999 and expiring on 12 November
2009 at a subscription price of 90.6 pence per Ordinary share.

- In November 1999, the Company raised its strategic investment stake in natural
language searching technology company, Muscat Ltd., from 70% to 100%.

- Also in December 1999, the Company launched a new suite of global knowledge
management software products under the "K-working" brand name. K-working
integrates the WSD's proprietary technologies of InfoSort and Muscat. Each
software module in the K-working range is designed to reflect the main processes
of interacting with information, from document generation to information
sharing, all through easy-to-use, intranet-based web-browser interfaces. An
organisation may adopt the full K-working suite, or opt to utilise a selection
of the tools available, depending upon its requirements. As a result of the
Restructuring, the Company retained the technology behind K-working which has
subsequently been rebranded Smartlogik. The Company has also retained the rights
to resell information content due to its strategic alliance with Thomson and
therefore continues to be able to offer knowledge management solutions that
combine a company's internal information with a wide range of premium
information. See "Products and Services" below.

Since the end of 1999, the following events have occurred:

- In January 2000, the ECD entered into an exclusive alliance with leading UK
Internet service provider Freeserve plc (NASDAQ: FREE; LSE: FRE) ("Freeserve"),
to provide a co-branded version of the Company's OfficeShopper service via the
business channel of Freeserve's Internet portal, at www.freeserve.net.

- In March 2000, the Company launched WebTop.com (www.webtop.com), a new
concept-based search engine, revolutionising the way in which people can search
the Internet. WebCheck, a concept-based search tool, featuring "drag and drop"
technology to enable the user to retrieve matches for an entire sentence,
paragraph, document or email, was subsequently introduced as a complementary
desktop application of WebTop.com. See "Products and Services" below.

- In April 2000, the Company announced that it was going to complete a
restructuring (see below) involving the sale of the ISD to Thomson, the
repayment of its corporate debt, the receipt of equity stakes from Thomson and
Jiyu Holdings, and the change of the Company's name to Bright Station plc.

- In May 2000, the Company acquired the underlying technology of boo.com from
the liquidators, KPMG. The Company also retained the services of a significant
number of the technical personnel from boo.com to assist in the development of
the technology and its integration with the Company's Sparza technology.

The Restructuring

Background In November 1997, the Company acquired KRII for $434 million, which
was funded by a combination of equity, senior debt and high yield notes.

         In February 1999, following completion of essential restructuring and
cost reduction efforts through 1998, the Company took its first step in focusing
on its three principal areas of opportunity, splitting the Company into three
major divisions - the ISD, the WSD and the ECD.

         Throughout 1998 and 1999, the Company focused some of its limited
investment resources on the WSD and ECD businesses, enabling the launch of the
K-working software suite, the WebTop.com search engine, Sparza eCommerce
software solutions and OfficeShopper business supplies eCommerce service.
Nevertheless, the advancement of the growth opportunities across all three
divisions was severely constrained by the Company's capital structure and the
requirements of the lending banks and, as a result, servicing the debt funding
proved a major challenge for a growing business with other significant
requirements to be met from its cash flow.
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Annual Report 1999
Description of Business

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In order to consider how best to resolve these constraints and deliver growth in
shareholder value, the Company commenced a formal strategic review in 1999 in
conjunction with its advisers. The process involved a lengthy period of
discussions with various third parties with respect to potential fund raising
proposals (i.e., strategic investment and asset sales).

         As a result of the strategic review, the Company concluded that the
sale of the ISD - and the consequent application of the proceeds to repay the
outstanding debt - presented the best way forward to providing appropriate
funding to the Company's technology-based operations, thereby restoring the
opportunity for delivering enhanced shareholder value.

The Transaction On 4 May 2000, the Company completed the Restructuring, which
included the sale of ISD to Thomson. Thomson is a major e-information and
solutions group with significant business interests in media and publishing
which has recognised the value of the Company's online information products,
InfoSort indexing technologies and knowledge management solutions.

         Under the terms of the Restructuring, the Company sold to Thomson the
ISD, comprising the entire issued share capital of various subsidiaries of each
of The Dialog Corporation plc and Dotcom Investments BV, including The Dialog
Corporation (the Company's North American subsidiary) in its entirety, together
with the business of the ISD as carried on by The Dialog Corporation plc,
comprising the business of Dialog, Profound and DataStar, for a total
consideration of $275 million, comprising $115 million payable in cash and the
repayment to the Company of intra-group debt of $160 million on completion (the
"Sale"). Net proceeds from the Sale were $269 million (approximately (pound)169
million). In accordance with UK accounting standards, after writing back
goodwill previously written off to reserves upon the acquisition of KRII, the
Company expects to report a loss of approximately (pound)106 million relating to
the Sale, subject to foreign exchange differences. A provision in respect of
this loss will be recognised in the first quarter of 2000. Pursuant to the
Restructuring, the Company agreed for 30 months not to engage in or operate a
business which directly or indirectly aggregates, stores and distributes for
general consumption information similar to that offered by The Dialog
Corporation in relation to the business, or the companies, being sold prior to
the Sale.

         On 20 April 2000, the Company purchased for cash all of its outstanding
11% Senior Subordinated Notes due 2007 in the aggregate amount of $180 million
(the "Notes"). The Notes were redeemed at par, together with accrued and unpaid
interest up to, but not including, the date of payment for the Notes accepted
for purchase.

         In conjunction with the Sale, the Company and Thomson have formed a
strategic alliance which includes a Reseller Agreement and a Software Licence
and Maintenance Agreement. The Reseller Agreement gives the Company the right to
sell ISD products for a period of not less than three years. The Software
Licence and Maintenance Agreement gives Thomson the right to use software owned
by the Company (e.g., InfoSort) for use in the products of ISD. The Company will
also provide maintenance services in relation to the InfoSort software.

         Thomson has also subscribed for 9,297,290 new Ordinary shares in the
Company for a cash consideration of (pound)15.9 million, giving Thomson a
holding of 5.4% of the enlarged issued share capital of the Company. The
subscription price of 170.5 pence per share was based on the closing price for
an Ordinary share on 21 March 2000 less 5%.

         Jiyu Holdings has also subscribed for 7,038,123 new Ordinary shares in
the Company for a cash consideration of (pound)12 million, giving Jiyu a holding
of 4.1% of the enlarged issued share capital of the Company. The subscription
price of 170.5 pence per share was based on the closing price for an Ordinary
share on 21 March 2000 less 5%. Jiyu Holdings is a private investment company,
unconnected to any of the Company's existing shareholders or investors. Jiyu
Holdings' principal shareholder already has substantial investments in a group
of high technology companies (operating in Europe, the Far and Middle East)
involved in the manufacture of digital set-top boxes and other satellite
receiving equipment.

         The effect of the Sale has been to reposition the Company to focus on
its eCommerce and Web Solutions Divisions. The proceeds of the Sale enabled the
Company to repay in full all of its outstanding senior and high yield debt,
including interest, which totalled approximately $275 million (approximately
(pound)173 million). The net proceeds of the Sale and the subscriptions by
Thomson and Jiyu Holdings also provide the Company, after repayment of the
indebtedness referred to above, with funds to provide growth capital to the
eCommerce and Web Solutions businesses. In addition, the Company has created a
new Bright Station Ventures Division ("BSV"), an investment business that will
focus on developing promising Internet and eCommerce start-ups, leveraging the
Company's leading edge technologies, management experience and capital. The
Company's new name "Bright Station plc" is intended to reflect this
repositioning.

Continuing Businesses A summary of the Company's continuing businesses and their
strategies is as follows:

Web Solutions Division
The WSD is the "search and structure" technology division. It owns the
intellectual property rights for the Company's proprietary InfoSort automatic
indexing and Muscat probabilistic searching technologies. The focus of the
division is to leverage these technology assets individually or together in the
form of various commercial applications such as the WebTop.com Internet search
engine, WebCheck concept-based desktop search application, and Smartlogik
knowledge management technologies, applications and services.

eCommerce Division
The ECD is the eCommerce technology arm of the Company. It owns the intellectual
property rights to its proprietary Sparza eCommerce software. The focus of the
division is to leverage its eCommerce technology assets both in providing
eCommerce software solutions to businesses, manufacturers, wholesalers and
resellers, and through eCommerce services such as OfficeShopper. OfficeShopper
will continue to grow its user base through both direct sales and alliances with
consumer-focused partners such as Freeserve.

Bright Station Ventures
BSV will seek to develop in-house, and assist externally generated, business
opportunities in the Internet and eCommerce areas. It
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Annual Report 1999
Description of Business

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will do this with the application of the Company's proprietary search,
structuring and eCommerce technologies, management expertise and investment
capital. The Company has also proposed a strategic relationship with leading UK
Internet incubator Oxygen Holdings plc. Oxygen board member Matthew Freud has
joined the investment panel of BSV and Bright Station's Chief Executive Dan
Wagner has been appointed to the investment committee of Oxygen Holdings. BSV
intends to make such investments in the coming months as and when suitable
opportunities arise. As of the filing date of this document, BSV has taken a 7%
stake in netimperative.com.

Competitive Strengths
The Company - a provider of knowledge management, technology and eCommerce
solutions - has a number of competitive strengths:

- Proprietary Technologies. Developed over the last 14 years, InfoSort is the
Company's proprietary indexing technology. It is a powerful information
management system for the indexing and categorisation of unstructured data.
InfoSort can be deployed on both databases and corporate intranets, enabling
users to index documents as they are created or acquired, using terminology
unique to their organisation. The Company also owns 100 of Muscat, which offers
sophisticated natural language search and retrieval software, and uses
linguistic inference to search unstructured data. This technology matches
'concepts', instead of the simple key-word matching used by most search engines
today. In addition, the Company owns the Sparza eCommerce software, with its
superior management control, and multi-lingual and multi-currency capabilities.
The Company believes that these technologies offer it a competitive advantage in
the Internet services, knowledge management, and business-to-business eCommerce
environment.

- Content Redistribution Rights. The Company benefits from being able to provide

- along with its Smartlogik knowledge management software tools - high-value
external content from the Dialog, DataStar and Profound databanks. The Company
believes this combination of content and technology provides a competitive
advantage in its knowledge management offerings, compared to other companies in
the marketplace.

- Integrated Service Offerings to Entrepreneurs. The Company believes that the
combination of its proprietary eCommerce and search software, hosting services,
and technology expertise distinguishes BSV from other Internet incubator
companies. In offering these capabilities - as well as the traditional offerings
from technology "incubators," such as seed funding, financial management, legal
advice, project management, business modelling, strategic planning, business
development, design, product development, branding, marketing services, market
analysis and research, and recruitment - BSV is able to provide critical
services to entrepreneurs at every stage of their company's development. In
contrast, many of BSV's competitors offer individual services designed to
address a particular need of Internet-based business, such as funding,
management consulting or investment banking.

Products, Services and Strategy
The Company's strategy is to focus on building its Web Solutions and eCommerce
Divisions and on leveraging the anticipated added value derived from the new BSV
Division.

Web Solutions Division
The WSD owns the intellectual property rights for the Company's proprietary
InfoSort automatic indexing and Muscat probabilistic searching technologies. The
focus of the WSD is to leverage these technology assets individually or together
in the form of various commercial applications.

Technologies:
Object Muscat (open source search engine code): Observing the impact of the Open
Source strategy for technologies such as Linux, the WSD has adopted an Open
Source policy for the new Muscat core search code. Open Sourcing is a growing
trend in the technology community whereby core code is made available freely for
use on a "shareware" basis for private use only. When the technology is embedded
into commercial applications, royalties flow back to the intellectual property
owner (as part of the Open Source contract). This policy precipitates rapid
deployment of a technology and generates significant technological enhancements
for the intellectual property owner (as it is adapted to run on different
operating systems, devices, or plug-ins). Programmers, who download the Open
Source code, upload their enhancements into "development community", thereby
improving the source code for other developers. This Open Source policy will
enable the Company to seed the core search engine (named Object Muscat) into
other market sectors and opportunities (leveraging recent academic insights and
new ideas) and then apply these new methods to its own applications and
products. Object Muscat is a core set of algorithms, useful only to the
developer community, and is not a ready-made application or product.

         For example, WebTop.com is one commercial application that uses Object
Muscat code. Thanks to new algorithms developed as a result of feedback from the
open source policy, a new version of the global search engine is expected to be
released with a five times improvement in search speeds. Smartlogik is another
application leveraging the Muscat code for the knowledge management market. Both
of these commercial applications generate royalties to Bright Station as the
owner of the intellectual property rights.

         InfoSort (automated categorisation technology): The InfoSort technology
applies index terms (or tags) to information (similar to a filing system for
hard copy documents). The technology incorporates a number of elements,
including technology to automatically create indexes, technology to read
documents, a hierarchy of categorisation terms, rule bases and thesauri, and
technology to automatically apply those terms, rule bases and thesauri to
documents. Thus, InfoSort provides a powerful information management system to
automatically and electronically categorise information by identifying key
topics within the text. A team of information scientists and technologists work
on further developing, updating and improving the InfoSort technologies on an
ongoing basis, and on customising the software for special projects. The Company
regards the intelligent use of indexing and categorisation software as one of
its chief strengths.

         These key search and retrieval technologies can also be combined to
create applications that are commercialised by the Company's businesses. There
are currently two such entities within the WSD, Smartlogik and WebTop.com.
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Annual Report 1999
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Products and Services:
Smartlogik offers a suite of products, incorporating InfoSort, Discovery and
Alert, which address the processes of information categorisation, retrieval, and
alerting to new information. Smartlogik solutions leverage the InfoSort and
Muscat technologies for the knowledge management, corporate intranet and
Internet markets. Smartlogik tools can collect data from external feeds (such as
The Dialog Corporation's databases), internal databases, internal documentation
on corporate intranets, or data from the Web. This information may then be
filtered through its indexing and search tools to deliver the right information
to the right employee at the right time. In addition, Smartlogik offers a range
of applications, and consulting and implementation services to ensure that its
clients can make full use of the technology. An organisation may adopt the full
Smartlogik suite, or opt to utilise a selection of the tools available,
depending upon its requirements.

         The Company believes that one of the major advantages of this knowledge
management application is that it automatically indexes and categorises
documents in real time. This means that it can handle the volumes and speeds
seen in data streams such as news feeds that would overwhelm manual processes.

         The Company has retained the rights to distribute content from the
Dialog, DataStar and Profound databases, which allows Smartlogik solutions the
unique opportunity to combine valuable external information with a company's own
internal information base. As companies begin to rely more on their intranets to
share and distribute information, the Company believes that there will be a
growing demand for automatic sorting and intelligent search technologies such as
Smartlogik. Current customers include the BBC, BAA, NASA and the British
Library.

WebTop.com/WebCheck - WebTop.com (www.webtop.com) is an Internet search engine
that combines Muscat's "concept based" retrieval technology with InfoSort's
powerful indexing system to return accurate results from the Internet grouped
into different "zones."

         Searches can be executed either through traditional means such as
typing or cutting and pasting text into the search box. Perhaps more
importantly, WebTop.com's WebCheck application allows for searches to be
executed without having to launch a web browser. Users simply drag and drop a
word or a body of text either from a document or email onto the WebCheck icon -
or highlight text in Java-enabled e-mail and click a WebCheck button - to get
immediate results. The application is as simple and intuitive as spell checking
a document.

Special Projects and Alliances:
Department of Trade and Industry - March 1998 - The Company was awarded a
five-year contract by the UK government's Department of Trade and Industry, to
build and operate an online export sales lead service. This service incorporates
an online leads matching service enabling business opportunities, identified by
the UK's Foreign & Commonwealth Office ("FCO") posts around the world, to be
brought to the attention of potential UK exporters. The service also includes a
database of archived export sales leads for UK companies to search for
opportunities abroad. In addition, subscribers will be able to access additional
data relevant to export activity, such as company news and country information.

British Broadcasting Corporation - August 1998 - The Company announced a
substantial five-year contract from the BBC to provide and run a News
Information Online (NEON) service, delivering essential information to BBC
staff. The service utilises the Company's proprietary indexing technology,
InfoSort. Articles are indexed to InfoSort standards and are mapped to existing
terms currently used by BBC personnel, thus tailoring InfoSort terms
specifically for BBC usage.

         Fujitsu Limited - June 1999 - The Company and Fujitsu established an
alliance whereby Fujitsu will deploy the Company's InfoSort software in existing
and future products and services. Through its extensive world-wide reseller
network, Fujitsu also became a marketing and distribution channel for the
Smartlogik knowledge management solutions and ISD content.

eCommerce Division
The ECD owns the intellectual property rights to its proprietary Sparza
technology. The focus of the ECD is to leverage these technology assets, along
with its start-up management expertise, in the eCommerce arena. Currently the
division operates two core business entities, Sparza Solutions and
OfficeShopper.

Technologies:
Sparza Technology - eCommerce Software Technology - Sparza technology is based
upon a number of elements in addition to the normal eCommerce procurement
software, from comprehensive management reporting functionality to catalogue
creation and maintenance technology, to interface design templates and
multi-lingual and multi-currency options.

Products and Services:
Sparza Solutions - eCommerce Software Solutions - Through its suite of products,
Sparza (www.sparza.com) delivers eCommerce technologies focused on enabling
trade manufacturers, wholesalers, aggregators and retailers to better control
and achieve greater profitability from their industry supply chain and build
closer relationships with resellers, retailers and customers.

         Sparza has created a suite of products designed to bring together
buyers and sellers in an efficient electronic chain. This secure hosted
Internet/Intranet solution effectively outsources a company's eCommerce
investment to allow Sparza customers to take advantage of the latest technology
as it emerges.

         The Company's recent acquisition of boo.com technology allows Sparza to
offer eCommerce capabilities to retailers by providing a fully hosted solution.

OfficeShopper - Procurement Service - OfficeShopper (www.officeshopper.com) is
an award-winning site that sells leading branded goods at discounted prices,
including office stationery, computer consumables, office equipment, office
furniture and office cleaning products. OfficeShopper enables users to purchase
business supplies either via the Internet or an organisation's corporate
intranet.

         Due to the nature of the office supply market, OfficeShopper also
pursues direct mail and traditional catalogue strategies, offering customers the
opportunity to order via the Internet, over the telephone or by fax.

         The Company expects to accelerate the growth of business in the UK
through investment in sales staff and by forging
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Annual Report 1999
Description of Business

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Technology born for business

08

additional strategic alliances, such as the Freeserve alliance, as a means of
broadening its online user base.

Bright Station Ventures
BSV is a combination of "greenhouse" development resource, seed investment fund
and a panel of industry specialists, bound together by an executive team with
personal experience as Internet entrepreneurs. The division has been established
to help develop new business ideas into successful Internet companies. It will
develop in-house and seek out and take minority stakes in Internet or eCommerce
start-up companies that could benefit from the Company's existing technology,
management experience and capital.

         BSV intends to provide entrepreneurs with all the services they need to
launch their Internet idea, so that they can focus on delivering the right
product to market in Internet time. These services include the Company's
proprietary eCommerce and search software, hosting services and technology
expertise, as well as the traditional offerings from technology "incubators"
such as seed funding, financial management, legal advice, project management,
business modelling, strategic planning, business development, design, product
development, branding, marketing services, market analysis and research, and
recruitment.

         BSV has relationships with individuals, organisations and partners who
will have a vested interest in the success of each new business idea. The BSV
panel, which is made up of senior executives from within the Internet, media and
investment communities, meet on a regular basis to consider new business ideas
and discuss market opportunities. It is this enterprise network, which the
Company believes gives the BSV its strength and provides the framework within
which entrepreneurs can come together as a powerful and dynamic force in the
global Internet market.

Historic Performance
The following table shows net sales of the Company by operating division in each
of the three years ended 31 December 1997, 1998 and 1999:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
                                                                                                    Net Sales
-------------------------------------------------------------------------------------------------------------
                                    1997            1997       1998           1998      1999             1999
                              (pound) million         %   (pound) million       %  (pound) million         %
-------------------------------------------------------------------------------------------------------------
<S>                                 <C>            <C>        <C>            <C>       <C>              <C>
Information Services Division       43.9           95.2       165.3          96.8      165.1            94.7
Web Services Division                0.4            0.9         4.0           2.3        7.9             4.5
eCommerce Division                     -              -         0.1           0.1        1.4             0.8
Other(1)                             1.8            3.9         1.4           0.8          -               -
-------------------------------------------------------------------------------------------------------------
Total                               46.1          100.0       170.8         100.0      174.4          100.00
-------------------------------------------------------------------------------------------------------------
</TABLE>

(1) The "Other" category relates to royalties earned from the provision of hotel
Internet access.

Industry Background
The Internet is the fastest growing communication medium in history. With over
196 million users in 1999, growing to 502 million by 2003, as estimated by
independent research firm International Data Corporation ("IDC"), the Internet
is dramatically changing how businesses and individuals communicate, share
information, and conduct business. The rapid acceptance of eCommerce, and the
development of content and commercial applications have driven the increased use
of the Internet by businesses and consumers. Forrester Research, Inc.
("Forrester Research") estimates that business-to-business eCommerce will
increase from approximately $109 billion in 1999 to $1.8 trillion in 2003. IDC
estimates that eCommerce software application licensing revenue will grow to
$13.2 billion in 2003, up from $444 million in 1998. The Web, corporate
intranets and extranets are also increasingly becoming the backbone for
accessing, disseminating and managing corporate information. According to IDC,
the growth of Internet content alone, as measured by the number of web pages
worldwide, will grow from 1.7 billion web pages in 1999 to 13.4 billion web
pages in 2003, a compounded annual growth rate of 67%.

         Many companies, regardless of their stage of development, have realised
that an effective Internet strategy and solution is paramount to the
competitiveness and sustainability of their businesses. An increasing number of
organisations, including start-up Internet based businesses, are engaging
Internet service firms. IDC projects that spending on Internet-related services
will rise from approximately $13 billion in 1999 to more than $78 billion in
2003, a compounded annual growth rate of 57.

Sales and Marketing
As at 31 December 1999, the Company marketed its services through direct sales
forces in 39 offices and through 24 independent sales agents around the world.
The Company's sales force consisted of approximately 351 full time sales,
marketing and customer support staff in 39 offices worldwide. The telemarketers
contact potential customers by telephone to explain the products and qualify
customer leads which are then given to salespersons for personal follow up. The
salespersons are responsible for calling on potential customers and obtaining
new subscriptions to the products. Once a field salesperson has procured a new
customer subscription, that client is assigned an account manager, who ensures
that the client receives any needed technical support (on site if requested by
the client) and seeks to expand the number of individual users and the amount of
usage within the client organisation. Field sales personnel are paid a minimum
base salary and are otherwise compensated on a commission basis for new
subscriptions. Telemarketers are compensated by a base salary and commissions
based upon qualified leads that subscribe to Dialog, DataStar or Profound
products. Account managers are compensated with a base salary and commission
based upon re-subscription targets and usage fees generated from the accounts
that they manage.

         Independent sales representatives/agents are compensated on a
commission calculated as a percentage of subscription and usage fees from
clients they recruit or clients who resubscribe. Independent sales
representatives also provide client service directly to the clients in their
territory.
         Following the Restructuring, the Company directly employs approximately
38 personnel in sales, sales support and marketing roles. The Company plans to
extend its sales and marketing resources for its WebTop, Smartlogik, Sparza and
OfficeShopper products in the future in order to enhance market share.

Intellectual Property and Proprietary Rights
The Company considers its InfoSort indexing system, WebTop, and Muscat to be
critical to its future success. The Company regards its InfoSort indexing system
and related software, Smartlogik suite, WebTop search engine and its Muscat
intelligent search engine software as proprietary. It relies primarily on a
combination of statutory and common law copyright, trademark and trade secret
laws, customer licensing agreements, employee and third-
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Annual Report 1999
Description of Business

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Technology born for business

09

party non-disclosure agreements and other methods to protect its intellectual
property and proprietary rights. The Company has several patents pending,
primarily relating to its InfoSort technologies and has secured a patent for its
Incremental Viewer.

         In addition, the Company may license data from third party providers.
The Company's right to use and distribute information depends almost entirely on
the rights of its third party providers to license such information.

Competition
The Internet and eCommerce industry is intensely competitive and is
characterised by rapid technological change. The Company believes that no single
competitor competes directly across the full range of services and products
offered by its three divisions; however, each division competes or may compete
directly or indirectly with a variety of competitors:

         WSD - Smartlogik technologies may compete against advanced Internet
search technology companies such as Autonomy, Infoseek Dataware, Excalibur,
Verity and NetMind; while WebTop.com may compete against Internet search engine
companies such as AltaVista, Ask Jeeves, InfoSpace, Inktomi, Google and
LookSmart.

         ECD - OfficeShopper may compete directly or indirectly with
non-Internet based companies such as Staples, OfficeMax and OfficeDepot who have
branched into the eCommerce arena. Sparza Solutions may experience competition,
directly or indirectly, from other Internet companies branching into the
business-to-business eCommerce software sector such as Ariba, Clarus, Commerce
One, Extensity, GE Information Services, Intelysis, Netscape Communications and
TRADE'ex Electronic Commerce Systems. Other current and potential competitors
include OEM providers of shopping technologies and services including Bottom
Dollar, InfoSpace and mySimon, third party merchant aggregators including
Affinia, SnapShot and WizShop, and Internet portals and other captive
marketplace websites, including Amazon.com, America Online, Excite@Home, Yahoo!
and Lycos.

          BSV - Numerous public companies such as CMGI, Inc., Internet Capital
Group, Inc., Rare Medium Group, Inc. and Softbank Corp., as well as private
companies such as Idealab! and Divine Interventures, Inc., provide some
combination of the venture funding and development services which may compete
directly or indirectly with BSV.

Employees
As of 31 December 1999, the Company had a total of 1052 full-time employees, of
which 308 were based in the UK, 560 were based in the US and 184 were based
throughout the rest of the world. After the Restructuring, the Company retained
a total of 170 full-time employees, of which 28 are involved in sales and
marketing and 94 in technology and product development. The Company's future
success depends in significant part on the continued service of its key
management, sales, technical and marketing personnel and on its ability to
continue to identify, attract, train, motivate and retain such highly qualified
employees. Competition for such personnel is intense and there can be no
assurance that the Company will be successful in attracting, assimilating,
retaining or motivating such key personnel in the future. None of the Company's
employees are represented by a collective bargaining organisation and the
Company has never experienced any work stoppages.

Risks Associated with the Company

The Company's current line of business has a limited operating history and its
future operating results are uncertain. It is difficult to predict whether the
Company's new divisions will generate future revenues or that the Company will
be profitable.

Following the sale of the ISD to Thomson, the Company was restructured so that
its business operations focused on three divisions, WSD, ECD and BSV. For the
fiscal year ended 31 December 1999, the Company derived approximately 95% of its
revenues from the ISD. The remaining 5% was derived from operations of the WSD
and ECD. Therefore, as it now operates, the Company has a limited operating
history which, together with the relative immaturity of the Company's markets
and other factors described in this Report make the prediction of future
operating results difficult. The Company's past financial performance should not
be considered indicative of future results. Furthermore, despite the strong
revenue growth reported for the WSD and ECD during fiscal 1999, there can be no
assurance that these revenues will continue to increase or will not decrease.
The Company as a whole has not yet achieved the level of revenues necessary to
provide it with operating results that are positive at the earnings level.

         In addition, the Company anticipates that additional future revenues
for the WSD and ECD will be derived from Internet advertising, co-branding of
the WebCheck tool and sponsorship of the WebTop.com Zones. The Company's
business could be harmed if Internet advertising does not grow, or if traffic on
its websites is not sufficient to drive business - and therefore revenues - from
sponsors, advertisers and partners.

         The Company currently expects to significantly increase its expenses
across each division as it expands its advertising, sales and marketing
expenditures, invests in the development and expansion of its hardware and
technology infrastructure, and dedicates capital and resources to assist the
needs of its portfolio companies. In addition, the Company's future operating
results and prospects must be considered in light of the risks and uncertainties
frequently encountered by companies expanding into new and rapidly evolving
areas such as the Internet and eCommerce industries, including:

- the growth of the market for the Company's products and services and its
ability to develop, extend and market its online service brands, software
products and Internet services;

- the demand for the Company's products and services;

- the level of competition faced by each of the Company's divisions;

- the Company's success in expanding its management team, marketing efforts,
sales force and strategic partnerships;

- the risks associated with providing venture funding and operating
Internet-based businesses; and

- the ability of the Company to control costs.

The markets in which each of the Company's divisions operate are highly
competitive. The Company cannot be certain that its products and services will
be accepted in the market place or capture market share.

The Internet and eCommerce industries are intensely competitive and are
characterised by rapid technological change. The Company believes that no single
competitor competes directly
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Annual Report 1999
Description of Business

www.brightstation.com
Technology born for business

10

across the full range of services and products offered by its three divisions;
however, each division competes or may compete directly or indirectly with a
variety of competitors. See "Description of Business - Competition". The WSD may
compete against advanced Internet search technology and search engine companies.
The ECD may compete directly or indirectly with non-Internet based office
supplies companies that have branched into the eCommerce arena, and from other
Internet companies branching into the business-to-business eCommerce software
sector. BSV may compete with numerous public and private companies that provide
some combination of the venture funding, venture development and venture banking
services which may compete directly or indirectly with BSV.

         Most current and many potential competitors have longer company
operating histories, larger customer bases and greater brand recognition in
other business and the Internet and eCommerce markets than the Company. Most of
these competitors also have significantly greater financial, marketing,
technical and other resources. Some may be able to devote more resources to
marketing and promotional campaigns, adopt more aggressive pricing policies and
devote substantially more resources to product, services and systems development
than the Company is able to devote. These competitors may also engage in more
extensive research and development and make more attractive offers to existing
and potential corporate customers, advertisers, syndicators and eCommerce
merchants. There can be no assurance that any such competition, on the basis of
price, scope of products, services and strategic relationships or other factors,
would not have a material adverse effect on the Company's results of operations.

The Company may not be able to secure additional capital or financing to support
its growth and future capital needs.
Each of the Company's three divisions has a limited operating history and little
to no current revenue streams. If the Company is unable to generate sufficient
cash flows from operations to meet the anticipated needs of each division for
working capital and capital expenditures, it will need to raise additional
funds. The Company may be unable to obtain any required additional financing on
favourable terms, if at all. If the Company raises additional funds through the
issuance of equity securities, its equity holders may experience dilution of
their ownership interest, and the newly-issued securities may have rights
superior to those of the Ordinary shares and the ADSs. If the Company raises
additional funds by issuing debt, it may be subject to limitations on its
operations, including limitations on the payment of dividends.

         If the Company requires, but is unable to obtain, additional financing
in the future on acceptable terms, or at all, the Company may be unable to:
continue its business strategy; fund the operations of its divisions; develop or
enhance its products and services; make investments in portfolio companies;
respond to competitive pressures, changing business or economic conditions; or
withstand adverse operating results. As a result, the Company's business,
financial condition and operating results may be materially and adversely
affected.

The Company's success depends on its ability to develop new products and
services in response to the rapid technological changes across the industry and
to customer demand. The Company's growth also depends on its ability to develop
brand recognition.

The Internet and eCommerce industries are influenced by rapidly changing
technology, changes in customer needs and frequent introductions of new or
enhanced products and services. Accordingly, the Company believes that its
future success will depend to a great extent upon its ability to meet these
changes by enhancing its existing products and services, increasing its market
presence and the market's awareness of the Company's brand names and developing
and introducing new products and services on a timely basis. Any failure by the
Company to anticipate or respond adequately to technological developments and
customer requirements, or any significant delays in development or introduction
of new products and services, could result in a loss of competitiveness or
revenues and thereby have a material adverse effect on the Company's results of
operations. Additionally, new products, when first released by the Company, may
contain undetected errors or "bugs" that, despite testing by the Company, are
discovered only after a product has been installed and used by customers. There
can be no assurance that errors will not be discovered in the future, causing
delays in product introduction and resulting in negative market reactions to the
new product or service.

         Broader brand recognition and a favourable public perception of the
Company's various brands and domain names such as WebTop.com, OfficeShopper and
InfoSort is essential to its future success. Accordingly, the Company intends to
pursue aggressive brand-enhancement strategies, which will include mass market
advertising, promotional programmes and public relations activities. These
expenditures may not result in a sufficient increase in revenues to cover such
advertising and promotional expenses, or if this brand enhancement strategy is
unsuccessful, these expenses may never be recovered and it may be unable to
increase future revenues.

If the Company fails to develop new relationships and enhance existing
relationships with strategic partners and corporate customers, this may
adversely affect its financial results.
In each of the Company's three operating divisions, its ability to achieve
revenue growth in the future will depend on its success in continuing to develop
new relationships and enhance existing relationships with strategic partners,
corporate customers and Internet users. For example, the WSD's strategic
alliance with Fujitsu is a step towards the Company's goal of positioning
InfoSort as an industry standard. The Company also markets its Smartlogik
technology by pursuing strategic alliances with corporations wishing to
integrate its technology into their Internet services. In addition, BSV's
established network of individuals, organisations and partners is important to
its ability to raise capital and provide the operational resources required to
develop successful portfolio companies. Similarly, the success of the ECD's
Sparza Solutions business depends on the Company's ability to attract business
customers, from manufacturers and wholesalers to resellers. The loss of any
strategic partnership or key customer in each of these instances, along with
many others affecting the Company's divisions, could significantly adversely
affect the financial results of the Company as a whole.
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Annual Report 1999
Description of Business

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Technology born for business

11

The Company's quarterly operating results are likely to fluctuate. If the
Company fails to meet the expectations of public market analysts or investors,
the market price for its Ordinary shares and ADSs - which is subject to
volatility - may decrease significantly.

The Company's Ordinary shares are listed on the London Stock Exchange and are
publicly traded in the UK. The Company's American Depositary Shares ("ADSs")
have been traded on the Nasdaq National Market since November 1995. The trading
price of the Ordinary shares on the London Stock Exchange, and the ADSs on the
NASDAQ National Market have been subject to wide fluctuations. In addition, in
recent years the stock market in general, and the shares of Internet and
technology companies in particular, have experienced extreme price and volume
fluctuations. This volatility has had a substantial effect on the market prices
of securities issued by many companies for reasons unrelated to their operating
performance. These broad market fluctuations may adversely affect the market
price of the Ordinary shares and ADSs. The market price of the Ordinary shares
and ADSs are directly affected by economic and political conditions in the UK,
in part because the Ordinary shares are listed and traded on the London Stock
Exchange and are subject to local conditions and press comment but also are a
result of differences between operating results reported under US and UK GAAP.

         In addition, the quarterly operating results from the ECD and the WSD
have varied significantly in the past and the Company anticipates that its
results as a whole may vary significantly in the future. The Company believes
that period-to-period comparisons of its results of operations may not be
meaningful and should not be relied upon as indicators of future performance.
The Company's operating results may fall below the expectations of securities
analysts or investors in some future quarter or quarters, and this may adversely
affect the market price of the Company's Ordinary shares and ADSs.

Systems failure or delay may cause interruption and disruption of the Company's
services which would harm its business.
The performance of the Company's server and networking hardware and software
infrastructure, whether provided internally or by a third party, is critical to
its business, reputation and ability to attract users, advertisers and partners.
Fire, floods, earthquakes, power loss, telecommunications failures, break-ins
and similar events could damage these systems. Computer viruses, electronic
break-ins or other similar disruptive problems could also adversely affect the
Company's services. The Company's insurance policies may not adequately
compensate it for any losses that may occur due to any failures or interruptions
in its systems.

         The Company's systems must accommodate a high volume of traffic and
deliver frequently updated information. The Company's websites may experience
slow response times, or minor or infrequent interruptions. In addition, because
the Company depends upon Internet and other online service providers to provide
consumers with access to the Company's websites, it is limited in its ability to
prevent system failures in the future. Many of these service providers have
sustained significant outages unrelated to the Company's systems in the past and
may experience similar failures in the future. While isolated occurrences of
such events should not have a material impact on the Company's business, if
system failures or slowdowns were sustained or repeated, the Company's revenues
and its reputation could be impaired.

         As traffic on the Company's websites continues to increase, it must
expand and upgrade its technology, transaction processing systems and network
hardware and software. The Company may be unable to accurately project the rate
of increase in its traffic and capacity limits on the Company's technology,
network hardware or software or transaction processing systems. If the Company
is unable to expand and upgrade its systems to meet increased use, its business
may be harmed.

The Company may be unable to protect its intellectual property and proprietary
technology and may be liable for infringing the intellectual property rights of
others.

The Company's business is dependent on proprietary technology and other
intellectual property rights - it considers the InfoSort indexing system,
Smartlogik suite, WebTop.com search engine and the Muscat information search and
retrieval technology to be critical to its future success. The Company generally
does not include in its software any mechanisms to prevent or inhibit
unauthorised use, but requires the execution of a license agreement, which
permits use of the Company's products by registered customers. If
misappropriation of the Company's proprietary rights were to occur to any
substantial degree, the Company's results of operations could be materially
adversely affected. There can be no assurance that the Company's means of
protecting its proprietary rights will be adequate. In general, the Company
relies primarily on a combination of statutory and common law copyright,
trademark and trade secret laws, customer licensing agreements, employee and
third-party non-disclosure agreements and other methods, rather than patents, to
protect its proprietary rights. In addition, the Company has several patents
pending for its InfoSort technologies.

         Despite these precautions, it may be possible for a third party to copy
or otherwise obtain and use the Company's proprietary rights without
authorisation, or to develop similar technology independently. Furthermore, the
laws of certain countries in which the Company makes its products and services
available do not protect the Company's intellectual property rights to the same
extent as the laws of the UK and the US. Litigation may be necessary in the
future to enforce the Company's intellectual property rights, to protect its
trade secrets or to determine the validity and scope of the proprietary rights
of others. This type of litigation could result in substantial costs and
diversions of resources, either of which could have a material adverse effect on
the Company's business, financial condition and operating results. While the
Company is not currently engaged in any litigation or legal proceedings with
respect to its intellectual property, there can be no assurance that third
parties will not claim the Company's current or future products infringe on the
proprietary rights of others. The Company expects that software developers
increasingly will be subject to such claims as the number of products and
services in the online information services industry grows. Any such claims,
with or without merit, could result in costly litigation or might require the
Company to enter into royalty or licensing agreements. Such royalty or license
agreements, if required,
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Annual Report 1999
Description of Business

www.brightstation.com
Technology born for business

12

may not be available on terms acceptable to the Company or at all.

         In addition, third parties may assert infringement claims against the
Company, alleging infringement of their trademarks and other intellectual
property rights of third parties. These claims and any resulting litigation,
should it occur, could subject the Company to significant liability for damages.
Even if the Company prevails against such claims, litigation of any kind could
be time-consuming and expensive to defend. See "Description of Business -
Intellectual Property and Proprietary Rights."

The legal environment in which the Company operates is uncertain and claims
against it could cause its business to suffer.

It is possible that if any information provided through the WSD's Smartlogik
solutions or WebTop.com search engine contains errors, third parties could make
claims against the Company for losses incurred in reliance on this information.
Further, there is the potential for product liability claims to be asserted
against the Company by end-users who purchase goods and services through the
ECD's business-to-business online shopping solutions. Although the Company
carries general liability insurance, the insurance may not cover potential
claims of this type or be adequate to protect the Company from all liability
that may be imposed.

Risks Associated with the Company's Divisions

Customising the Company's WSD and ECD products and services for corporate
customers is labour intensive.

The Company's strategy in bringing the WSD's Smartlogik technology to market
involves pursuing strategic alliances with corporations wishing to integrate its
technology into their IT systems. Such relationships may involve customisation
of the Smartlogik technology to suit the customer's needs. Likewise, an integral
characteristic of the ECD's Sparza eCommerce solutions is that customers may use
the solution to build fully functional, branded, business-to-business
transaction websites. The customisation of the Company's products may be labour
intensive and it may be difficult to predict the length of the development
cycle, realise revenue goals and manage the Company's internal hiring needs to
meet new projects. Factors affecting the length of the development cycle include
the overall size and complexity of the customer's IT platform, the interaction
with the customer and the dynamic nature of the content.

The Company and its BSV business may incur significant costs to avoid investment
company status and may suffer other adverse consequences if the Company is
deemed to be an investment company.

The Company may incur significant costs to avoid investment company status and
may suffer other adverse consequences if deemed to be an investment company
under the US Investment Company Act of 1940 (the "1940 Act"). Some equity
investments in other businesses made by BSV may constitute investment securities
under the 1940 Act. A company may be deemed to be an investment company if it
owns investment securities with a value exceeding 40% of its total assets,
subject to certain exclusions. Investment companies are subject to registration
under, and compliance with, the 1940 Act unless a particular exclusion or US
Securities and Exchange Commission safe harbor applies. If the Company was
forced to comply with the rules and regulations of the 1940 Act, its BSV
operations may significantly change, and it may be prevented from successfully
executing its BSV business strategy.

BSV's investments will be risky.
A portion of BSV's assets will include equity interests directly and indirectly
acquired in the Company's portfolio companies. It is anticipated that the
portfolio companies will either be developed in-house or be in the early stages
of development. Even though the Company intends to be actively involved in the
affairs of its portfolio companies, it may not be able to control the policies
or directions that these companies take if it owns less than a majority of the
shares of the portfolio companies. The Company makes no assurances that these
companies will be able to successfully achieve their business goals in a timely
manner or at all.

         BSV's strategy is to realise a return on its equity interests in
portfolio companies by liquidating its investments through sales of equity, sale
of the portfolio company or otherwise, so its success depends upon the success
of its portfolio companies. Any risk affecting the portfolio companies, whether
such risk be inherent to the Internet and eCommerce industries, driven by a
venture partner's internal operations or reflecting general market conditions,
in turn translates into a risk indirectly affecting the Company. There can be no
assurance that the Company will realise any return on any of its investments, or
that the value of the portfolio companies will not decrease. Moreover, the
trading price of the Company's Ordinary shares and ADSs may be adversely
affected if it does not realise any return on these investments, or if that
return is lower than the market expects. The failure of one or more of the
companies in which the BSV invests, and the timing of any dispositions of its
investments in these companies, could have a material adverse effect on the
Company's business, financial condition and operating results and on the market
price of its equities.

Risks Related to Internet and eCommerce Industry

The Company depends on increasing use of the Internet and on the growth of
eCommerce. If the use of the Internet and of eCommerce solutions do not grow as
anticipated or capacity constraints restrict the use of the Internet as a
commercial marketplace, the Company's business may be seriously harmed.
The Company's WSD and ECD products and services, as well as the success of BSV's
portfolio companies, depend on the increased acceptance and use of the Internet
as a medium of commerce.

         The continued growth of the Internet and eCommerce depends on various
factors, many of which are outside the Company's control. These factors include:

- performance and reliability of the Internet may decline as usage grows;

- security, authentication and performance concerns due to hackers; and

- privacy concerns, including those related to the ability of websites to gather
user information without the user's knowledge or consent.
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Description of Business

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In addition, capacity constraints may cause consumers to reject the Internet as
a viable long-term commercial marketplace. These constraints include:
- potentially inadequate development of the necessary communication and network
infrastructure, particularly if rapid growth of the Internet continues;
- delays in the development or adoption of enabling technologies, performance
improvements, or new standards and protocols; and
- increased governmental regulation.

If acceptance and use of the Internet does not continue to develop at historical
rates or a sufficiently broad base of business customers do not adopt or
continue to use the Internet as a medium for commerce, demand for the Company's
products and services may decline and the financial condition of the Company's
three divisions could be materially adversely affected. Demand and market
acceptance for recently introduced services and products over the Internet and
by eCommerce solutions are subject to a high level of uncertainty, and there
exist few proven services and products.
         Any adverse events affecting those industries, whether it be lack of
growth or consumer distrust, would impair the Company's ability to grow its
business.

Privacy concerns relating to the Internet and increasing government regulation
of the Internet could harm the Company's business.
The perception of privacy concerns, whether or not valid, may indirectly inhibit
market acceptance of the Company's products. Legislative or regulatory
requirements may heighten these concerns if businesses must notify website users
that the data captured after visiting certain websites may be used by marketing
entities. Although the Company does not provide details of individual users to
such organisations, its business could be harmed if general consumer privacy
concerns are not adequately addressed.
         In addition, as the Internet, eCommerce, and intranet related services
and solutions continue to evolve, the Company expects that local, US, UK and
foreign governments will adopt laws and regulations tailored to the Internet.
This may cover issues like user privacy, taxation of goods and services provided
over the Internet, pricing, content and quality of products and services.
The US Congress recently adopted Internet laws regarding children's privacy,
copyrights, taxation and the transmission of sexually explicit material. The
European Union recently enacted its own privacy regulations, and is currently
considering copyright legislation that may extend the right of reproduction held
by copyright holders to include the right to make temporary copies for any
reason.
         The imposition of new sales or other taxes could limit the growth of
eCommerce generally and, as a result, demand for the Company's products and
services. Recent federal legislation in the US limits the imposition of state
and local taxes on Internet-related sales, but Congress may choose not to renew
this legislation in 2001, in which case state and local governments in the US
would be free to impose additional taxes on electronically purchased goods. The
Company believes that most companies selling products over the Internet do not
currently collect sales or other taxes on shipments of their products into
states or foreign countries where they are not physically present. However,
these jurisdictions may seek to impose sales or other tax collection obligations
on such companies engaged in eCommerce. Furthermore, there may be calls for more
stringent consumer protection laws that may impose additional burdens on
companies conducting business online.
         The law of the Internet remains largely unsettled, even in areas where
there has been some legislative action. It may take years to determine whether
and how existing laws such as those governing intellectual property, privacy,
libel and taxation apply to the Internet. The adoption or modification of laws
or regulations relating to the Internet, or interpretations of existing law,
could limit the market for eCommerce and Internet related solutions and products
and, therefore, adversely affect the Company's business.

Description of Property
The Company's head office and principal place of business in the UK is The
Communications Building, 48 Leicester Square, London WC2H 7DB where it leases
approximately 14,332 square feet for its executive offices and UK product
development departments.
         In addition, the Company leases approximately 4,600 square feet of
office space in Wembley, Middlesex to support the Trade UK service operated in
conjunction with the UK Government's Department of Trade and Industry. The
Company's ECD is currently located in Oxford where it leases approximately 2,700
square feet of office space. The Company also leases approximately 5,500 square
feet of office space in Cambridge to accommodate the WSD.
         The Company's field sales and support operations lease facilities in
locations in Europe and the United States. The Company believes that its
existing facilities are adequate for its current needs and that additional space
will be available as needed.
         Prior to the sale of the ISD to Thomson which was completed on 4 May
2000, the Company's US operations were based in Cary, North Carolina and in
Mountain View, California. The Company leased approximately 63,743 square feet
of office space in Cary, which served as the sales and administrative
headquarters for the US. The Company also leased approximately 133,500 square
feet of office space in Mountain View (of which 88,532 square feet was leased to
sub-tenants), which housed the US product development group.
         During 1999, the Company's principal data centre was in Palo Alto,
California, where it leased approximately 35,500 square feet of space. The
Company also leased approximately 20,900 square feet in Bern, Switzerland which
was both a data centre and a technical support facility for the Datastar
service. The Company's UK mainframe computers were located in Slough, England,
and were managed by a third party specialist company.
         On the completion of the sale of the ISD to Thomson, the leases in
Cary, Mountain View, Palo Alto, Bern and Slough, together with all sales and
support leased facilities in the US and Europe, were transferred to Thomson
under the terms of the sale agreement.
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Annual Report 1999

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Operating and Financial Review

The following review of operating results, liquidity and capital resources has
been prepared in accordance with both the recommendations of the UK Accounting
Standards Board in their statement entitled "Operating and Financial Review",
and recognising the US requirement for a Management's Discussion and Analysis of
Financial Conditions and Results of Operations.
         The Company maintains its accounting records and reports its results in
pounds sterling in accordance with UK generally accepted accounting principles
(GAAP). There are significant differences between UK GAAP and US GAAP (see note
30 of Notes to the Financial Statements) and, unless otherwise indicated, all
financial results and analyses in this section refer to the Company's UK GAAP
financial statements and results.

Summary
For much of 1999, due to cash constraints, management's primary focus was on the
resolution of the Company's inappropriate capital structure. This meant that the
Company was managed on a cash basis with little investment in sales and
marketing. Nevertheless, in February 1999, the Company announced the strategic
realignment of its existing operations into three newly formed divisions in
order to provide a greater focus and reporting transparency for its increasing
range of Web-based operations and initiatives. The three new divisions were: (1)
Information Services Division ("ISD"); (2) Web Solutions Division ("WSD"); and
(3) eCommerce Division ("ECD").
         On 4 May 2000, the Company completed the disposal of the ISD to Thomson
for $275 million ((pound)176 million) and raised a further (pound)27.9 million
through two equity subscriptions. Following the disposal, the Group has
primarily focused on its remaining eCommerce and Web Solutions Divisions. The
net proceeds of the sale and subscriptions, after repayment in full of the
Group's outstanding senior and high yield debt, will provide the Group with
approximately (pound)44 million in cash to devote to its business. In addition,
the Company has established a new investment business, Bright Station Ventures,
that will focus on developing promising Internet and eCommerce start-ups,
leveraging the Company's leading edge technologies, management experience and
capital.

Divisional turnover and operating profit
Group turnover of (pound)174.5 million compares favourably with reported
turnover in 1998 of (pound)170.8 million. The increase was driven by revenues
resulting from the Company's strategic partnership with Fujitsu, which benefited
both the Company's WSD and the ISD.
         Group operating profit for 1999 of (pound)15.1 million shows a decline
of 27% on 1998's operating profit after restructuring costs of (pound)20.7
million.

Information Services Division
This division, sold to Thomson on 4 May 2000, represented the core online
information business offered to information professionals and end-users. The
main product lines included Dialog, DataStar, Profound and CD-ROM which
represented 67%, 9%, 11% and 5% respectively of total divisional sales for 1999.
         Reported turnover of (pound)165.1 million for 1999 shows a 0.1% decline
against 1998's turnover of (pound)165.3 million. The ISD, along with the rest of
the business, was hindered by the cash constraints under which the Company was
operating with the result that the Company was unable to invest in sales and
marketing expenditure to the an appropriate degree. These circumstances led to a
decline throughout 1999 that was compensated by the receipt of one-off licence
fees from Fujitsu amounting to (pound)12.6 million.
         Operating profit for 1999 of (pound)13.6 million reflects a decline of
36% on 1998's reported operating profit of (pound)21.4 million. The decrease is
largely due to increased staffing levels throughout the division and reflects a
lower level of capitalisation of programming staff used to support the products
successfully released in 1999. Year 2000 compliance costs of approximately
(pound)2 million were an additional drain on resources. Furthermore, there was
an increase in amortisation of development costs of (pound)1.6 million (21%) as
a result of increased product releases.
         Under Thomson's ownership, the Company believes that the ISD will
benefit from the greater capital resources that will be devoted to the business
as well as from the synergies inherent in Thomson's existing substantial content
collection and global infrastructure.

Web Solutions Division
The WSD is the "search and structure" technology arm of the Company. It owns the
intellectual property rights for the Company's proprietary InfoSort automatic
indexing and Muscat probabilistic search technologies. The focus of the division
is to leverage these technology assets individually or together in the form of
various commercial applications such as its WebTop.com Internet search engine,
WebCheck concept based desktop search application, and the Smartlogik suite of
knowledge management technologies, applications and services.
         Turnover of (pound)7.9 million for 1999 shows a 97% increase against
turnover in 1998 of (pound)4.0 million. The main reason for the increase is the
technology licence from Fujitsu of (pound)4.0 million. Other revenues in the WSD
during 1999 arose from the Company's contracts with the British Broadcasting
Corporation (BBC) and Department of Trade and Industry (DTI) as well as ongoing
sales of Smartlogik's suite of knowledge management technologies, applications
and services.
         Operating profit for 1999 of (pound)2.7 million shows an increase of
182% on 1998's operating profit of (pound)1 million due largely to the Fujitsu
technology licence.

eCommerce Division
Following on from the Company's acquisition of Write Works Limited in November
1998, the Company concentrated on OfficeShopper, the UK's first fully integrated
online service for over 40,000 office products and Sparza, the business
responsible for licensing the underlying software to companies wishing to create
their own eCommerce solutions.
         Turnover in 1999 for OfficeShopper and Sparza amounted to
(pound)918,000 (1998: (pound)77,000) and (pound)484,000 (1998: (pound)nil)
respectively. OfficeShopper in particular was severely limited by the cash
constraints under which the Company was operating with the result that very
little cash was made available for sales and marketing expenditure. This gave
rise to only modest revenue performance and the Company is confident that, with
sufficient funds provided from the disposal of the ISD, management will be able
to grow revenues significantly.
         Similarly, Sparza has suffered from near zero investment in sales and
marketing but nevertheless managed to generate
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Annual Report 1999

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revenues of (pound)484,000 from its first eight months of trading. Although
revenues are expected to grow as further businesses make use of Sparza's hosted
eCommerce solution, the Company expects 2000 to be a fairly modest year in terms
of revenue growth as management is immediately focused on consolidating and
growing its technical resources.
         1999's operating loss of (pound)1.2 million compares to an operating
loss in 1998 of (pound)0.1 million. The increase reflects the inclusion of the
Write Works business for a full year in 1999 as opposed to only the final six
weeks of 1998.

Geographical analysis of turnover
The ISD had operations and offices throughout the United States, Europe and
Asia. During the year ended 31 December 1999, total revenues from overseas
operations outside the United Kingdom increased from (pound)131.8 million in
1998 to (pound)152.8 million in 1999.
         Following the disposal of the ISD to Thomson, management expects
substantially all revenues to be generated in the United Kingdom in the near
term.

Cost of sales
Cost of sales decreased by 4.8% from (pound)71.6 million in 1998 to (pound)68.2
million in 1999 and represented 41.9% and 39.1% of turnover respectively.
         Due to the significant weighting of revenues to the ISD, cost of sales
within the ISD consists primarily of royalties paid by the Company to content
publishers, whose information is downloaded by a user through the Company's
services. Also relating to the ISD are telecommunications charges and computer
processing costs, and, to a lesser degree, annual fixed fees paid to some
content providers irrespective of the level of usage of that provider's
information. The majority of the ISD's royalties paid to content publishers are
based upon a percentage of net revenue billed to the user which allows the
Company to offer flat-fee packages. However, there is a minority of content
providers to whom royalties are paid on the basis of volume of data accessed,
regardless of the revenue billed to the customer. The number of flat-fee
packages with access to this latter category of content providers increased
slightly during 1999 with a corresponding negative effect on the ISD's gross
margin. The effect of this, however, was more than offset by the benefit of the
Fujitsu licence fees causing the ISD's gross margin to increase slightly from
57.7% in 1998 to 59.9% in 1999.
         Cost of sales for the WSD is much lower than the ISD as
technology-based sales, which consist of licence fees and royalties, have
minimal associated direct costs. The majority of 1999's cost of sales consists
of direct costs associated with the Fujitsu technology licence.
         Cost of sales within the ECD relate solely to the costs of goods sold
by OfficeShopper. Sales made by Sparza have negligible associated direct costs.

Distribution costs
Distribution costs consist of salaries and commissions paid to sales staff and
account managers, travel and entertainment and similar expenses incurred by
sales personnel, and marketing expenses, including advertisements, marketing
literature and trade shows.
         Distribution costs increased slightly from(pound)21.6 million in 1998
to(pound)22.1 million in 1999. Although management had planned to invest
significantly in sales and marketing expenditure across all three divisions,
cash constraints meant that these costs remained largely flat. Following the
disposal of the ISD to Thomson, it is expected that the level of distribution
costs in the WSD and the ECD to rise accordingly.

Administration expenses
Administration expenses consist of all facilities costs (including the Company's
main offices in London, California, North Carolina and Bern, Switzerland, which
house the Company's management, sales, administrative and editorial staff, and
the Company's data centres); remuneration for all employees other than persons
directly involved in selling or account management; and operating expenses for
the Company's data centres (other than telecommunications and processing charges
included in cost of sales as described above).
         Administration expenses increased from (pound)44.2 million in 1998 to
(pound)54.7 million in 1999, which represent 25.9% and 31.3% of revenues
respectively. The increase is primarily attributable to increased investment in
staff across all three divisions and also reflects a lower level of
capitalisation of programming staff used to support the products successfully
released in 1999. All Year 2000 issues were successfully resolved but also
necessitated certain additional resources.

Amortisation of product development costs/goodwill
The amortisation of product development costs and goodwill amounted to
(pound)9.7 million, compared to (pound)7.8 million in 1998. The increase is
primarily due to the release in 1999 of a suite of ISD products that further
enabled customers to access content via the Web.

Amounts written off investments
Amounts written off investments in 1999 totalled (pound)4.6 million, an increase
of 100% on 1998's balance of (pound)2.3 million. In 1999 the Company booked a
provision of (pound)3.2 million against its remaining investments in 4th Network
(now renamed eHotel), reflecting further delays in eHotel's proposed initial
public offering. In addition, a further charge of (pound)1.4 million was made
against the Company's investment in Frost & Sullivan Electronic Distribution LLC
reflecting concerns over the value of certain of its exclusive online
distribution rights.

Exceptional items
During 1999, the Company entered into a strategic partnership with Fujitsu
whereby Fujitsu was appointed exclusive reseller of the Company's products in
Japan. The Company has booked a provision of (pound)911,000 relating to the
closure of its former subsidiary distributor in Japan, KMK DigiTex Company
Limited.

Interest receivable and interest payable
Net interest payable of (pound)18.0 million compares to (pound)17.2 million for
1998, an increase of 4.8%, and relates almost exclusively to interest paid on
both senior and high-yield debt taken out at the time of the acquisition of
Knight-Ridder Information, Inc. (KRII). The average balance outstanding during
1999 amounted to $277.8 ((pound)172.4) million as compared to $253.4
((pound)157.2) million in 1998.
         The net proceeds of the sale of the ISD on 4 May 2000 were used to
repay these balances in full.
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Operating and Financial Review

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Included within the net interest expense of (pound)18.0 million is (pound)1.3
million of amortised bank debt fees. Bank and related fees amounting to
(pound)8.2 million were paid in connection with the debt raised to acquire KRII,
and the unamortised value is netted off against the carrying value of the
related indebtedness in accordance with FRS4 (Capital instruments). The
unamortised balance written off to the profit and loss account on 4 May 2000
following the repayment in full of the debt balances amounted to (pound)5.6
million.

Taxation
The Company's tax charge for 1999 relates mainly to the tax arising on the
profitable performance of its foreign sales subsidiaries. In addition,
(pound)400,000 relates to the application of 10% Japanese withholding tax on the
technology licence granted to Fujitsu of (pound)4.0 million.
         No tax arises in the UK, US or Switzerland as a result of past tax
losses. It is expected that the tax losses in the US and Switzerland will pass
to Thomson following the disposal of the ISD.
         No capital gains liabilities are forecast as a result of the disposal
of the ISD.

Earnings per share (EPS)
The Company achieved a loss per share of 3.5 pence compared to earnings of 4.8
pence per share for 1998.
         The dilutive impact of the Company's outstanding warrants and options
did not have a material effect on reported EPS.

Liquidity and capital resources
The Company's operating activities generated net cash of (pound)33.6 million
during the year ended 31 December 1999, compared to (pound)34.1 million in 1998.
The cash generated in 1999 from operating activities is shown net of (pound)2.7
million of costs relating to the one-off restructuring charges arising from the
merger activity of KRII and M.A.I.D, compared to restructuring costs of
(pound)6.9 million in 1998. As at 31 December 1999, nearly all exceptional
restructuring costs had been incurred with the exception of onerous lease
commitments amounting to (pound)0.6 million and potential legal costs of
(pound)0.8 million.
         The Company incurred net capital expenditure of (pound)16.6 million in
1999 compared to (pound)18.8 million in 1998, the reduction largely due to cash
constraints experienced by the Company.
         The Company's capital expenditure requirements are primarily for
product development, computer equipment for the Company's data centres and other
operations, related software, leasehold improvements and office equipment. In
November 1999, the Company announced that it had entered into an agreement with
ICL to outsource the operations of its data centre in Palo Alto, California for
a period of seven years. This will limit the ISD's future capital expenditure in
relation to the Dialog data centre to approximately (pound)1 million per year
over the life of the agreement. Following the disposal of the ISD to Thomson, it
is expected that the Company's future capital expenditure requirements will
greatly reduce.
         In June 1999, the Company acquired the remaining 48% minority
shareholding in its Japanese subsidiary, KMK DigiTex Company Limited, for
(pound)0.4 million. This allowed for the subsequent transfer of the ISD content
distribution rights in the Japanese territory to Fujitsu, which became effective
in January 2000.
         On 2 February 1999, the Company announced the disposal of the CARL
library systems and the UnCover document delivery businesses for gross proceeds
of $2.25 ((pound)1.4) million. Both of these businesses were acquired as part of
the acquisition of KRII and were not core to the Dialog product offering. The
disposal proceeds consisted of an upfront cash payment of $1 million together
with an interest bearing loan note of $1.25 million due in January 2001, $0.25
million of which was paid in advance during the year ended 31 December 1999. The
balance owing on the loan note has been transferred to Thomson along with the
disposal of the ISD. The Company incurred expenses of $0.5 ((pound)0.3) million
in connection with the sale of these non-core businesses.
         The Company had cash at bank and in hand on 31 December 1999 of
(pound)10.5 million compared to (pound)4.5 million on 31 December 1998. The
Company had a revolving bank facility of $25.0 ((pound)15.5) million available,
$21.5 million ((pound)13.2) million of which was drawn at 31 December 1999. In
addition, during May 1999 the Company announced that it had secured an
additional facility from The Chase Manhattan Bank to enable the release of some
funds previously earmarked for debt repayments to be invested in the operating
businesses. The facility was repayable in October 2002 and carried interest at a
rate of 3.25 percentage points above US Dollar LIBOR through to 1 October 1999
and 4.25 percentage points over US Dollar LIBOR thereafter.
         In connection with this additional facility, the Company agreed to
issue Chase warrants to purchase an initial 1.5 million Ordinary shares
exercisable between 17 May 1999 and 11 October 2002, together with additional
warrants to purchase a further 1.5 million Ordinary shares between 1 August and
1 November 1999 since the term facility was still outstanding on these dates,
such warrants to be exercisable up to 14 May 2004. The warrants were originally
exercisable at a price of 120.5 pence per share but were re-priced in November
at an exercise price of 90.6 pence.
         In addition, in November 1999, the Company requested, and was granted,
a relaxation of the banking covenants from the senior lenders in order to
facilitate refinancing discussions. In consideration for this covenant
relaxation, the Company granted further warrants to the senior lenders to
purchase 6 million Ordinary shares at a price of 90.6 pence per share. These
warrants remain exercisable until November 2009.
         Total debt service costs in 1999 amounted to principal of (pound)22.0
million and interest of (pound)16.9 million compared to principal of (pound)9.6
million and interest of (pound)15.3 million in 1998. The principal repaid in
1999 included $10.3 ((pound)6.4) million in respect of the additional Chase
facility. Since 31 December 1999, the Company paid an amount of $6.0
((pound)3.7) million owing on the additional Chase facility. On 4 May 2000,
following the disposal of ISD, the Company repaid all of its remaining
outstanding indebtedness of $275.0 ((pound)171.9) million, including accrued
interest of $9.7 ((pound)6.0) million.

Investments
Investments include strategic investments in non-quoted companies including:
Frost & Sullivan ((pound)5.0 million), a leading market research company;
Teltech Resources ((pound)3.1 million), a redistributor of Dialog content; and
Frost & Sullivan Electronic Distribution LLC, a joint venture with Frost &
Sullivan ((pound)1.5 million). During the year, the Board provided for the
Company's remaining investment in Fourth Network, Inc. (now renamed eHotel) of
(pound)2.3 million.
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The Company's investments in Frost & Sullivan and Frost & Sullivan Electronic
Distribution LLC were transferred to Thomson along with the disposal of the ISD.
         On 7 March 2000, Teltech announced its intention to merge with Sopheon
plc, valuing the Company's investment in Teltech at approximately $7.5 million
((pound)4.3 million). Consummation of the merger is subject to various
conditions that include registering the Sopheon shares and approval of the
transaction by Teltech shareholders at a special shareholders' meeting.
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Board of Directors and Company Secretary

Allen Thomas
Non-Executive Chairman, Age 60
Allen Thomas joined the Board as a Non-Executive Director in September 1997. A
qualified solicitor, Allen is Chairman of Ockham Holdings plc, a Director of
Penna Holdings plc and a Non-Executive Director of Eidos plc. From 1972 to 1992
he was a partner in Paul, Weiss, Rifkind, Wharton & Garrison, a leading New York
based law firm, where he was the founding managing partner of the Hong Kong
office and acted as General Counsel to Municipal Assistance Corporation in the
refinancing of New York City. Additionally, he was a Non-Executive Director of
The Mitsubishi Bank Trust Company of New York.

Daniel Wagner
Chief Executive, Age 36
Daniel Wagner founded the Company in 1985, and has been the driving force behind
its growth and development, including listings on both the London Stock Exchange
and the NASDAQ. Throughout his career, he has engineered numerous acquisitions,
and has been responsible for forging a wide array of strategic alliances. In
addition, he has driven the Company's move into the Internet technology and
eCommerce markets, and led the formation of the Company's incubator division. As
one of the key individuals behind the development of the online sector, Daniel
has won various awards for entrepreneurial achievement and is in frequent demand
for high-level speaking engagements both in the UK and overseas.

David Mattey
Chief Financial Officer, Age 37
David Mattey joined the Company as Financial Controller in 1991 and was
appointed Finance Director in December 1992. David was key to the Company's
flotation on both the LSE and NASDAQ, and indeed has been credited as being the
youngest Finance Director to bring a company to market on both sides of the
Atlantic. In the past year, David led negotiations with the Company's lending
banks and bondholders to eliminate the Company's debt, and has been responsible
for restructuring the overall capital and financial structure of Bright Station
plc. Additionally, he is a Non-Executive Director of Easynet Group plc, a
leading European Internet service provider. David is a qualified Chartered
Accountant and was previously a tax consultant with the accountancy firm BDO
Stoy Hayward.

Ian Barton
Non-Executive Director, Age 54
Ian Barton joined the Board as a Non-Executive Director in 1986. During his
career, he has held a number of executive management and other senior positions
in information, technology and investment businesses. Most recently, he was
Managing Director of Octagon Investment Management. Prior to this, he held
senior posts in organisations including the Post Office Telecommunications
Headquarters' Long Range Intelligence Division, and CADCentre Ltd. Ian currently
holds Non-Executive Directorships with the high-technology companies Robot (UK)
Ltd, Pelco (UK) Ltd and Distributed Information Processing Ltd, and with Central
Europe Trust Company Ltd, a consultancy and fund management company specialising
in Central and Eastern Europe.

Marmaduke Hussey
Non-Executive Director, Age 76
Lord Hussey of North Bradley joined the Board as a Non-Executive Director in May
1996. His distinguished media career began in 1949 with Associated Newspapers,
where he became a Director in 1964. In 1967 he was appointed Managing Director
of Harmsworth Publications, and joined the Thomson Organisation as Chief
Executive of Times Newspapers in 1971. Lord Hussey was a Director of Times
Newspapers Ltd and Colonial Mutual Ltd from 1982 to 1986 and served as the
Chairman of the Board of Governors of the BBC from 1986 to March 1996. He was a
Director of William Collins Limited from 1985 to 1989 and Chairman of the Royal
Marsden Hospital from 1985 to 1998. He is Chairman of Ruffer Investment
Management and Cadweb Ltd, and sits on the Council of the King's Fund. Lord
Hussey is retiring from the Board and has determined not to stand for
re-election at this year's AGM.

Patrick Sommers
Non-Executive Director, Age 53
Patrick Sommers joined the Company as Chief Operating Officer in October 1998,
and was a key figure in the sale of the ISD to The Thomson Corporation. Upon
closure of the deal, Patrick resigned his executive responsibilities with the
Company to become President of the Dialog business, with Thomson. He remains on
the Board as a Non-Executive Director. Prior to joining the Company, Patrick was
Chairman and Chief Executive of Medicus Systems Corporation, a NASDAQ-listed
technology company. Between 1986 and 1995, he was President of three companies:
Ceridian Corporation (formerly known as Control Data), GTE Industry Services (an
outsourcing company) and D&B Information Resources Inc. Patrick previously held
various positions in the international division and corporate centre of Dun &
Bradstreet.

Richard Swank
Non-Executive Director, Age 69
Richard Swank joined the Company in November 1997 as an advisor on integration
strategy following the purchase of Knight-Ridder Information Inc. He acted as
Non-Executive Chairman of the North American businesses, until being appointed
as a Non-Executive Director of the Company in March 1999. From April 1989 to
December 1994, Richard was Chairman and Chief Executive Officer of Advanstar
Communications Inc. where he had responsibility for a successful financial
restructuring and implementation of a revised corporate strategy. Prior to
joining Advanstar, Richard was Executive Vice President of Dun & Bradstreet
Corporation and President of its subsidiary, the Rueben H. Donnelly Corporation.

Jonathan Ball
Company Secretary, Age 42
Jonathan Ball joined the Company in 1994 and was appointed Company Secretary in
1996. He has been closely involved in the Company's NASDAQ placing and in the
Company's acquisition, merger and divestiture activities over the past six
years. In his current position as both Secretary to the Board and Director of
Human Resources, Jonathan is responsible for a broad range of administrative
matters within the Group. Prior to joining the Company, he held various
international management posts within the hospitality industry. Jonathan is a
Fellow of the Institute of Chartered Secretaries and Administrators.
<PAGE>

Annual Report 1999

www.brightstation.com
Technology born for business

19

Corporate Governance and Internal Financial Control

The Board's policy is to manage the affairs of the Company in accordance with
the Principles of Good Governance and Code of Best Practice as derived from the
Final Report of the Committee on Corporate Governance ("the Combined Code"). The
ways in which the Company applies those principles is contained in the relevant
sections of this Report. The Company complied during the year with all the
provisions of section 1 of the Combined Code with the following exceptions: (i)
Following the appointment of Allen Thomas as Chairman in May 1999, the Company
does not currently have a nominated Senior Non-Executive Director. (ii) Prior to
the sale of the ISD, Patrick Sommers was employed on a two-year rolling contract
as an Executive Director. On completion of the sale, Patrick Sommers became a
Non-Executive Director of the Company and no longer is subject to a service
agreement.

Compliance with the Combined Code

The Board
The Board normally meets 12 times a year to make and review major business
decisions and monitor current trading against approved budgets. Matters
specifically reserved for the Board are set out in a formal schedule. Once a
year the Board meets in conference to consider long-term strategy and industrial
developments affecting the Company.
         There is an agreed procedure for Directors to take independent
professional advice, if necessary, at the Company's expense. They also have
access to the advice and services of the Company Secretary, whose appointment is
in accordance with the Combined Code.

Chairman and Chief Executive
The roles of Chairman and Chief Executive are separate. The Chairman is
primarily responsible for the working of the Board, for the balance of its
membership (subject to Board and shareholders' approval), and for ensuring that
all Directors are enabled to play their full part in its activities. The Chief
Executive's task is to manage the business and to implement the policies and
strategies adopted by the Board.
         Following the retirement of Michael Mander as Chairman of the Company
in May 1999, Allen Thomas, previously Deputy Chairman and senior Non-Executive
Director, was appointed as Chairman.
         The Board considered the issue of nominating a new senior Non-Executive
Director and determined that it was an inappropriate time to make such an
appointment. The Board will reconsider the matter in the near future.

Board balance
There are two Executive Directors and five Non-Executive Directors on the Board.
Patrick Sommers was an Executive Director of the Company until completion of the
sale of the ISD to Thomson whereupon he became a Non-Executive Director. The
Non-Executive Directors are independent of management and free from any business
or other relationship with the Company, other than owning shares or as disclosed
in note 7. Their biographies are set out on page 18.

Supply of information
The Board is provided with comprehensive reports on the Company's affairs in
order that informed decisions can be reached in a timely manner. Periodical
reports are supplemented with more detailed information on all important issues
and regular contact is maintained with the Non-Executive Directors between Board
meetings.

Appointments to the Board
There is a Nomination Committee consisting of Allen Thomas, Ian Barton,
Marmaduke Hussey, Patrick Sommers and Richard Swank which is chaired by Allen
Thomas. The Committee is responsible for overseeing the selection process for
Executive and Non-Executive Directors and for making recommendations to the
Board on all new appointments.

Re-election
Under the Company's articles of association, one third of the Directors are
required to stand for re-election at each Annual General Meeting. All Directors
are subject to election by shareholders at the earliest opportunity following
their appointment to the Board. Biographical details of all Directors, including
those who present themselves for election or re-election at this year's Annual
General Meeting, are set out on page 18.

Directors' remuneration
The remuneration policy for the executive Directors is devised and monitored by
the Remuneration Committee comprising of Allen Thomas, Ian Barton, Marmaduke
Hussey and Richard Swank and chaired by Allen Thomas. The Committee's report is
set out on pages 20-21.

Relations with shareholders and AGM
The Company maintains a close relationship with its principal investors and
encourages all shareholders to participate in the Annual General Meeting,
whether in person or by proxy.

Accountability and audit
The responsibilities of the Directors and auditors are set out on pages 24 and
25.

Going concern
The Directors consider that the Company and the Group have adequate resources to
continue in operational existence for the foreseeable future and that it is
therefore appropriate to adopt the going concern basis in preparing the
financial statements. In arriving at this decision, the Directors have reviewed
the Company's budget for 2000 and plan for 2001. This review included
consideration of the cash flow implications of these plans, including proposed
expenditure on tangible and intangible fixed assets. These cash flow
implications were then compared with the Company's cash resources and existing
bank facilities.

Internal control
The Board is committed to identifying all of the Group's significant risk areas
and enhancing its internal systems and procedures to ensure that risk is
identified, managed and regularly reported. Following guidance for directors
published by the Turnbull Committee, the Board acknowledges its need to develop
further a more formal and periodic reporting function
<PAGE>

Annual Report 1999
Corporate Governance
and Internal Financial Control

www.brightstation.com
Technology born for business

20

with which to assess and manage the Group's risks. This will enable the Group to
ensure that adequate resources are targeted at controlling the main areas of
risk to which the Group is exposed.
         In view of the significant change that the Group has recently
undergone, the Directors will be conducting a detailed review during the
remainder of 2000. The Board is committed to ensuring that by the end of 2000
the Turnbull recommendations with regard to risk management will be fully
implemented. In the meantime, in accordance with current guidelines, the Board
continues to report only internal financial controls.

Internal Financial Control
The Directors have overall responsibility for the Group's system of internal
financial control, which aims to safeguard Group assets, ensure that proper
accounting records are maintained and ensure that the financial information used
within the business and for publication is reliable. Although no system of
internal control can provide absolute assurance against material misstatement or
loss, the Directors have reviewed the effectiveness of the Group's internal
financial control and are satisfied that they provide reasonable assurance that
problems are identified on a timely basis and dealt with appropriately.
         The Company does not have an internal audit function at present,
although the Board will keep this matter under review.
         Key features of the Group's system of internal financial control
include:
- There are clear responsibilities on the part of the financial management for
the maintenance of good financial controls and the production of accurate and
timely financial management information.
- A comprehensive budgeting system including detailed reviews at all levels of
the Group's operations and formal reviews and approvals of the annual budget by
the Directors.
- The preparation of monthly comparisons of actual results against budget which
are subject to review by the Board.
- A framework of delegated authorities and powers exist such that transactions
of significant size or type are undertaken only after Board review, and that
other significant transactions require the authority of two of the executive
Directors.
- With respect to treasury procedures, the Company's policy is to place its cash
and time deposits with lending banks which are rated AA - or higher in order to
limit the amount of credit exposure.

Audit Committee and external auditors
The Audit Committee is formally constituted and consists of Ian Barton,
Marmaduke Hussey, Allen Thomas and Patrick Sommers, being chaired by Ian Barton.
The Audit Committee meets with the Chief Financial Officer in order to review
the effectiveness of the system of internal financial control, and discusses
with the auditors the control matters identified during the course of their
audit work. It also reviews the annual accounts and the interim and preliminary
announcements prior to submission to the Board, compliance with accounting
standards and the scope and extent of the external audit programme. The Chairman
of the Audit Committee reports to the Board on matters discussed at the Audit
Committee meeting. The Audit Committee is responsible for selecting the firm of
accountants to be recommended to shareholders for appointment as independent
auditors each year, and reviewing the overall financial relationship between the
Company and its auditors.
         The report from the auditors is set out on page 25.

Remuneration Committee Report
The members of the Remuneration Committee are:
Allen Thomas (Chairman of the Committee)
Ian Barton
Marmaduke Hussey
Richard Swank

Details of each Director's remuneration package, together with their share
options and interests in Ordinary shares of the Company, are set out in note 7
to the Financial Statements.

Policy statement
The Remuneration Committee (the "Committee") seeks to provide remuneration
packages in form and amount that will attract, retain, motivate and reward
executive Directors of the quality required to manage the business of the Group.
The Committee seeks to avoid paying more than the market rate for this purpose.
In establishing the level of remuneration for each Director, the Committee has
careful regard to the packages offered by comparable companies and has access to
external remuneration consultants which enables wide-ranging comparisons to be
made.

Salaries and performance-related remuneration
The salaries of the executive Directors are reviewed annually. As part of the
review process, the Committee considers individual performance and experience,
the size and nature of the role, the Company's performance and salaries offered
for similar positions elsewhere. Wherever possible, the Committee seeks to align
the interests of executives with those of shareholders through
performance-related remuneration. Bonuses are based on successful performance
and are only paid on achievement of carefully considered targets. All bonuses
are capped. Bonus payments and any gains under share option schemes are not
pensionable.

Benefits
Executive Directors are eligible for a range of taxable benefits which include
provision of a company car or car allowance (taken in the form of additional
salary) and payment of related operating expenses including fuel for business
use. Additional benefits include contributory pension arrangements, membership
of private medical insurance schemes, reimbursement, up to specified limits, of
the annual subscription to an appropriate professional body and of
business-related home telephone charges.

Notice periods
Each of the current Executive Directors is employed on rolling contracts with a
notice period of one year.
         The Remuneration Committee considers that notice periods of one year
are reasonable and proper and in the interests of the Company and its Executive
Directors, having regard to prevailing domestic market conditions and current
practice amongst public companies.
<PAGE>

Annual Report 1999
Corporate Governance and
Internal Financial Control

www.brightstation.com
Technology born for business

21

Change of control provisions
The Executive Directors' service agreements contain certain provisions which
become effective in the event that any person or persons acting in concert
acquires or acquire a Controlling Interest (as defined within Part 1 of Schedule
13 of the Companies Act 1985) in the Company. These provisions include the
payment of salary equivalent to the contractual notice period as well as payment
in lieu of a bonus of 75% of salary in the event of termination of employment
within 12 months following a change of control of the Company.

Share schemes
The Company operates a number of share related schemes for employees, details of
which are set out on pages 52-58. In awarding share options to executive
Directors, the Remuneration Committee has regard to guidelines published by
investor protection committees, the provisions of the Combined Code and the
individual performance of participants, as well as the particular circumstances
of the Company. Grants under the executive schemes are generally made on a
bi-annual basis at the prevailing market share price and are subject to a
vesting period of three years. Grants under the US stock option plan are subject
to incremental vesting after an initial one year period in order to reflect
current US market practice.
         Following the recent reorganisation of the Company, the Committee
believes that it is an appropriate time to establish certain additional equity
incentive arrangements that will strengthen the union of interest between
shareholders and key executives. Details of the proposals, which the Committee
consider to be in the best interests of the Company and its shareholders, are
set out on pages 80-84.

Performance conditions
During the year, share options were granted to the executive Directors at an
exercise price of (pound)4.00 per Ordinary share, a premium of 340% above the
market price of the Company's shares prevailing at the time.

Remuneration policy for Non-Executive Directors
The remuneration of Non-Executive Directors consists of fees for their services
in connection with Board and Board Committee meetings. Fee levels are determined
by the Executive Directors with regard to remuneration surveys and levels
offered by comparable companies and, in the case of the Chairman's fees, in
consultation with the other Non-Executive Directors.
         The Non-Executive Directors do not have service contracts, nor do they
participate in Group bonus schemes.
<PAGE>

Annual Report 1999

www.brightstation.com
Technology born for business

22

Report of the Directors

The Directors present their report together with the audited financial
statements for the year ended 31 December 1999.

Principal activity
The principal activity of the Company and its subsidiaries is the provision of
Internet-based information, technology and eCommerce solutions to the corporate
market.

Review of the business
A review of the business is set out in the Operating and Financial Review.

Subsequent events
As detailed in note 31 to the financial statements, on 23 March 2000 the Company
announced the restructuring of the Group through the proposed sale of the ISD to
The Thomson Corporation for $275 million in cash. In connection with this
transaction, the Company launched a cash tender offer and consent solicitation
on 24 March 2000 to the holders of its $180 million 11% Senior Subordinated
Notes which was accepted by the bondholders on 20 April 2000. The proposals were
approved by the Company shareholders at an Extraordinary General Meeting held on
27 April 2000, and the transfer was completed on 4 May 2000.
         On 5 May 2000 the Company changed its name from The Dialog Corporation
plc to Bright Station plc.

Results and dividends
The profit and loss account set out on page 26 shows the results for the year.
The Directors do not recommend the payment of a dividend (1998: (pound)nil). The
retained deficit of (pound)5.4 million has been transferred to reserves.

Fixed assets
The changes in fixed assets are shown in notes 10-13 to the financial
statements.

Share capital
Movementsin the share capital and share premium account are shown in notes 18
and 19 to the financial statements.
         Shares to be issued are detailed in note 20 to the financial
statements.

Directors and their interests
The Directors who served during the year were as follows:
--------------------------------------------------------------------------------
                                                                       Position
Name             Age                               Position          held since
--------------------------------------------------------------------------------
I Barton          54                               Director                1986
G Burrows         49          Chief Technology Officer (US)                1998
                                 (resigned 2 February 1999)
M Hussey          76                               Director                1996
S Maller          41     Chief Technology Officer (EMEA-AP)*               1996
M Mander          64        Director (resigned 1 July 1999)                1987
D Mattey          37                Chief Financial Officer                1992
J Molle           35               President - The Amercias*               1997
C Morton          36                    President - EMEA-AP*               1997
D Smith           54               Executive Vice President                1996
                                 (resigned 2 February 1999)
P Sommers         53                Chief Operating Officer                1998
                                    (Non-Executive Director
                                           from 4 May 2000)
R Swank           69                               Director
                                  (appointed 15 March 1999)
A Thomas          60                               Chairman                1997

D Wagner          36                Chief Executive Officer                1985
--------------------------------------------------------------------------------
*        resigned and transferred with the ISD on 4 May 2000

The Directors' interests in the Ordinary share capital and options over shares
of the Company are disclosed in note 7 to the financial statements. The
interests of Directors in contracts with the Company are also set out in note 7
to the financial statements.
         The Company purchased directors' and officers' liability insurance for
the year ended 31 December 1999 which has been renewed for the current financial
year.
         At each Annual General Meeting one third of the directors shall retire
from office by rotation. A retiring director shall be eligible for re-election.
         The biographies of the Directors are set out on page 18.

Substantial shareholdings
As at 30 June 2000, notification had been received of the following interests,
excluding the interests of Directors of the Company as at 31 December 1999 (as
discussed in note 7 to the financial statements), exceeding 3% of the Company's
Ordinary share capital:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------
                                                 Ordinary          % of issued
                                                shares of     share capital at
                                                  1p each        30 June 2000*
------------------------------------------------------------------------------
<S>                                             <C>           <C>
Prudential Corporation                          9,585,498                 5.55
Thomson Finance SA                              9,297,290                 5.39
Jiyu Holdings Limited                           7,038,123                 4.08
------------------------------------------------------------------------------
</TABLE>

* Based upon the total issued share capital of 172,598,331 at 30 June 2000. The
movement in the total issued share capital from 154,943,398 at 31 December 1999
to 172,598,331 at 30 June 2000 resulted from the issue of shares to Thomson and
Jiyu Holdings in conjunction with the transfer of the ISD to Thomson, the
allotment of 428,796 Ordinary shares as deferred consideration for the
acquisition of Write Works, the issue of 285,444 Ordinary shares to P Sommers in
connection with a bonus arrangement on the transfer of the ISD to Thomson
along with the allotment of 68,844 Ordinary shares into the Company's 401(k)
Investment Savings Plan for US employees and the exercise of options over
<PAGE>

Annual Report 1999
Report of the Directors

www.brightstation.com
Technology born for business

23

536,436 Ordinary shares under the terms of the Company's share option schemes.

Employee communication and involvement
It is a Group policy to communicate regularly and frequently with all employees
on matters of concern to enable them to take a wider interest in the affairs of
their employing company and the Group. This is done in a variety of ways
including bulletins and briefing sessions.
         A significant number of employees are either shareholders in the
Company or hold options through the share option schemes. This provides them
with the opportunity to participate directly in the success of the business.

Employment policies
The Group is committed to the principle of equal opportunity in employment,
regardless of a person's race, creed, colour, nationality, sex, marital status,
or disability. Employment policies are fair, equitable, and consistent with the
skills and abilities of our employees and the needs of our business. These
policies ensure that everyone is accorded equal opportunity for recruitment,
training and promotion. Where an employee becomes disabled whilst employed by a
Group company, every effort is made to allow that person to continue in
employment.

Creditor payment terms
It is the Group's normal procedure to agree to terms of transactions, including
payment terms, with suppliers in advance. Payment terms vary, reflecting local
practice throughout the world. It is the Group's policy that payment is made on
time, provided that suppliers perform in accordance with the agreed terms and
subsequent to available liquid resources. As at 31 December 1999, trade
creditors of the Company represented 55 days equivalent of aggregate amounts
invoiced by suppliers during the year.

Charitable and political donations
During the year ended 31 December 1999, the Group made no corporate donations
for charitable purposes (1998: (pound)28,915). No political donations were made
during the year (1998:(pound)nil).

Year 2000
The Company completed, by early December 1999, a group wide multi-faceted
programme to address Year 2000 compliance issues with the objective of ensuring
that there was no adverse impact on business operations or systems. The total
cost of the programme was approximately (pound)3 million (1998 expense: (pound)1
million; 1999 expense: (pound)2 million).
         The Company and the Group did not experience any Year 2000 related
problems. The Directors do not consider that there are any significant matters
in respect of the Year 2000 issue that have had an operational or financial
impact on the Company and the Group. This success can be attributed to the
significant risk analysis performed by Bright Station plc which determined the
impact of the issue on all activities. Prioritised action plans were developed
and designed to address the key risks, and priority was given to those systems
which could cause a significant financial or legal impact on the Group's
business if they were to fail.
         The Company has not been adversely affected by the inability of third
parties to successfully manage their Year 2000 problem.
         Given the complexity of the problem, it is still not possible for any
organisation to guarantee that no Year 2000 problems will occur, because at
least some level of failure may still occur. However, the Directors believe that
the Company has achieved and maintained an acceptable state of readiness and has
also provided resources to deal promptly with significant subsequent failures or
issues that still might arise.

Auditors
PricewaterhouseCoopers have expressed their willingness to continue in office
and a resolution to re-appoint them will be proposed at the Annual General
Meeting.

Annual General Meeting
Notice of the Annual General Meeting to be held at 10.0 a.m.on Tuesday 5
September 2000 at The Institute of Directors, 116 Pall Mall, London SW1Y 5ED is
set out on pages 85-86.
         Resolutions 1-3 to be proposed at the meeting deal with ordinary
business. Resolutions 4-7 deal with special business as explained below and in
further detail in the notes to the Notice of the Annual General Meeting.
         Resolution 4 authorises the establishment of subsidiary share option
schemes (the "Schemes") in respect of four designated subsidiaries of Bright
Station - WebTop, OfficeShopper, Smartlogik and Sparza - for the incentivisation
and benefit of key management and personnel within these subsidiaries. The
strategy of the Board is to develop these businesses as separate entities within
the Group with the expectation that they will eventually be floated or sold. The
Board considers that an important factor in ensuring the success of this
strategy is to tie the fortunes of the management teams to the success of the
ventures for which they have specific responsibility by granting options over
shares in the relevant business. Further details of the proposed Schemes are on
pages 80-84.

         Resolution 5 seeks authority for the Board to establish a new
discretionary share-based incentive arrangement which the Board believes will
meet its objective of incentivising senior employees to generate a material
increase in the current value of a shareholder's investment. The main features
of the LTIP are summarised on pages 80-84.
         Resolution 6 seeks authority for the establishment of an Employee
Benefit Trust for the subscription or purchase of Bright Station shares for the
equity incentive schemes operated by the Company. The main features of the Trust
are summarised on pages 80-84.
         Resolution 7 seeks authority for the Board to amend the limits
contained within the rules of the existing share option schemes in order to
ensure continuity amongst all of the Company's equity incentive plans. To this
end, it is proposed that awards made to employees who no longer work for the
Company as a result of the sale of the ISD to The Thomson Corporation shall be
disregarded for the purposes of calculating the maximum scheme limits. Details
of the proposed amendments are set out on pages 80-84.

By order of the Board

/s/ J. BALL
-------------

J Ball
Company Secretary, 14 July 2000
<PAGE>

Annual Report 1999

www.brightstation.com
Technology born for business

24

Statement of Directors' Responsibilities

Company law requires the Directors to prepare financial statements for each
financial year which give a true and fair view of the state of affairs of the
Company and of the Group for that period. In preparing the financial statements,
the Directors are required to:

- select suitable accounting policies and then apply them consistently;
- make judgements and estimates that are reasonable and prudent;
- state whether applicable accounting standards have been followed, subject to
any material departures disclosed and explained in the financial statements.

The Directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
Company and to enable them to ensure that the financial statements comply with
the Companies Act 1985. They are also responsible for safeguarding the assets of
the Company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
<PAGE>

Annual Report 1999

www.brightstation.com
Technology born for business

25

Auditors' Report to the Shareholders of Bright Station plc (formerly The Dialog
Corporation plc)

We have audited the financial statements on pages 26-70 which have been prepared
under the historical cost convention.

Respective responsibilities of Directors and Auditors
The Directors are responsible for preparing the Annual Report. As described on
page 24, this includes responsibility for preparing the financial statements, in
accordance with applicable United Kingdom accounting standards. Our
responsibilities, as independent auditors, are established in the United Kingdom
by statute, the Auditing Practices Board, the Listing Rules of the Financial
Services Authority and our profession's ethical guidance.
         We report to you our opinion as to whether the financial statements
give a true and fair view and are properly prepared in accordance with the
United Kingdom Companies Act. We also report to you if, in our opinion, the
Directors' report is not consistent with the financial statements, if the
Company has not kept proper accounting records, if we have not received all the
information and explanations we require for our audit, or if information
specified by law or the Listing Rules regarding Directors' remuneration and
transactions is not disclosed.
         We read the other information contained in the Annual Report and
consider the implications for our report if we become aware of any apparent
misstatements or material inconsistencies with the financial statements.
         We review whether the statement on pages 19-21 reflects the Company's
compliance with those provisions of the Combined Code specified for our review
by the Financial Services Authority, and we report if it does not. We are not
required to consider whether the Board's statements on internal control cover
all risks and controls, or to form an opinion on the effectiveness of the
Company's or the Group's corporate governance procedures or its risk and control
procedures.

Basis of audit opinion
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board of the United Kingdom, which are substantially similar
to generally accepted auditing standards in the United States. An audit includes
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the financial statements. It also includes an assessment of the
significant estimates and judgements made by the Directors in the preparation of
the financial statements, and of whether the accounting policies are appropriate
to the Company's circumstances, consistently applied and adequately disclosed.
         We planned and performed our audit so as to obtain all the information
and explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.

United Kingdom opinion
In our opinion the financial statements give a true and fair view of the state
of affairs of the Company and the Group at 31 December 1999 and of the loss and
cash flows of the Group for the year then ended and have been properly prepared
in accordance with the Companies Act 1985.

United States opinion
In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Group at 31 December 1999, 1998 and 1997
and the results of its operations and cash flows for each of the three years in
the period ended 31 December 1999, all expressed in Pounds Sterling in
conformity with accounting principles generally accepted in the United Kingdom.
         Accounting principles generally accepted in the United Kingdom vary in
certain significant respects from accounting principles generally accepted in
the United States. The application of the latter would have affected the
determination of consolidated net income for each of the three years in the
period ended 31 December 1999 and consolidated shareholders' equity, all
expressed in Pounds Sterling at 31 December 1999 and 1998 as shown in the
summary of differences between UK and US generally accepted accounting
principles set out on pages 64-68.

PricewaterhouseCoopers
Chartered Accountants and Registered Auditors
1 Embankment Place
London
WC2N 6NN
14 July 2000
<PAGE>

Annual Report 1999

www.brightstation.com
Technology born for business

26

Consolidated Profit and Loss Account for the year ended 31 December 1999

<TABLE>
<CAPTION>
====================================================================================================================================
                                                            Restructuring                               Restructuring
                                                                costs and                                   costs and
                                                     Total          other          Total          Total         other         Total
                                                    before    exceptional          after         before   exceptional         after
                                             restructuring          items  restructuring  restructuring         items restructuring
                                      Total          costs       (note 5)          costs          costs      (note 5)         costs
                                       1999           1998           1998           1998           1997          1997          1997
                           Notes (pound) 000   (pound) 000    (pound) 000    (pound) 000    (pound) 000   (pound) 000   (pound) 000
------------------------------------------------------------------------------------------------------------------------------------
<S>                        <C>   <C>         <C>            <C>            <C>            <C>           <C>           <C>
Turnover                       2    174,452        170,762              -        170,762         46,082             -        46,082
Cost of sales                       (68,174)       (71,618)             -        (71,618)       (17,166)            -       (17,166)
------------------------------------------------------------------------------------------------------------------------------------
Gross profit                        106,278         99,144              -         99,144         28,916             -        28,916
Distribution costs                  (22,118)       (21,605)            45        (21,560)       (15,700)       (1,313)      (17,013)
Administrative expenses             (54,677)       (44,170)        (2,628)       (46,798)       (13,415)       (9,247)      (22,662)
Amortisation/write-off of
development costs          10,11     (9,749)        (7,760)             -         (7,760)        (3,558)       (7,990)      (11,548)
Amounts written
off investments                5     (4,619)             -         (2,300)        (2,300)             -             -             -
------------------------------------------------------------------------------------------------------------------------------------
Operating profit/(loss)      2,4     15,115         25,609         (4,883)        20,726         (3,757)      (18,550)      (22,307)
Exceptional item - provision
for closure of business        5       (911)             -              -              -              -             -             -
Exceptional item - gain on
sale of fixed
asset investments              5          -              -          2,069          2,069              -         4,035         4,035
Interest receivable                     305            205              -            205            338             -           338
Interest payable and
similar charges                6    (18,366)       (17,436)             -        (17,436)        (2,498)            -        (2,498)
------------------------------------------------------------------------------------------------------------------------------------
(Loss)/profit on ordinary
activities before taxation           (3,857)         8,378         (2,814)         5,564         (5,917)      (14,515)      (20,432)
Taxation on (loss)/profit
on ordinary activities         8     (1,478)          (769)             -           (769)          (323)            -          (323)
------------------------------------------------------------------------------------------------------------------------------------
(Loss)/profit on ordinary
activities after taxation            (5,335)         7,609         (2,814)         4,795         (6,240)      (14,515)      (20,755)
Minority equity interests     23        (50)          (356)             -           (356)            11             -            11
------------------------------------------------------------------------------------------------------------------------------------
Retained (deficit)/profit     21     (5,385)         7,253         (2,814)         4,439         (6,229)      (14,515)      (20,744)
====================================================================================================================================
(Loss)/earnings per
share (pence)                  9       (3.5)           4.8              -            2.9           (6.2)            -         (20.5)
Fully diluted (loss)/earnings
per share (pence)              9       (3.5)           4.8              -            2.9           (6.1)            -         (20.4)
====================================================================================================================================
</TABLE>

Consolidated Statement of Total Recognised Gains and Losses
================================================================================
                                          1999           1998            1997
                                      (pound) 000    (pound) 000     (pound) 000
--------------------------------------------------------------------------------
(Loss)/gain for the financial year        (5,385)         4,439         (20,744)
Consolidated translation differences
on foreign currency net investments       (5,491)           680          (3,099)
--------------------------------------------------------------------------------
Total recognised gains and losses
for the financial year                   (10,876)         5,119         (23,843)
================================================================================
The profit and loss accounts shown above have been prepared on a historical cost
basis.

The turnover and operating profit/(loss) all relate to continuing activities of
the Group as of 31 December 1999.

The notes on pages 30-70 form part of these financial statements.
<PAGE>

Annual Report 1999

www.brightstation.com
Technology born for business

27

Consolidated Balance Sheet as at 31 December 1999
=============================================================================
                                                              1999      1998
                                                  Notes (pound) 000  (pound) 000
-----------------------------------------------------------------------------
Fixed assets
Intangible assets                                    10     27,030    23,154
Goodwill                                             11      9,805     7,676
Tangible assets                                      12     14,338    17,870
Investments                                          13      9,635    12,354
-----------------------------------------------------------------------------
                                                            60,808    61,054
-----------------------------------------------------------------------------
Current assets
Stocks                                                          60       221
Debtors: amounts due within one year                 14     36,690    42,781
Assets held for resale                                           -       992
Cash and bank deposits                                      10,521     4,494
-----------------------------------------------------------------------------
                                                            47,271    48,488

Creditors (amounts falling due within one year)      15    (71,574)  (58,845)
-----------------------------------------------------------------------------
Net current liabilities                                    (24,303)  (10,357)

Total assets less current liabilities                       36,505    50,697

Creditors (amounts falling due after more than
  one year)                                          16   (137,370) (139,741)
Provisions for liabilities and charges               17     (1,430)   (4,697)
-----------------------------------------------------------------------------
Net liabilities                                           (102,295)  (93,741)
-----------------------------------------------------------------------------
Capital and reserves - equity
Called up share capital                              18      1,549     1,514
Share premium account                                19    154,949   152,128
Shares to be issued                                  20        967       967
Profit and loss account                              21   (260,303) (249,427)
-----------------------------------------------------------------------------
Equity shareholders' funds                           22   (102,838)  (94,818)

Minority equity interest                             23        543     1,077
-----------------------------------------------------------------------------
Total shareholders' funds                                 (102,295)  (93,741)
=============================================================================

The financial statements were approved by the Board of Directors on 14 July 2000
and signed on its behalf by:

/s/ D. WAGNER                         /s/ D. MATTEY
---------------------                 -------------------------
D Wagner                              D Mattey
Chief Executive                       Chief Financial Officer

The notes on pages 30-70 form part of these financial statements.
<PAGE>

Annual Report 1999

www.brightstation.com
Technology born for business

28

Company Balance Sheet as at 31 December 1999
<TABLE>
<CAPTION>
===========================================================================================
                                                                     1999           1998
                                                          Notes   (pound) 000     (pound) 000
-------------------------------------------------------------------------------------------
<S>                                                          <C>       <C>            <C>
Fixed assets
Intangible assets                                            10        4,899          4,650
Tangible assets                                              12        2,183          2,842
Investments                                                  13      186,522        284,836
-------------------------------------------------------------------------------------------
                                                                     193,604        292,328
-------------------------------------------------------------------------------------------
Current assets
Stocks                                                                    27             27
Debtors                                                      14       35,258         40,734
Cash at bank and in hand                                               1,634              -
-------------------------------------------------------------------------------------------
                                                                      36,919         40,761

Creditors (amounts falling due within one year)              15      (57,935)       (55,435)
-------------------------------------------------------------------------------------------
Net current liabilities                                              (21,016)       (14,674)
-------------------------------------------------------------------------------------------
Total assets less current liabilities                                270,659        277,654

Creditors (amounts falling due after more than one year)     16     (135,745)      (136,709)
-------------------------------------------------------------------------------------------
Net assets                                                            36,843        140,945
-------------------------------------------------------------------------------------------
Capital and reserves - equity
Called up share capital                                      18        1,549          1,514
Share premium account                                        19      154,949        152,128
Shares to be issued                                          20          967            967
Profit and loss account                                      21     (120,622)       (13,664)
-------------------------------------------------------------------------------------------
Total shareholders' funds                                    22       36,843        140,945
===========================================================================================
</TABLE>
The financial statements were approved by the Board of Directors on 14 July 2000
and signed on its behalf by:

/s/ D. WAGNER             /s/ D. MATTEY
------------------        ------------------------
D Wagner                  D Mattey
Chief Executive           Chief Financial Officer

The notes on pages 30-70 form part of these financial statements.
<PAGE>

Annual Report 1999

www.brightstation.com
Technology born for business

29

Consolidated Cash Flow Statement for the year ended 31 December 1999

<TABLE>
<CAPTION>
==========================================================================================================================
                                                                                   1999           1998           1997
                                                                        Notes  (pound) 000     (pound) 000    (pound) 000
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>    <C>             <C>            <C>
Net cash inflow from operating activities                                 25       33,583           34,151           3,175
--------------------------------------------------------------------------------------------------------------------------
Returns on investments and servicing of finance
Dividends paid to minority shareholders in subsidiary undertakings                      -                -             (41)
Interest received                                                                     303              205             353
Interest paid on bank loans and overdrafts                                        (16,945)         (15,251)           (585)
Interest paid on finance leases                                                      (106)             (46)           (119)
--------------------------------------------------------------------------------------------------------------------------
                                                                                  (16,748)         (15,092)           (392)
--------------------------------------------------------------------------------------------------------------------------
Taxation Paid                                                                        (911)            (349)           (158)
--------------------------------------------------------------------------------------------------------------------------
Capital expenditure
Payments to develop intangible assets                                             (12,178)         (11,762)         (2,747)
Payments to acquire tangible fixed assets                                          (4,536)          (7,223)         (1,987)
Receipts from sale of tangible fixed assets                                            78              211             178
--------------------------------------------------------------------------------------------------------------------------
                                                                                  (16,636)         (18,774)         (4,556)
--------------------------------------------------------------------------------------------------------------------------
Acquisitions and disposals
Purchase of subsidiary undertakings                                       11            -             (965)       (262,623)
Cash impact of revisions to fair values                                                 -           (2,284)              -
Payment to acquire minority interests in a subsidiary undertaking         11         (428)          (1,720)              -
Net cash acquired with subsidiary undertakings                                          -              (33)         11,907
Investment in joint venture                                                        (1,235)          (1,086)           (610)
Expenses in connection with purchase of subsidiary undertakings                         -             (471)         (3,857)
Proceeds from sale of assets held for resale/investments                              777            7,123               -
Payments made in connection with sale of technology                                     -                -            (562)
Expenses in connection with the sale of assets held for resale                       (303)               -               -
--------------------------------------------------------------------------------------------------------------------------
                                                                                   (1,189)             564        (255,745)
--------------------------------------------------------------------------------------------------------------------------
Cash (outflow)/inflow before the use of liquid resources and financing             (1,901)             500        (257,676)
--------------------------------------------------------------------------------------------------------------------------
Management of liquid resources
Cash withdrawn from deposit                                               26            -              620               -
Net receipts from sale of investments with original maturity date of
  less than one year                                                                    -                -           5,380
--------------------------------------------------------------------------------------------------------------------------
Financing
Net proceeds on issue of Ordinary share capital                                       142              458         111,302
Net proceeds on issue of Senior Credit Facility                                         -                -          52,836
Net proceeds on issue of Senior Subordinated Notes                                      -                -         102,844
Debt due within one year - Increase in borrowings                                  13,187                -               -
Debt due within one year - Increase in finance leases                               1,549                -               -
Debt due within one year - Repayment of loans                                     (22,004)          (9,551)              -
Debt due after one year - New secured loan                                         15,593                -               -
Debt due after one year - Increase in finance leases                                1,509                -               -
Expenses on issue of Ordinary share capital                                             -                -            (755)
Expenses on raising of Senior Credit Facility and Senior Subordinated
  Notes                                                                            (1,246)             (29)         (1,608)
Repayment of capital element of finance leases                                       (525)            (549)         (1,491)
--------------------------------------------------------------------------------------------------------------------------
                                                                                    8,205           (9,671)        263,128
--------------------------------------------------------------------------------------------------------------------------
Increase/(decrease) in cash                                                         6,304           (8,551)         10,832
--------------------------------------------------------------------------------------------------------------------------
Reconciliation of net cash flow to movement in net debt
Increase/(decrease) in cash in the period                                           6,304           (8,551)         10,832
Cash used to decrease lease financing                                                 525              549           1,491
Cash acquired from issue of debt (net of expenses)                                (27,533)              29        (154,072)
Cash used to repay loans                                                           22,004            9,551               -
Cash acquired from sale and leaseback                                              (3,058)               -               -
Decrease in liquid resources and cash deposits with original maturity
  dates of more than one year                                                           -             (620)         (5,380)
--------------------------------------------------------------------------------------------------------------------------
Change in net debt from cash flows                                                 (1,758)             958        (147,129)
Other non-cash changes                                                             (1,274)            (946)           (119)
New finance leases                                                                 (3,614)               -            (122)
Effect of foreign exchange rate changes                                            (5,242)           1,695          (4,422)
--------------------------------------------------------------------------------------------------------------------------
Movement in net (debt)/funds in period                                            (11,888)           1,707        (151,792)
Net (debt)/funds at beginning of period                                          (145,091)        (145,904)          5,888
--------------------------------------------------------------------------------------------------------------------------
Net debt at end of period                                                 27     (156,979)        (144,197)       (145,904)
==========================================================================================================================
</TABLE>

The notes on pages 30-70 form part of these financial statements.

                                       27
<PAGE>

Annual Report 1999

www.brightstation.com
Technology born for business

30

Notes to the Financial Statements

1  Accounting Policies
================================================================================
The financial statements of Bright Station plc (the "Company") have been
prepared under the historical cost convention and in accordance with accounting
standards applicable in the United Kingdom. There are significant differences
between generally accepted accounting principles (GAAP) in the United Kingdom
(UK) and the United States (US). A summary of these differences together with
the reconciliation of net profit/(loss) and shareholders' equity from UK GAAP to
US GAAP is provided in note 29 to these financial statements. Certain additional
disclosures have been made to aid US readers of the financial statements. The
following principal accounting policies have been applied:

Accounting estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Group accounts
The consolidated financial statements incorporate the financial statements of
the Company and its subsidiaries (the "Group"). All intercompany transactions
and balances have been eliminated. The accounts include the results of
subsidiaries acquired during the year from the relevant date of acquisition
other than those subsidiaries acquired with a view to resale.

Goodwill
Prior to 1 January 1998, goodwill arising as the difference between the cost of
acquisition of a subsidiary and the fair value of its net assets at the date of
acquisition was written off to reserves in the year of acquisition. Goodwill
arising on acquisitions since 1 January 1998 is capitalised and subsequently
written off over its estimated useful life, which currently ranges from 10-20
years. Where necessary, adjustments to provisional fair values of net assets
acquired are adjusted to goodwill in the first full year following the
acquisition.

Turnover and revenue recognition
Turnover represents database subscription sales, online and usage charges and
design and implementation fees at invoiced amounts, exclusive of value added tax
and other sales taxes. Subscription revenues are recognised when contractually
due and invoiced. The costs of fulfilling obligations under the terms of the
subscription contract are accrued at the time the income is recognised. Online
and usage charges are recognised as the service is provided.
         Most subscriptions are due and invoiced either annually or
semi-annually in advance and recognised in full at the commencement of the
subscription term. Some of the Group's US operations bill monthly under its
'modular pricing' scheme, whereby subscriptions for access to the Group's
service are raised on a monthly basis and are accounted for accordingly.
         Annual CD-ROM usage fees are deferred and amortised over the life of
the contract.
         Turnover also includes licence fees for technology sales and exclusive
distribution rights. Revenues on such items are recognised when the Company has
fulfilled all of its significant performance obligations.

Fixed assets
Fixed assets are stated at cost. Depreciation is provided to write off the cost,
less estimated residual value, of all tangible fixed assets over their expected
useful lives and is calculated at the following rates:
--------------------------------------------------------------------------------
Equipment, including computers            - 33% straight line
Motor vehicles                            - 25% straight line
Fixtures and fittings                     - 20% straight line
Leasehold improvements                    - shorter of remaining lease
                                            period and 20% straight line
Mainframe computers                       - 20% straight line
--------------------------------------------------------------------------------
Leasehold improvements relate to the cost of refurbishment of the Group's short
leasehold properties.

Stocks
Stocks, which comprise consumable items, are stated at the lower of cost and net
realisable value.

Foreign currency
Transactions denominated in foreign currencies are recorded at the exchange rate
prevailing at the date of the transaction. Transactions to be settled at a
contract rate are recorded at that rate. Any gains or losses from the
translation of transactions denominated in foreign currencies are included in
the results of the operation. Assets and liabilities denominated in foreign
currencies are translated at the exchange rate ruling at the year-end. Profit
and losses of overseas companies are translated at average rates of exchange for
the period. Exchange differences arising out of the translation of accounts of
foreign subsidiaries, net of associated borrowings, are taken to reserves.

Financial instruments
Changes in the value of forward foreign exchange contracts are recognised in the
results in the same period as changes in the values of the assets and
liabilities they are intended to hedge. Any interest receipts arising from the
interest rate cap would be matched to those arising from the underlying debt
position.
<PAGE>

Annual Report 1999
Notes to the Financial Statements

www.brightstation.com
Technology born for business

31

1  Accounting Policies continued
================================================================================
Intangible fixed assets
Intangible fixed assets comprise both system and product development costs.
         System development comprises costs associated with the Group's host
computer systems and databases, and includes software licence fees and
installation costs. These costs are amortised on a straight line basis over five
years in line with the depreciation policy for the computer hardware used to
host the Group's services.
         Product development consists of the pre-launch costs associated with
the development of new products. These include the costs of consultancy,
programmers' salaries and related overheads including depreciation and lease
interest on computer hardware wholly used for product development. These costs
are amortised on a straight line basis over three years commencing in the first
month of revenue generation from the developed product.
         Product development costs are reviewed regularly for impairment and
additional depreciation is charged, if necessary, to reduce the net amount
carried forward on a product by product basis to net revenues expected to be
generated from that product.

Indexing costs
The cost of indexing information on databases is deferred and amortised on a
straight line basis over two years.

Fixed asset investments
Investments in subsidiaries and other fixed asset investments are stated in the
balance sheet at cost. Provision is made in full for diminution in value if
considered permanent.

Deferred taxation
Provision is made for timing differences between the treatment of certain items
for taxation and accounting purposes, to the extent that it is probable that a
liability or asset will crystallise.

Leased assets
Where assets are financed by leasing agreements that give rights approximating
to ownership ('finance leases'), the assets are treated as if they had been
purchased outright. The amount capitalised is the present value of the minimum
lease payments payable over the term of the lease. The corresponding leasing
commitments are shown as amounts payable to the lessor. Depreciation on the
relevant assets is charged to the profit and loss account except for that
proportion relating to assets wholly used for product development.
         Lease payments are analysed between capital and interest using the
actuarial method. The interest is charged to the profit and loss account except
for that proportion relating to assets wholly used for product development. The
capital part reduces the amounts payable to the lessor.
         All other leases are treated as operating leases. Their annual rentals
are charged to the profit and loss account on a straight line basis over the
lease term except where the costs are capitalised as development costs.

Pension costs
For the year ended 31 December 1999, the Group operated defined contribution
pension schemes in the UK, US and Switzerland. The amount of contributions
payable to the pension schemes are charged to the profit and loss account as
incurred.

Finance costs
Borrowings are stated net of the associated costs of raising the finance. Such
finance costs are charged to the profit and loss account over the term of the
related borrowing, increasing the outstanding borrowing to the amount of the
debt at the maturity date.

Content provider agreements
Certain of the Group's information provider agreements contain provisions for
either fixed fees or minimum royalty payments irrespective of the usage revenues
generated by the Group. The Group recognises these fixed fees or minimum royalty
payments on a pro-rata basis in accordance with the terms of the contracts. The
Group periodically reviews the projected revenues related to these arrangements
and makes provision if fixed fees or minimum royalty commitments are not
expected to be recovered from the related revenues.

Cash
Cash is defined as cash in hand and deposits repayable on demand.

Warrants
Net proceeds from the issue of warrants are credited to equity upon issue. Where
warrants are issued in conjunction with debt, the net proceeds are allocated
between equity and debt based upon their respective fair values at the time of
issue.
<PAGE>

Annual Report 1999
Notes to the Financial Statements

www.brightstation.com
Technology born for business

32

2 Turnover and Segmental Analysis
================================================================================
On 2 February 1999, the Company announced the creation of three new operating
divisions: the Information Services Division which provides an indexed online
delivery system sourced principally in the United Kingdom and North America; the
Web Solutions Division which licenses the Group's search technologies for
corporate knowledge management solutions; and the eCommerce Division.
         1998 includes a full year's results of Knight-Ridder Information, Inc.
(KRII) as opposed to the previous year which only shows the results of KRII from
the date of acquisition, being 14 November 1997.

The composition of turnover is analysed as follows:
--------------------------------------------------------------------------
                                              1999        1998        1997
                                        (pound) 000  (pound) 000  (pound) 000
--------------------------------------------------------------------------
Information Services:
-        Usage sales                       132,631     136,992      28,040
-        Subscription sales                  8,891      10,561      14,092
-        CD-ROM sales                        7,465       8,737       1,134
-        Other sales(1)                     16,146       9,021         590
--------------------------------------------------------------------------
                                           165,133     165,311      43,856
Web Solutions(2)                             7,917       4,010         397
eCommerce                                    1,402          77           -
Other                                            -       1,364       1,829
--------------------------------------------------------------------------
                                           174,452     170,762      46,082
==========================================================================
(1) Includes(pound)12.6 million in respect of the sale of exclusive distribution
rights in 1999 (1998 and 1997:(pound)nil).
(2) Includes(pound)4 million in respect of technology sales in 1999 (1998 and
1997:(pound)nil).

The composition of operating profit/(loss) is analysed as follows:
--------------------------------------------------------------------------
                                              1999        1998        1997
                                        (pound) 000  (pound) 000  (pound) 000
--------------------------------------------------------------------------
Information Services                        13,639      21,422     (24,125)
Web Solutions                                2,692         953         (11)
eCommerce                                   (1,216)        (59)          -
Other                                            -         601       1,829
--------------------------------------------------------------------------
                                            15,115      22,917     (22,307)
==========================================================================

The 'Other' category relates to royalties earned from the provision of hotel
Internet access.

The composition of depreciation and amortisation is analysed as follows:
--------------------------------------------------------------------------
                                              1999        1998        1997
                                        (pound) 000  (pound) 000  (pound) 000
--------------------------------------------------------------------------
Information Services                        16,362      15,487       6,414
Web Solutions                                  489         208          21
eCommerce                                      380          27           -
Other                                            -           -           -
--------------------------------------------------------------------------
                                            17,231      15,722       6,435
==========================================================================

The composition of capital expenditure is analysed as follows:
--------------------------------------------------------------------------
                                              1999        1998        1997
                                        (pound) 000  (pound) 000  (pound) 000
--------------------------------------------------------------------------
Information Services                        16,370      17,597       4,656
Web Solutions                                   90       1,385          78
eCommerce                                      254           3           -
Other                                            -           -           -
--------------------------------------------------------------------------
                                            16,714      18,985       4,734
==========================================================================
<PAGE>

Annual Report 1999
Notes to the Financial Statements

www.brightstation.com
Technology born for business

33

2  Turnover and Segmental Analysis continued
==========================================================================
The composition of net liabilities is analysed as follows:
--------------------------------------------------------------------------
                                             1999         1998        1997
                                      (pound) 000  (pound) 000 (pound) 000
--------------------------------------------------------------------------
Information Services                        57,632      52,532      66,943
Web Solutions                                2,053       2,209         947
eCommerce                                     (301)        (23)          -
Other                                            -           -           -
--------------------------------------------------------------------------
                                            59,384      54,718      67,890
Unallocated net liabilities               (161,679)   (148,459)   (158,845)
--------------------------------------------------------------------------
                                          (102,295)    (93,741)    (90,955)
==========================================================================
Unallocated net liabilities comprise borrowings and cash deposits.

The composition of total assets is analysed as follows:
--------------------------------------------------------------------------
                                             1999         1998        1997
                                      (pound) 000  (pound) 000 (pound) 000
--------------------------------------------------------------------------
Information Services                       104,925     106,665     123,336
Web Solutions                                2,864       2,718       1,174
eCommerce                                      290         158           -
Other                                            -           -           -
--------------------------------------------------------------------------
                                           108,079     109,541     124,510
==========================================================================

The geographical composition of turnover by source is analysed as follows:
--------------------------------------------------------------------------
                                             1999         1998        1997
                                      (pound) 000  (pound) 000 (pound) 000
--------------------------------------------------------------------------
United Kingdom                              22,764      17,243      29,013
North America                              131,997     129,478      14,367
Continental Europe                          15,271      17,231       2,244
Rest of the world                            4,420       6,810         458
--------------------------------------------------------------------------
                                           174,452     170,762      46,082
==========================================================================

The geographical composition of turnover by destination is analysed as follows:
--------------------------------------------------------------------------
                                             1999         1998        1997
                                      (pound) 000  (pound) 000 (pound) 000
--------------------------------------------------------------------------
United Kingdom                              21,661      24,374      14,026
North America                               80,626      91,845      20,377
Continental Europe                          26,234      24.547       7,365
Rest of the world                           45,931      29,996       4,314
--------------------------------------------------------------------------
                                           174,452     170,762      46,082
==========================================================================

The geographical composition of operating profit/(loss) is analysed as follows:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
                                                   Restructuring                                   Restructuring
                                            Total      costs and            Total             Total    costs and           Total
                                           before          other            after           before         other           after
                                    restructuring    exceptional    restructuring    restructuring   exceptional   restructuring
                                            costs          items            costs            costs         items           costs
                              1999           1998           1998             1998             1997          1997            1997
                        (pound) 000   (pound) 000    (pound) 000      (pound) 000      (pound) 000   (pound) 000     (pound) 000
--------------------------------------------------------------------------------------------------------------------------------
<S>                     <C>         <C>              <C>            <C>               <C>            <C>           <C>
United Kingdom             (13,989)        (9,950)        (2,689)         (12,639)          (5,599)       (5,983)        (11,582)
North America               31,559         33,892         (2,781)          31,111             (375)      (10,107)        (10,482)
Continental Europe          (2,088)           921            587            1,508            2,288        (2,429)           (141)
Rest of the world             (367)           746              -              746              (71)          (31)           (102)
--------------------------------------------------------------------------------------------------------------------------------
                            15,115         25,609         (4,883)          20,726           (3,757)      (18,550)        (22,307)
================================================================================================================================
</TABLE>

The operating profit/(loss) for the United Kingdom for the periods under review
includes the central costs associated with the Group's worldwide head office
functions.
<PAGE>

Annual Report 1999
Notes to the Financial Statements

www.brightstation.com
Technology born for business

34

2  Turnover and Segmental Analysis continued
================================================================================
The composition of net assets and total assets by location is presented on a
basis consistent with the segmental analysis of operating profit/(loss). The
assets in any location are not necessarily matched with the turnover in that
location. The net assets and total assets for the United Kingdom for the periods
under review include those associated with the Group's worldwide head office
functions.

The geographical composition of net liabilities is analysed as follows:
--------------------------------------------------------------------------------
                                               1999          1998          1997
                                        (pound) 000   (pound) 000   (pound) 000
--------------------------------------------------------------------------------
United Kingdom                               15,747        13,003        20,387
North America                                40,756        37,720        38,403
Continental Europe                            2,460         2,481         3,293
Rest of the world                               421         1,514         5,807
--------------------------------------------------------------------------------
Net operating assets                         59,384        54,718        67,890
Unallocated net liabilities                (161,679)     (148,459)     (158,845)
--------------------------------------------------------------------------------
                                           (102,295)      (93,741)      (90,955)
================================================================================
Unallocated net liabilities comprise borrowings and cash deposits.

The geographical composition of total assets is analysed as follows:
--------------------------------------------------------------------------------
                                               1999          1998          1997
                                        (pound) 000   (pound) 000   (pound) 000
--------------------------------------------------------------------------------
United Kingdom                               34,265        28,382        28,287
North America                                66,043        66,546        78,325
Continental Europe                            6,940         7,771        10,376
Rest of the world                               831         6,843         7,522
--------------------------------------------------------------------------------
Net operating assets                        108,079       109,542       124,510
================================================================================

3 Staff numbers and costs
================================================================================
Staff costs (including Directors) consist of:
--------------------------------------------------------------------------------
                                               1999          1998          1997
                                        (pound) 000   (pound) 000   (pound) 000
--------------------------------------------------------------------------------
Wages and salaries                           34,091        32,529        14,336
Social security costs                         3,878         2,997         1,440
Other pension costs                             945           910            51
--------------------------------------------------------------------------------
                                             38,914        36,436        15,827
================================================================================
Included above are staff costs of (pound)3,880,000 (1998: (pound)9,260,000;
1997: (pound)1,413,000) which represent costs of product and systems development
and have been capitalised in accordance with the accounting policy for
intangible fixed assets as set out in note 1 to these financial statements.

Pension arrangements
The Group operates defined contribution pension schemes in the UK, the US and
Switzerland. The pension cost charge represents contributions payable by the
Group to the funds and amounted to (pound)945,000 (1998: (pound)910,000; 1997:
(pound)51,000). The assets of all the schemes are held by independent custodians
and kept entirely separate from the assets of the Group.

The average number of full-time employees during the year was:
--------------------------------------------------------------------------------
                                               1999          1998          1997
--------------------------------------------------------------------------------
United Kingdom                                  308           275           217
North America                                   560           573           289
Continental Europe                              110            99            43
Rest of the world                                74            78            43
--------------------------------------------------------------------------------
                                              1,052         1,025           592
================================================================================
<PAGE>

Annual Report 1999
Notes to the Financial Statements

www.brightstation.com
Technology born for business

35

4 Operating Profit/(Loss)
================================================================================
This is arrived at after charging/(crediting):
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
                                                                         1999         1998         1997
                                                                  (pound) 000  (pound) 000  (pound) 000
-------------------------------------------------------------------------------------------------------
<S>                                                               <C>          <C>          <C>
Hire of plant and machinery - operating leases                             60            -          560
Hire of other assets - operating leases                                 4,613        5,160        1,272
Depreciation:
-        on owned assets                                                6,964        7,069        4,378
-        on leased assets                                                 518          893          516
Amortisation/write-off:
-        of development costs                                           9,334        7,699       11,548
-        of goodwill                                                      415           61            -
Auditors' remuneration:
-        PricewaterhouseCoopers                                           252          229          197
-        other                                                             29           28           78
Gain on foreign currency translations                                    (119)        (290)         (60)
Loss/(profit) on disposal of fixed assets                                 631           17          (15)
Net costs arising on reorganisation of Group's agency arrangements          -            -          267
Write-off of fixed asset investments (see notes 5 and 13)               4,619        2,300            -
-------------------------------------------------------------------------------------------------------
</TABLE>

The auditors' remuneration includes amounts in respect of the parent company for
the year ended 31 December 1999 of (pound)100,000 (1998:(pound)100,000;
1997:(pound)100,000).
         Additional fees paid to PricewaterhouseCoopers for non-audit services
amounted to(pound)52,000 in 1999 (1998: (pound)8,000; 1997:(pound)1,433,000).
The fees paid in 1997 were in respect of the Company's acquisition of KRII in
November 1997 and the associated financing.
         Of the 1997 costs of reorganising the Group's agency arrangements
amounting to (pound)267,000, which was charged against operating profit in 1997,
(pound)383,000 related to the cost of purchasing the Company's South African
agency, offset by a gain of (pound)116,000 on the assignment of the Group's
former Japanese agency to Fujitsu.

The (loss)/profit for the year attributable to shareholders, dealt with in the
accounts of Bright Station plc, is:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
                                                                         1999         1998         1997
                                                                  (pound) 000  (pound) 000  (pound) 000
-------------------------------------------------------------------------------------------------------
<S>                                                               <C>          <C>          <C>
                                                                     (103,340)      (9,016)       4,120
=======================================================================================================
</TABLE>

As permitted by Section 230 of the Companies Act 1985, the profit and loss
account of the Company is not presented.
<PAGE>

Annual Report 1999
Notes to the Financial Statements

www.brightstation.com
Technology born for business

36

5  Amounts Written off Investments, Exceptional Items and Restructuring Costs
================================================================================
1999
The amounts written off investments during the year ended 31 December 1999
comprised (pound)3.2 million in respect of the Company's remaining investment in
eHotel (formerly 4th Network), reflecting further delays in its proposed initial
public offering. In addition, a provision of (pound)1.4 million was made against
the Company's investment in Frost & Sullivan Electronic Distribution LLC
reflecting concerns over the value of certain of its exclusive online
distribution rights.
         The provision for closure of business of (pound)911,000 booked during
the year ended 31 December 1999 relates to the closure of its former subsidiary
distributor in Japan, KMK Digitex Company Limited. The provision has been
classified within accruals and deferred income at 31 December 1999.

1998
During the year ended 31 December 1998, exceptional restructuring costs of
(pound)2.6 million were charged as a result of the continuing integration of
KRII. These costs consisted of (pound)1.8 million relating to the relocation of
the US headquarters, (pound)1.6 million relating to the termination of property
leases and (pound)0.9 million of various other restructuring charges, relating
primarily to the integration of the sales force and one-off customer hostings.
These costs were offset by a write-back of (pound)1.2 million relating to data
centre convergence costs and (pound)0.5 million relating to the removal of the
Knight-Ridder Information name.
         An exceptional write-down of (pound)2.3 million was charged to the
profit and loss account relating to the Company's investment in eHotel.
         On 6 May 1998, the Group disposed of its investment in NewsEdge
Corporation, an online service provider, for net proceeds of (pound)3.9 million.
This resulted in a book profit on the disposal of (pound)1.0 million.
         On 13 May 1998, the Company disposed of its investment in Easynet Group
plc, an Internet and telecommunications company, for net proceeds, after
associated expenses, of (pound)3.2 million. This resulted in a book profit on
the disposal of (pound)1.1 million.

1997
On 24 February 1997, the Company sold its hotel Internet access technology (and
existing hotel contracts) to eHotel and became their agent in Europe. In
consideration the Company received 500,000 shares in eHotel with an aggregate
value of (pound)4,597,000. The costs associated with the transfer were
(pound)562,000. There was no effect on the Group's tax charge as a result of
this exceptional gain.
         During the year ended 31 December 1997, exceptional restructuring costs
of (pound)18.6 million were charged as a result of the integration of KRII.
Distribution costs of (pound)1.3 million related to the removal of the KRII name
and logo from all printed materials, products and signage. Administrative
expenses of (pound)9.3 million consisted of (pound)5.3 million relating to data
centre integration costs, (pound)2.2 million relating to the termination of
property leases, (pound)1.5 million relating to severance costs and (pound)0.3
million relating to various other restructuring charges. Amortisation of
(pound)8.0 million related to the write-off of previously capitalised product
development costs where these products were no longer being pursued by the
enlarged Group.

6        Interest Payable and Similar Charges
================================================================================
                                                   1999        1998        1997
                                            (pound) 000 (pound) 000 (pound) 000
--------------------------------------------------------------------------------
Bank loans and overdrafts:
-        on Senior Subordinated Notes            12,268      12,013       1,701
-        on Senior Credit Facility                4,585       4,399         659
-        amortisation of debt fees                1,274         946           -
-        on bank overdrafts                          78          33          26
-        other                                       59           -           -
--------------------------------------------------------------------------------
                                                 18,264      17,391       2,386
Finance leases                                      105          45         118
Exchange gains on foreign currency deposits          (3)          -           -
--------------------------------------------------------------------------------
                                                 18,366      17,436       2,504
Less: Lease finance costs capitalised                 -           -          (6)
--------------------------------------------------------------------------------
                                                 18,366      17,436       2,498
================================================================================
<PAGE>

Annual Report 1999
Notes to the Financial Statements

www.brightstation.com
Technology born for business

37

7  Directors' Emoluments and Interests in Ordinary Shares
<TABLE>
<CAPTION>
==============================================================================================
                                                               1999         1998          1997
                                                        (pound) 000  (pound) 000   (pound) 000
----------------------------------------------------------------------------------------------
<S>                                                     <C>          <C>             <C>
Aggregate emoluments                                          1,291        1,326           773
Compensation to past Directors for loss of office               154            -             -
Amounts paid to third parties                                    33           51            38
Amounts paid to former Directors                                 11           50           167
Contributions to defined contribution pension schemes            25           12             -
----------------------------------------------------------------------------------------------
                                                              1,514        1,439           978
==============================================================================================
</TABLE>

Details of the full cost of each Director's remuneration package for the year
ended 31 December 1999 are as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
                                                                      Pension        1999      1998       1997
                         Fees     Salary   Benefits    Bonus    contributions       Total     Total      Total
                       (pound)    (pound)    (pound)  (pound)          (pound)     (pound)   (pound)    (pound)
--------------------------------------------------------------------------------------------------------------
<S>                     <C>      <C>       <C>        <C>       <C>             <C>         <C>        <C>
I Barton               25,000          -          -        -                -      25,000    20,000     15,000
G Burrows
(to 2 February 1999)        -     23,403          -        -                -      23,403    30,894          -
M Hussey               25,000          -          -        -                -      25,000    20,000     15,000
S Maller                    -    127,000         26        -                -     127,026    98,841     82,236
M Mander
(to 1 July 1999)       32,500          -          -        -                -      32,500    51,250     37,500
D Mattey                    -    173,333      4,062        -            5,867     183,262   144,380    167,062
J Molle                     -    169,235      4,947        -            2,114     176,296   128,514     39,788
C Morton                    -    150,000      7,205        -            4,500     161,705   124,880     37,853
D Smith
(to 2 February 1999)        -     13,333      1,437        -            6,933      21,703   143,401    161,858
P Sommers                   -    192,313          -   30,979            5,576     228,868    39,677          -
R Swank
(from 15 March 1999)   20,233          -          -        -                -      20,233         -          -
A Thomas               51,664          -          -        -                -      51,664    20,000      3,750
D Wagner                    -    210,000      4,407        -                -     214,407   168,078    199,510
--------------------------------------------------------------------------------------------------------------
                      154,397  1,058,617     22,084   30,979           24,990   1,291,067   989,915    759,557
==============================================================================================================
</TABLE>

Derek Smith resigned on 2 February 1999 and, in addition to the emoluments shown
above, received(pound)153,600 in respect of the termination of his service
contract.
         Benefits include P11D benefits (non-cash compensation) for the UK
Directors, as detailed in the Remuneration Committee Report.
         David Mattey, Ciaran Morton and Derek Smith are or were members of the
Company's defined contribution scheme in the UK and Jason Molle and Patrick
Sommers were, during the year ended 31 December 1999, members of the Company's
defined contribution scheme in the US. The Company made (pound)17,300
contributions to the UK scheme and $12,412 contributions to the US scheme on
behalf of the Directors in 1999.
         Each of the Executive Directors has service agreements with the Company
for continuing employment unless and until terminated by either party by giving
not less than twelve months' notice, except Patrick Sommers who was on a two
year rolling contract prior to becoming a Non-Executive Director on 4 May 2000.
         On 4 May 2000 the Company completed the sale of the ISD to Thomson. On
this date, Stephen Maller, Jason Molle and Ciaran Morton transferred to Thomson
and resigned as directors of the Company. On the same date, Patrick Sommers
became a Non-Executive Director of the Company upon his transfer to Thomson. On
completion of the sale, the Company paid Patrick Sommers a bonus of $1.5 million
((pound)1.0 million), half in cash and the remainder by the issue of 71,361
ADSs, equivalent to 285,444 Ordinary shares, credited as fully paid, at a price
of 168 pence per share.
         In May 2000, the following bonuses were paid to the Executive
Directors in respect of the sale of the ISD the successful repayment of the
Company's debt, and, where applicable, the restructuring and formation of Bright
Station plc:
         Patrick Sommers                $300,000 ((pound)192,000)
         Jason Molle                    $150,000 ((pound)96,000)
         Daniel Wagner            (pound)190,000
         David Mattey             (pound)160,000
         Ciaran Morton            (pound)100,000
         Stephen Maller            (pound)50,000
         The amounts disclosed above as fees paid to Michael Mander were paid to
Close Brothers Corporate Finance Ltd, his primary employer. Michael Mander, who
resigned as a Non-Executive Director on 1 July 1999, was paid an additional
(pound)11,000 during the year for services provided under a consultancy
agreement which will expire on 31 December 2000.
<PAGE>

Annual Report 1999
Notes to the Financial Statements

www.brightstation.com
Technology born for business

38

7  Directors' Emoluments and Interests in Ordinary Shares continued
================================================================================
The following table sets forth certain information regarding the beneficial
ownership of Ordinary shares by (a) each officer and executive director, and (b)
all directors and officers of the Company as a group. Unless otherwise noted in
the footnotes to the table, (i) the persons named in the table have sole voting
and investing power with respect to all Ordinary shares indicated as being
beneficially owned by them and (ii) officers and directors can be reached via
the principal offices of the Company.

Interests in Ordinary shares (1)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                                                        % of issued
                                                                                       shares as at      % of issued
                                                                         31 December    31 December     shares as at
Name of beneficial owner   1 January 1999*  Acquisitions      Disposals        1999+           1999     30 June 2000
--------------------------------------------------------------------------------------------------------------------
<S>                        <C>              <C>               <C>        <C>           <C>              <C>
I Barton (2)                      479,139              -              -      479,139           0.31             0.28
M Hussey (3)                      242,610              -              -      242,610           0.16             0.14
S Maller                           25,441              -              -       25,441           0.02             0.01
M Mander (4)                      900,327              -              -      900,327           0.58             0.52
D Mattey (5)                    2,335,200              -              -    2,335,200           1.51             1.35
J Molle                           135,116              -              -      135,116           0.09             0.08
C Morton                          202,001              -              -      202,001           0.13             0.11
D Smith                           550,000              -              -      550,000           0.35             0.32
P Sommers (6)                       8,000**       40,000**            -       48,000**         0.03             0.03
R Swank (7)                        12,000**       20,000**            -       32,000**         0.02             0.02
A Thomas (8)                      100,000              -              -      100,000           0.06             0.06
D Wagner (9)                   17,434,780              -              -   17,434,780          11.25            10.10
--------------------------------------------------------------------------------------------------------------------
Total                          22,424,614         60,000              -   22,484,614          14.51            13.02
====================================================================================================================
</TABLE>

*        or date of appointment if later
+        or date of retirement if earlier
**       held as American Depositary Shares

(1)   Based on 154,943,398 Ordinary shares outstanding at 31 December 1999 and
      excluding an aggregate of 4,080,058 that may be acquired by all executive
      officers and directors as a group pursuant to the share option schemes as
      described on pages 39-40 and note 18 to the financial statements.
(2)   Includes 20,640 Ordinary shares held by A Barton, I Barton's wife.
(3)   242,610 Ordinary shares held for the benefit of M Hussey by RBSTB Nominees
      Limited.
(4)   Includes 9,327 Ordinary shares held for the benefit of M Mander by BDS
      Nominees Limited.
(5)   Includes (i) 600,000 Ordinary shares held by Barclayshare Nominees Limited
      for the benefit of D Mattey, (ii) 560,000 Ordinary shares held jointly by
      D Mattey and Alan Mattey, and (iii) 200 Ordinary shares held by A Mattey,
      D Mattey's wife.
(6)   On 8 September 1999, P Sommers purchased 10,000 American Depositary
      Shares, equivalent to 40,000 Ordinary shares. P Sommers holds the
      equivalent of 48,000 Ordinary shares held as American Depositary Shares.
(7)   On 14 July 1999, R Swank purchased 3,000 American Depositary Shares,
      equivalent to 12,000 Ordinary shares. On 21 July 1999, R Swank purchased
      2,000 American Depositary Shares, equivalent to 8,000 Ordinary shares. R
      Swank holds the equivalent of 32,000 Ordinary shares held as American
      Depositary Shares.
(8)   100,000 Ordinary shares held for the benefit of A Thomas by BAT Holdings
      Limited.
(9)   Includes (i) 1,334,060 Ordinary shares held jointly by D Wagner and Y
      Wagner, (ii) 100,000 Ordinary shares held in trust for the benefit of D
      Wagner by the Daniel Wagner (M.A.I.D) Trust, and (iii) 400,000 Ordinary
      shares held by S Wagner, D Wagner's wife.

To the Company's knowledge, no other person is the owner of more than 10% of the
outstanding Ordinary shares nor is the Company directly or indirectly owned or
controlled by any other corporation or any government.
         There are no arrangements known to the Company the operation of which
may, at a subsequent date, result in a change of control of the Company.
         With respect to those Directors in office at 31 December 1999, all of
their interests in the Ordinary shares of the Company are beneficial.
         Since 31 December 1999 through to the date of this Annual Report
Patrick Sommers has increased his holding to 83,361 ADSs, equivalent to 333,444
Ordinary shares pursuant to his bonus arrangement as disclosed in note 31 to the
financial statements. In addition, certain ex-Directors have reduced their
interests in the Company after retiring as Directors of the Company.
<PAGE>

Annual Report 1999
Notes to the Financial Statements

www.brightstation.com
Technology born for business

39

7  Directors' Emoluments and Interests in Ordinary Shares continued

<TABLE>
<CAPTION>
===================================================================================================================================
                                                   At                                         At               Date from
                                            1 January       Granted/                 31 December   Exercise        which     Expiry
Options over Ordinary shares        Scheme       1999*    (Cancelled)    (Exercised)        1999+     price  exercisable       date
-----------------------------------------------------------------------------------------------------------------------------------
<S>                  <C>                      <C>         <C>           <C>          <C>           <C>       <C>         <C>
G Burrows (1)         US Stock Option Plan**   50,000              -              -       50,000       170p     08/09/99   08/09/08
                      US Stock Option Plan**   70,000              -              -       70,000       150p     08/10/99   08/10/08
              Employee Stock Purchase Plan***   3,812              -              -        3,812       158p     30/09/00   30/09/00
S Maller (2)              Sharesave Scheme      7,040              -              -        7,040        49p     01/12/99   31/05/00
                          Sharesave Scheme      2,156              -              -        2,156        64p     01/06/00   30/11/00
                          Sharesave Scheme        308              -              -          308       224p     01/12/00   31/05/01
                          Sharesave Scheme        766              -              -          766       180p     01/06/01   30/11/01
                          Sharesave Scheme        569              -              -          569       137p     01/07/01   31/12/01
                          Sharesave Scheme          -          1,174              -        1,174        99p     01/07/02   31/12/02
                         Unapproved Scheme     30,000              -              -       30,000       189p     14/03/00   14/03/04
                         Unapproved Scheme     30,000              -              -       30,000       173p     30/04/01   30/04/05
                         Unapproved Scheme    120,000              -              -      120,000       150p     08/10/01   08/10/05
                          Executive Scheme     62,727              -              -       62,727       110p     24/03/97   24/03/04
                          Executive Scheme     20,000              -              -       20,000        80p     25/04/98   25/04/05
                          Executive Scheme     17,500              -              -       17,500       248p     04/10/98   04/10/05
                         Unapproved Scheme          -        250,000              -      250,000       400p     02/07/02   02/07/06
D Mattey                  Sharesave Scheme          -         17,045              -       17,045        99p     01/07/04   31/12/04
                          Sharesave Scheme     19,602        (19,602)             -            -        88p     01/05/99   31/10/99
                         Unapproved Scheme     30,000              -              -       30,000       173p     30/04/01   30/04/05
                         Unapproved Scheme    120,000              -              -      120,000       150p     08/10/01   08/10/05
                          Executive Scheme    122,727              -              -      122,727       110p     24/03/97   24/03/04
                         Unapproved Scheme          -        325,000              -      325,000       400p     02/07/02   02/07/06
J Molle (2)              Unapproved Scheme     54,545              -              -       54,545       110p     24/03/97   24/03/01
                         Unapproved Scheme     17,500              -              -       17,500       248p     04/10/98   04/10/02
                         Unapproved Scheme     30,000              -              -       30,000       189p     14/03/00   14/03/04
                      US Stock Option Plan**   30,000              -              -       30,000       173p     30/04/99   30/04/08
                      US Stock Option Plan**  120,000              -              -      120,000       150p     08/10/99   08/10/08
              Employee Stock Purchase Plan***   2,196          1,352         (3,548)           -        80p     29/06/99   29/06/99
              Employee Stock Purchase Plan***       -          5,276              -        5,276        59p     04/10/00   04/10/00
                      US Stock Option Plan**        -        250,000              -      250,000       400p     02/07/02   02/07/06
                         Unapproved Scheme          -         50,000              -       50,000       400p     02/07/02   02/07/06
C Morton (2)              Sharesave Scheme                    35,204              -       35,204        49p     01/12/99   31/05/00
                         Unapproved Scheme                    17,500              -       17,500       248p     04/10/98   04/10/02
                         Unapproved Scheme                    30,000              -       30,000       189p     14/03/00   14/03/04
                         Unapproved Scheme                    30,000              -       30,000       173p     30/04/01   30/04/05
                         Unapproved Scheme                   120,000              -      120,000       150p     08/10/01   08/10/05
                          Executive Scheme                    61,364              -       61,364       110p     24/03/97   24/03/04
                         Unapproved Scheme                         -        300,000      300,000       400p     02/07/02   02/07/06
D Smith (3)               Executive Scheme                    15,900              -       15,900       189p     02/02/99   14/03/01
                         Unapproved Scheme                    84,100              -       84,100       189p     02/02/99   14/03/01
                         Unapproved Scheme                    30,000              -       30,000       173p     02/02/99   30/04/02
                         Unapproved Scheme                   120,000              -      120,000       150p     02/02/99   08/10/02
                          Sharesave Scheme                     7,116              -        7,116       137p     02/02/99   02/02/99
P Sommers             US Stock Option Plan**                 200,000              -      200,000       150p     08/10/99   08/10/08
                      US Stock Option Plan**                       -        200,000      200,000        90p     02/07/00   02/07/09
              Employee Stock Purchase Plan***                      -          2,352        2,352       128p     22/04/01   22/04/01
              Employee Stock Purchase Plan***                      -          5,276        5,276        59p     04/10/00   04/10/00
                         Unapproved Scheme                         -        600,000      600,000       400p     02/07/02   02/07/06
R Swank             Individual Arrangement                    26,844              -       26,844       220p     14/11/98   14/11/04
                    Individual Arrangement                    16,928              -       16,928       185p     08/09/99   08/09/05
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>

Annual Report 1999
Notes to the Financial Statements

www.brightstation.com
Technology born for business

40

7        Directors' Emoluments and Interests in Ordinary Shares continued

<TABLE>
<CAPTION>
========================================================================================================================
                                                   At                            At               Date from
                                            1 January       Granted/    31 December   Exercise        which       Expiry
Options over Ordinary shares        Scheme       1999*    (Cancelled)          1999+     price  exercisable         date
------------------------------------------------------------------------------------------------------------------------
<S>                  <C>                      <C>         <C>           <C>          <C>           <C>       <C>
D Wagner                  Sharesave Scheme          -         17,045         17,045        99p     01/07/04     31/12/04
                          Sharesave Scheme     19,602        (19,602)             -        88p     01/05/99     31/10/99
                         Unapproved Scheme     30,000              -         30,000       173p     30/04/01     30/04/05
                         Unapproved Scheme    130,000              -        130,000       150p     08/10/01     08/10/05
                           Executive Scheme   163,636              -        163,636       110p     24/03/97     24/03/04
------------------------------------------------------------------------------------------------------------------------
Grand Total                                 2,099,642      1,980,416      4,080,058
========================================================================================================================
</TABLE>

*  or date of appointment if later
+  or date of retirement if earlier
** under the terms of the US Stock Option Plan, options are granted in the form
of ADSs at an exercise price expressed in US Dollars. Options granted under the
US Stock Option Plan become exercisable in cumulative increments as determined
by the Remuneration Committee of the Board of Directors. For the purpose of
uniformity, all options detailed above are expressed in Ordinary shares and in
Pounds Sterling.
*** under the terms of the Employee Stock Purchase Plan, rights are granted for
eligible US employees to acquire beneficial ownership of Ordinary shares of the
Company by purchasing ADSs. The purchase price may not be less than the lower of
85% of the fair market value of the ADSs on the offering date or 85% of the fair
market value of the ADSs on the purchase date. The purchase price is accumulated
by payroll deductions over the course of the offering. There are two offerings a
year. For the purpose of uniformity, all rights to purchase ADSs under the
Employee Stock Purchase Plan detailed above are expressed in Ordinary shares and
in Pounds Sterling.

Notes:
(1) All options held by Graham Burrows lapsed upon his resignation as a Director
of the Company on 2 February 1999.

(2) In accordance with the rules of the Company's share option schemes, the
period within which options held by Stephen Maller, Jason Molle and Ciaran
Morton may be exercised were amended in the following manner upon their transfer
to Thomson:
         Options held under the Executive Scheme, the Unapproved Scheme and the
US Stock Option Plan became immediately exercisable and remain so until the
later of 12 months after the date of transfer or four years after the date of
grant, whereupon they lapse. Options held under the Sharesave Scheme became
immediately exercisable (to the value of accumulated savings) and remain so for
six months, whereupon they lapse. Rights to purchase ADSs under the Employee
Stock Purchase Plan matured on completion, whereupon they lapsed.

(3) Options held by Derek Smith under the Executive and Unapproved Schemes
became immediately exercisable on 2 February 1999 and remain exercisable until
the later of 2 February 2000 and four years from the date of grant, whereupon
they lapse. Options held under the Sharesave Scheme became exercisable on 2
February 2000 (to the value of the accumulated savings) and remained exercisable
for six months, whereupon they lapsed.

During May 2000 options were granted to the following Directors:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
                                    Scheme    Date of         Number       Exercise  Exercisable     Expiry
                                                grant                         price         from       date
-----------------------------------------------------------------------------------------------------------
<S>                 <C>                    <C>              <C>             <C>       <C>        <C>
D Mattey                 Unapproved Scheme 4 May 2000         50,000          93.5p   4 May 2004 4 May 2007
P Sommers             US Stock Option Plan 4 May 2000        200,000          93.5p   4 May 2001 4 May 2010
P Sommers           Individual arrangement 5 May 2000        285,444         170.0p   5 May 2001 5 May 2007
D Wagner                 Unapproved Scheme 4 May 2000         50,000          93.5p   4 May 2004 4 May 2007
===========================================================================================================
</TABLE>

Further details of each of the Company's share option schemes are contained in
note 18 to the financial statements.

The mid-market price of the Company's Ordinary shares on 30 December 1999, the
last trading day in 1999, was 91 pence per share and the range during 1999 was
57 pence to 148 pence per share. Further details of the Company's share option
schemes are set out in note 18 to the financial statements.
         None of the Directors have notified the Company of an interest in any
other shares, transactions or arrangements which require disclosure except as
indicated in note 7 to the financial statements.
<PAGE>

Annual Report 1999
Notes to the Financial Statements

www.brightstation.com
Technology born for business

41

8   Taxation on (Loss)/Profit on Ordinary Activities

<TABLE>
<CAPTION>
==============================================================================================
                                                              1999          1998          1997
                                                        (pound) 000   (pound)00E0    (pound) 000
----------------------------------------------------------------------------------------------

<S>                                                     <C>           <C>            <C>
UK corporation tax at 30% (1998: 31%; 1997: 31.5%)             (65)            -             -
Overseas tax                                                 1,413           776           332
Adjustment relating to earlier years                           156             -             -
Deferred tax credit                                            (26)           (7)           (9)
----------------------------------------------------------------------------------------------
Tax charge                                                   1,478           769           323
==============================================================================================
</TABLE>

The taxation on (loss)/profit on ordinary activities may be reconciled as
follows to the UK statutory rate:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
                                                              1999          1998          1997
                                                                 %             %             %
----------------------------------------------------------------------------------------------
<S>                                                           <C>           <C>           <C>
UK statutory rate of tax                                        30            31            31
Disallowed expenditures                                        (12)           14             -
Tax deduction in respect of goodwill written off to reserves   114           (80)            -
Unrecognised tax losses                                       (170)           49           (32)
----------------------------------------------------------------------------------------------
Effective rate of tax provided                                 (38)           14            (1)
==============================================================================================
</TABLE>

9        (Loss)/Earnings per Share

<TABLE>
<CAPTION>
===================================================================================================================================
                                                                          Total            Total             Total            Total
                                                                         before            after            before            after
                                                                  restructuring    restructuring     restructuring    restructuring
                                                                          costs            costs             costs            costs
                                                            1999           1998             1998              1997             1997
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>            <C>              <C>               <C>              <C>
Attributable (loss)/profit ((pound))                  (5,385,000)     7,253,000        4,439,000        (6,229,000)     (20,744,000)
Weighted average number of Ordinary shares in issue  151,928,606    150,579,177      150,579,177       101,077,187      101,077,187
-----------------------------------------------------------------------------------------------------------------------------------
(Loss)/earnings per share (pence)                           (3.5)           4.8             (2.9)             (6.2)           (20.5)
===================================================================================================================================
Attributable (loss)/profit as above ((pound))         (5,385,000)     7,253,000        4,439,000        (6,229,000)     (20,744,000)
Weighted average number of Ordinary shares
in issue as above                                    151,928,606    150,579,177       50,579,177       101,077,187      101,077,187
Add: shares issuable on conversion of options            119,429        384,655          384,655           735,716          735,716
Add: shares issuable on acquisition of subsidiary      1,062,637      1,667,241        1,667,241                 -                -
-----------------------------------------------------------------------------------------------------------------------------------
Adjusted average number of Ordinary shares           153,110,672    152,631,073      152,631,073       101,812,903      101,812,903
-----------------------------------------------------------------------------------------------------------------------------------
Fully diluted (loss)/earnings per share (pence)             (3.5)           4.8              2.9              (6.1)           (20.4)
===================================================================================================================================

Share equivalents excluded from calculation
of fully diluted (loss)/earnings per share
because anti-dilutive:
Warrants                                               9,000,000              -                -                 -                -
Options                                                8,419,638      3,911,532        3,911,532           301,844          301,844
-----------------------------------------------------------------------------------------------------------------------------------
                                                      17,419,638      3,911,532        3,911,532           301,844          301,844
===================================================================================================================================
</TABLE>

In view of the significant impact of restructuring costs and other exceptional
items on earnings per share calculated in accordance with FRS14, additional
earnings per share figures have been provided.
<PAGE>

Annual Report 1999
Notes to the Financial Statements

www.brightstation.com
Technology born for business

42

<TABLE>
<CAPTION>
10       Intangible Fixed Assets
================================================================================
                                                              Group      Company
                                                        (pound) 000  (pound) 000
--------------------------------------------------------------------------------
<S>                                                     <C>          <C>
Cost
At 31 December 1997                                         33,204      11,299
Transfer from subsidiary undertakings                            -       1,153
Revisions to fair values and other adjustments              (2,377)          -
Exchange adjustments                                          (231)          -
Additions                                                   11,762       2,396
--------------------------------------------------------------------------------
At 31 December 1998                                         42,358      14,848
Amounts written off                                            (57)          -
Exchange adjustments                                           805           -
Additions                                                   12,734       2,512
--------------------------------------------------------------------------------
At 31 December 1999                                         55,840      17,360
--------------------------------------------------------------------------------
Amortisation
At 31 December 1997                                         11,580       7,142
Transfer from subsidiary undertakings                            -         779
Exchange adjustments                                           (75)          -
Provision for year                                           7,699       2,277
--------------------------------------------------------------------------------
At 31 December 1998                                         19,204      10,198
Exchange adjustments                                           272           -
Provision for year                                           9,334       2,263
--------------------------------------------------------------------------------
At 31 December 1999                                         28,810      12,461
================================================================================
Net book amount
At 31 December 1999                                         27,030       4,899
================================================================================
At 31 December 1998                                         23,154       4,650
================================================================================
</TABLE>

<TABLE>
<CAPTION>
The net book amounts are analysed as follows:
--------------------------------------------------------------------------------
                                                               1999        1999
                                                              Group     Company
                                                        (pound) 000 (pound) 000
--------------------------------------------------------------------------------
<S>                                                     <C>         <C>
Systems development                                          5,841         121
Product development                                         21,189       4,777
--------------------------------------------------------------------------------
                                                            27,030       4,898
================================================================================

                                                               1998        1998
                                                              Group     Company
                                                        (pound) 000 (pound) 000
--------------------------------------------------------------------------------
Systems development                                          5,370         237
Product development                                         17,784       4,413
--------------------------------------------------------------------------------
                                                            23,154       4,650
================================================================================
</TABLE>

Additions to intangible fixed assets in 1999 for the Group principally comprised
product development costs related to Dialog Web, Dialog Select and Open System
Alerts. The product development costs include salaries and related overhead
costs of (pound)6,175,000 (1998:(pound)10,210,000) (1997:(pound)1,798,000),
consultancy costs, including attributable overheads, of (pound)3,223,000
(1998:(pound)526,000) (1997:(pound)211,000) and hardware and software costs of
(pound)487,000 (1998:(pound)896,000) (1997:(pound)1,955,000) (including
depreciation of (pound)nil (1998:(pound)nil) (1997:(pound)1,200,000). Additions
to systems development costs in 1999 related to various database projects.
<PAGE>

Annual Report 1999
Notes to the Financial Statements

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Technology born for business

43

<TABLE>
<CAPTION>
11       Goodwill
================================================================================
                                                                         Group
                                                                    (pound) 000
--------------------------------------------------------------------------------
<S>                                                                 <C>
Cost
At 31 December 1997                                                          -
Additions                                                                7,743
Exchange adjustments                                                        (6)
--------------------------------------------------------------------------------
At 31 December 1998                                                      7,737
Additions                                                                2,490
Exchange adjustments                                                        54
--------------------------------------------------------------------------------
At 31 December 1999                                                     10,281
================================================================================
Amortisation
At 31 December 1997                                                          -
Provision for the year                                                      61
--------------------------------------------------------------------------------
At 31 December 1998                                                         61
Provision for year                                                         415
--------------------------------------------------------------------------------
At 31 December 1999                                                        476
================================================================================
Net book amount
At 31 December 1999                                                      9,805
================================================================================
At 31 December 1998                                                      7,676
================================================================================
</TABLE>

Responsive Database Services, Inc.
On 6 October 1998, the Group exercised its option to acquire all of the share
capital of Responsive Database Services, Inc. ('RDS') for total cash
consideration of $2.85 million ((pound)1.72 million). The Group has historically
provided all financing for RDS and, accordingly, has consolidated its results
within the Group financial statements. No fair value adjustments were required.
The total consideration paid has been treated as goodwill arising on the
acquisition of a minority interest.

Write Works
On 19 November 1998, the Company acquired all of the share capital of Write
Works Limited ('Write Works') for a maximum consideration of (pound)6.0 million
to be paid over two years. The consideration has been satisfied through an
initial payment of (pound)1.0 million in cash and approximately (pound)1.2
million by the issue of 694,025 new Ordinary shares at a price of (pound)1.66
per share. A further consideration of up to a maximum of (pound)3.8 million in
cash and shares (cash of (pound)2.8 million and shares with a market value of
(pound)1.0 million at the dates the deferred consideration is payable) will be
paid on the achievement of certain earnings targets over the next two years.

KMK
On 30 June 1999, the Company acquired the remaining 48% minority interest in its
Japanese subsidiary, KMK Digitex Company Limited, for total cash consideration
of (pound)428,000. No fair value adjustments were required and no goodwill arose
on the transaction.

Muscat
On 30 November 1999, the Company announced that it had acquired the remaining
30% minority interest in its UK subsidiary, Muscat Limited. The consideration of
(pound)2,500,737 was satisfied by the issue of 3,012,936 Ordinary shares at 83
pence per share.
         No fair value adjustments were required. The resultant goodwill of
(pound)2,490,000 has been capitalised and will subsequently be written off over
20 years as set out in Note 1.
<PAGE>

Annual Report 1999
Notes to the Financial Statements

www.brightstation.com
Technology born for business

44

12       Tangible Fixed Assets
<TABLE>
<CAPTION>
============================================================================================
                               Leasehold                Fixtures &        Motor
                            improvements    Equipment     fittings     vehicles        Total
Group                         (pound) 000   (pound) 000   (pound) 000   (pound) 000   (pound) 000
---------------------------------------------------------------------------------------------
<S>                               <C>         <C>           <C>            <C>       <C>
Cost
At 31 December 1997                2,181       25,255        3,095          595       31,126
Exchange adjustments                 (12)         (97)         (28)           3         (134)
Additions                            408        5,969          150           14        6,541
Revisions to fair values               -          (43)           -            -          (43)
Disposals                            (99)         (83)        (449)         (82)        (713)
--------------------------------------------------------------------------------------------
At 31 December 1998                2,478       31,001        2,768          530       36,777
Exchange adjustments                  30          582           78          (19)         671
Additions                            776        3,464          287            9        4,536
Disposals                            (65)      (5,133)        (359)        (158)      (5,715)
--------------------------------------------------------------------------------------------
At 31 December 1999                3,219       29,914        2,774          362       36,269
============================================================================================
Depreciation
At 31 December 1997                1,384        9,078        1,080          230       11,772
Exchange adjustments                 (10)         (55)         (12)           2          (75)
Provided for the year                436        6,855          532          139        7,962
Revisions to fair values               -         (267)           -            -         (267)
Disposals                            (33)        (190)        (209)         (53)        (485)
--------------------------------------------------------------------------------------------
At 31 December 1998                1,777       15,421        1,391          318       18,907
Exchange adjustments                  31          493           44          (19)         549
Provided for the year                377        6,772          224          109        7,482
Disposals                            (31)      (4,627)        (239)        (110)      (5,007)
--------------------------------------------------------------------------------------------
At 31 December 1999                2,154       18,059        1,420          298       21,931
============================================================================================
Net book amount
At 31 December 1999                1,065       11,855        1,354           64       14,338
============================================================================================
At 31 December 1998                  701       15,580        1,377          212       17,870
============================================================================================
</TABLE>

On 10 November 1999, the Company entered into an agreement with International
Computers Limited ("ICL") to outsource the operations of its data centre in Palo
Alto, California for a period of seven years. In connection with this
transaction, the Company sold certain assets in the Palo Alto data centre with a
net book value of (pound)3,475,000 in return for cash of (pound)3,058,000 and a
reduction in outsourcing charges of (pound)1,451,000. Although the assets have
been legally sold to ICL, they continue to be used by the Company and have
therefore been retained on the balance sheet in accordance with FRS 5 (Reporting
the substance of transactions).
         After accounting for this transaction, the net book amounts of assets
held under finance leases at 31 December 1999 were (pound)5,255,000 (1998:
(pound)857,000).
         Equipment included assets under finance leases of (pound)12,809,000 and
(pound)5,378,000 at 31 December 1999 and 1998 respectively. Accumulated
depreciation relating to equipment under finance leases totalled
(pound)7,554,000 and (pound)4,521,000 at 31 December 1999 and 1998 respectively.
Depreciation of equipment under finance leases is included in the depreciation
expense, unless capitalised in accordance with the Group's system and product
development cost policy (note 1).
<PAGE>

Annual Report 1999
Notes to the Financial Statements

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45

12       Tangible Fixed Assets continued
<TABLE>
<CAPTION>
=================================================================================================================
                                            Leasehold                 Fixtures &         Motor
                                         improvements    Equipment      fittings      vehicles        Total
Company                                    (pound) 000   (pound) 000    (pound) 000    (pound) 000  (pound) 000
-----------------------------------------------------------------------------------------------------------------
<S>                                        <C>         <C>           <C>            <C>          <C>
Cost
At 31 December 1997                               849        2,633           500           557        4,539
Transfer from subsidiary undertakings               -        6,979            29             -        7,008
Additions                                         174          653            11             -          838
Disposals                                           -          (25)           (4)          (82)        (111)
-----------------------------------------------------------------------------------------------------------
At 31 December 1998                             1,023       10,240           536           475       12,274
Transfer to subsidiary undertakings                 -          (14)            -           (14)         (28)
Additions                                           -        1,131            56             -        1,187
Disposals                                         (21)           -            (1)         (143)        (165)
-----------------------------------------------------------------------------------------------------------
At 31 December 1999                             1,002       11,357           591           318       13,268
===========================================================================================================
Depreciation
At 31 December 1997                               304        1,695           305           205        2,509
Transfer from subsidiary undertakings               -        4,638            20             -        4,658
Provided for the year                             183        1,914            93           129        2,319
Disposals                                           -           (1)            -           (53)         (54)
-----------------------------------------------------------------------------------------------------------
At 31 December 1998                               487        8,246           418           281        9,432
Transfer from subsidiary undertakings               -            -             -           (16)         (16)
Provided for the year                             170        1,418            80            96        1,764
Disposals                                           -            -             -           (95)         (95)
-----------------------------------------------------------------------------------------------------------
At 31 December 1999                               657        9,664           498           266       11,085
===========================================================================================================
Net book amount
At 31 December 1999                               345        1,693            93            52        2,183
===========================================================================================================
At 31 December 1998                               536        1,994           118           194        2,842
===========================================================================================================
</TABLE>

The net book amounts of assets held under finance leases at 31 December 1999
were (pound)nil (1998:(pound)nil).
<PAGE>

Annual Report 1999
Notes to the Financial Statements

www.brightstation.com
Technology born for business

46

13       Fixed Asset Investments
=========================================================
Group
Investments                                    (pound) 000
---------------------------------------------------------
At 31 December 1997                                18,374
Amounts written off (note 5)                       (2,300)
Additions                                           1,446
Disposals                                          (5,053)
Exchange movements                                   (113)
---------------------------------------------------------
At 31 December 1998                                12,354
Amounts written off (note 5)                       (4,619)
Additions                                           1,645
Disposals                                               -
Exchange movements                                    255
---------------------------------------------------------
At 31 December 1999                                 9,635
=========================================================
         The additions during the year ended 31 December 1999 related to the
final funding instalments ((pound)746,000) of Frost & Sullivan Electronic
Distribution LLC ("FSED"), a 50:50 joint venture with Frost & Sullivan which is
registered in the US, and further funding of (pound)899,000 in respect of the
Company's investment in eHotel (formerly 4th Network).

         Following further delays in eHotel's proposed initial public offering,
the Company booked a provision of (pound)3,196,000 against its remaining
investment. In addition, the Company booked a provision of (pound)1,423,000
against the carrying value of its investment in FSED, reflecting concerns over
the value of certain of its exclusive online distribution rights.

--------------------------------------------------------------------------------
                                                        Long-term
                                                         loans to
                                                            Group
                                        Investments     companies         Total
Company                                 (pound) 000   (pound) 000   (pound) 000
--------------------------------------------------------------------------------
At 31 December 1997                          61,562       220,724       282,286
Amounts written off (note 5)                 (2,300)            -        (2,300)
Additions                                     6,015         1,325         7,340
Disposals                                    (2,135)            -        (2,135)
Disposals to subsidiary undertakings           (355)            -          (355)
--------------------------------------------------------------------------------
At 31 December 1998                          62,787       222,049       284,836
Amounts written off (note 5)                 (3,196)       (1,423)       (4,619)
Additions                                     3,630           746         4,376
Provision for impairment                          -       (98,071)      (98,071)
--------------------------------------------------------------------------------
At 31 December 1999                          63,221       123,301       186,522
================================================================================
Following the disposal of the ISD to Thomson on 4 May 2000 (see note 31), the
Company has written down certain long term loans made by the Company to its
subsidiaries to fund the acquisition of KRII.
<PAGE>

Annual Report 1999
Notes to the Financial Statements

www.brightstation.com
Technology born for business

47

13       Fixed Asset Investments continued

<TABLE>
<CAPTION>
========================================================================================
The following were principal subsidiary undertakings as at 31 December 1999 and have all
been included in the consolidated accounts except where indicated. Each subsidiary
principally does business in the country of its incorporation/registration and all
equity is in the form of Ordinary shares or their equivalent.
---------------------------------------------------------------------------------------
                                              Country of
                                             incorporation/  Proportion of   Nature of
Company name                                  registration    equity held    business**
---------------------------------------------------------------------------------------
<S>                                            <C>             <C>           <C>
Dialog Holdings Limited                        England           100%            3
Dialog Nova KK                                 Japan             100%            3
Dotcom Investments BV                          Netherlands       100%            3
InfoDynamics Limited                           England           100%            2
KMK Digitex Company Limited                    Japan             100%            1
Muscat Limited                                 England           100%            5
Officeshopper Holdings Limited                 England           100%            3
Officeshopper.com Limited                      England           100%            8
Prosmart Systems Limited                       England           100%            3
Sparza Limited                                 England           100%            6
Webtop.com Limited                             England           100%            5
Write Works Limited                            England           100%            8
Dialog Information Services Limited            England           100%            1*
Frost & Sullivan Electronic Distribution LLC   USA                50%            4*
Infomart/DIALOG Limited                        Canada             50%            1*
Responsive Database Services Inc.              USA               100%            7*
Responsive Database Services Limited           England           100%            7*
The Dialog Corporation                         USA               100%            1*
The Dialog Corporation A/S                     Denmark           100%            1*
The Dialog Corporation Asia Pacific Limited    Hong Kong         100%            1*
The Dialog Corporation BV                      Netherlands       100%            1*
The Dialog Corporation GmbH                    Germany           100%            1*
The Dialog Corporation GmbH                    Switzerland       100%            1*
The Dialog Corporation (Ireland) Limited       Ireland           100%            1*
The Dialog Corporation SA                      Belgium           100%            1*
The Dialog Corporation S.A.R.L                 France            100%            1*
The Dialog Corporation Srl                     Italy             100%            1*
The Dialog Corporation Sociedad Limitada       Spain             100%            1*
The Dialog Corporation (Sweden) AB             Sweden            100%            1*
========================================================================================
</TABLE>

*        Companies marked were sold to Thomson on 4 May 2000 as part of the ISD
**       Key
1        Provision of an indexed online business information service
2        Provision of a database system
3        Holding company
4        Preparation of publishing information
5        Provision of indexing and search technology
6        Provision of eCommerce procurement systems
7        Development and provision of business information
8        Provision of eCommerce services
<PAGE>

Annual Report 1999
Notes to the Financial Statements

www.brightstation.com
Technology born for business

48

14       Debtors

<TABLE>
<CAPTION>
==========================================================================================
                                            Group       Group       Company      Company
                                            1999         1998         1999         1998
                                        (pound) 000  (pound) 000  (pound) 000  (pound) 000
------------------------------------------------------------------------------------------
<S>                                         <C>        <C>           <C>          <C>
Amounts due within one year
Trade debtors                               30,362     32,131        6,417        3,039
Other debtors                                1,657      1,334          673        1,093
Prepayments and accrued income               4,671      9,316        1,680        3,807
Amounts owed by subsidiary undertakings          -          -       26,488       32,795
------------------------------------------------------------------------------------------
                                            36,690     42,781       35,258       40,734
==========================================================================================
</TABLE>

Trade debtors for the Group are stated net of the allowance for doubtful trade
debtor balances, which amounted to (pound)2,184,000 and (pound)2,974,000 at 31
December 1999 and 1998, respectively.

         Included within 'Other debtors' are the deferred indexing costs for
both the Group and Company, which are deferred and amortised on a straight line
basis over two years. The deferred indexing costs for both the Group and Company
amounted to (pound)296,000 and (pound)541,000 at 31 December 1999 and 1998,
respectively.

15       Creditors: Amounts falling due within one year

<TABLE>
<CAPTION>
=================================================================================================================
                                                                Group         Group       Company       Company
                                                                1999          1998          1999          1998
                                                            (pound) 000   (pound) 000   (pound) 000   (pound) 000
-----------------------------------------------------------------------------------------------------------------
<S>                                                              <C>            <C>         <C>             <C>
Bank overdrafts                                                     --           --            --           161
Senior Credit Facility (see note 16)                            30,075       13,158        30,075        13,158
Deferred consideration - purchase of subsidiary (see note 20)    1,437        1,437         1,437         1,437
Trade creditors                                                  8,095        8,987         2,806         2,447
Obligations under finance leases                                 1,813          222         1,729           210
Other creditors                                                  4,030        4,274         3,704         3,873
Taxation and social security                                     1,008        1,030           782           416
Corporation tax                                                    556          258            --            --
Accruals and deferred income                                    24,560       29,479         3,350         4,651
Amounts owed to subsidiary undertakings                             --           --        14,052        29,082
-----------------------------------------------------------------------------------------------------------------
                                                                71,574       58,845        57,935        55,435
=================================================================================================================
</TABLE>

Included within 'Other creditors' for both Group and Company are subscriber
service cost provisions, which amounted to (pound)349,000 and (pound)542,000 at
31 December 1999 and 1998, respectively.

         Subsequent to the year end, the balance owing under the Senior Credit
Facility has been repaid in full (note 31).

Accruals and deferred income for the Group, which individually represent in
excess of 5% of current liabilities, consist of the following:
--------------------------------------------------------------------------------
                                                           1999          1998
                                                       (pound) 000   (pound) 000
--------------------------------------------------------------------------------
Information provider accruals                              8,742        10,867
Deferred revenue                                           5,438         4,495
Other accrued expenses                                    10,380        14,117
--------------------------------------------------------------------------------
                                                          24,560        29,479
================================================================================
<PAGE>

Annual Report 1999
Notes to the Financial Statements

www.brightstation.com
Technology born for business

49

16       Creditors: Amounts falling due after more than one year

<TABLE>
<CAPTION>
==================================================================================================================
                                                                Group         Group        Company       Company
                                                                1999           1998         1999           1998
                                                             (pound) 000   (pound) 000   (pound) 000   (pound) 000
------------------------------------------------------------------------------------------------------------------
<S>                                                              <C>           <C>           <C>            <C>
$180 million 11% Senior Subordinated Notes due 2007             108,231       104,433       108,231        104,433
Senior Credit Facility                                           22,835        30,868        22,835         30,868
Accruals                                                            355         2,256            --             --
Other creditors                                                      --           776            --             --
Deferred consideration - purchase of subsidiary (see note 20)     1,396         1,396         1,396          1,396
Obligations under finance leases                                  4,553            12         3,283             12
------------------------------------------------------------------------------------------------------------------
                                                                137,370       139,741       135,745        136,709
==================================================================================================================
</TABLE>

The Senior Subordinated Notes are for a term of 10 years and interest is fixed
at 11% throughout the term.
         The Senior Credit Facility consists of two tranches. Tranche A was the
original facility used to fund the acquisition of KRII. It is repayable over
five years and, until November 1999, interest was fixed every three to six
months at a rate of 2.25 percentage points over US Dollar LIBOR. With effect
from 15 November 1999, interest was fixed every month at a rate of 2.5 points
over US Dollar LIBOR. The Company has entered into an interest rate cap
agreement that limits the exposure of 75% of the balance of Tranche A to a
maximum US Dollar LIBOR rate of 6.5%.
         In May 1999, the Company entered into a new agreement with Chase
Manhattan Bank International Limited ("Chase") to borrow an additional $25
million ("Tranche B"). The Company issued Chase with a total of three million
warrants to subscribe for Ordinary shares in the Company (see note 18). Tranche
B is repayable in October 2002 and carried interest at a rate of 3.25 percentage
points above US Dollar LIBOR through to 1 October 1999, 4.25 percentage points
above US Dollar LIBOR through to 15 November 1999 and 4.5 percentage points
above US Dollar LIBOR thereafter.

Repayments on the Senior Subordinated Notes and Senior Credit Facility fall due
as follows:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
                                                  Group        Group         Company       Company
                                                   1999         1998           1999         1998
                                               (pound) 000  (pound) 000    (pound) 000   (pound) 000
----------------------------------------------------------------------------------------------------
<S>                                            <C>          <C>           <C>           <C>
Within 1 year                                      30,075      13,158         30,075        13,158
Within 1-2 years                                   25,349      13,158         25,349        13,158
Within 2-5 years                                       --      19,736             --        19,736
After 5 years                                     111,663     108,186        111,663       108,186
----------------------------------------------------------------------------------------------------
                                                  167,087     154,238        167,087       154,238
Less: Unamortised finance costs                    (5,946)     (5,779)        (5,946)       (5,779)
----------------------------------------------------------------------------------------------------
                                                  161,141     148,459        161,441       148,459
====================================================================================================
</TABLE>

The Company's obligations with respect to the Senior Credit Facility and finance
leases are collateralised by the assets of the Company and certain of its
subsidiaries. The Senior Subordinated Notes are unsecured.
         Subsequent to the year end, the balances owing under the Senior Credit
Facility and $180 million Senior Subordinated Notes have been repaid in full
(note 31).

Obligations under finance leases are due as follows:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                              Group          Group       Company       Company
                               1999          1998          1999          1998
                           (pound) 000    (pound) 000  (pound) 000   (pound) 000
--------------------------------------------------------------------------------
<S>                        <C>            <C>          <C>           <C>
Within 1 year                  1,813          222         1,729          210
Within 1-2 years               3,629           12         3,283           12
Within 2-5 years                 924           --            --           --
--------------------------------------------------------------------------------
                               6,366          234         5,012          222
================================================================================
</TABLE>
<PAGE>

Annual Report 1999
Notes to the Financial Statements

www.brightstation.com
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50

17       Provision for liabilities and charges

<TABLE>
<CAPTION>
====================================================================================================================================
                                                                                    Post-
                                                       Removal of                acquisition
                                                      Knight-Ridder Termination  funding of                Relocation
                              Deferred    Data centre  Information  of property   non-core                   of US
                              taxation    integration     name       leases(1)   businesses    Legal(2)   headquarters  Total
Group                        (pound) 000  (pound) 000  (pound) 000  (pound) 000  (pound) 000  (pound) 000 (pound) 000   (pound) 000
------------------------------------------------------------------------------------------------------------------------------------
<S>                         <C>          <C>          <C>           <C>         <C>          <C>         <C>           <C>
At 31 December 1997                119        4,473         1,313          917          761           --           --       7,583
Reclassification from creditors     --           --            --           --           --          547           --         547
Transfer from/(to) profit
         and loss account           (7)      (1,197)         (524)       1,589           --           --        1,758       1,619
Amounts paid                        --       (3,254)         (418)      (1,667)      (1,483)        (513)        (947)     (8,282)
Revisions to fair values            --           --            --          378          728        2,172           --       3,278
Exchange adjustments                16          (22)          (10)         (10)          (6)         (13)          (3)        (48)
----------------------------------------------------------------------------------------------------------------------------------
At 31 December 1998                128           --           361        1,207           --        2,193          808       4,697
Transfer to profit
         and loss account          (26)          --            --           --           --         (620)          --        (646)
Amounts paid                        --           --          (372)        (647)          --         (808)        (833)     (2,660)
Exchange adjustments               (13)          --            11            6           --           10           25          39
----------------------------------------------------------------------------------------------------------------------------------
At 31 December 1999                 89           --            --          566           --          775           --       1,430
==================================================================================================================================
</TABLE>

(1) Onerous lease commitments in respect of properties vacated following the
    acquisition of KRII. The Company expects to continue making payments against
    this provision until 2004.
(2) Provision for legal costs and settlements (see note 32). The Company expects
    to have substantially utilised this provision by the end of 2000.

Deferred taxation
-------------------------------------------------------------------------------
                              1999          1999         1998          1998
                           Potential    Provided in    Potential    Provided in
                           liability      accounts     liability     accounts
Group                     (pound) 000   (pound) 000   (pound) 000   (pound) 000
-------------------------------------------------------------------------------
Fixed asset related           2,704          --          1,530           --
Other timing differences         89          89            128          128
-------------------------------------------------------------------------------
                              2,793          89          1,658          128
===============================================================================
At 31 December 1999, the Group had (pound)50.1 million of tax losses carried
forward (1998: (pound)25.3 million), giving rise to an unprovided potential
deferred tax asset of (pound)18.6 million (1998: (pound)9.1 million). With the
exception of the tax losses carried forward in the Company (see below) the
Group's tax losses passed to Thomson following the disposal of the ISD.

Deferred taxation
-------------------------------------------------------------------------------
                              1999          1999          1998         1998
                           Potential    Provided in    Potential    Provided in
                           liability      accounts     liability     accounts
Company                   (pound) 000   (pound) 000   (pound) 000   (pound) 000
-------------------------------------------------------------------------------
Fixed asset related           1,470           -          1,441            -
<PAGE>

Other timing differences          -           -              -            -
-------------------------------------------------------------------------------
                              1,470           -          1,441            -
===============================================================================
At 31 December 1999, the Company had (pound)13.2 million of tax losses carried
forward (1998: (pound)15.1 million), giving rise to an unprovided potential
deferred tax asset of (pound)3.9 million (1998: (pound)4.7 million).
<PAGE>

Annual Report 1999
Notes to the Financial Statements

www.brightstation.com
Technology born for business

52

18       Share Capital continued
================================================================================
(v)      Exercise of share options
At various dates throughout 1998, in accordance with the Company's share option
schemes, a number of eligible employees exercised their share options. The
options were exercised at prices between (pound)0.49 and (pound)1.10 per share
for a total consideration of (pound)457,729.

(vi)     401(k) Investment Savings Plan contributions
The Company operates a defined contribution pension scheme in the US (the 401(k)
Investment Savings Plan). At various dates throughout 1998, the Company matched
employee contributions to this Plan, partially with the allotment of new
Ordinary shares valued at market price at the time of issue and subsequently
converted into ADSs. A total of 140,392 Ordinary shares were issued during the
year at prices between (pound)0.56 and (pound)1.84 per share for an aggregate
market value of (pound)179,936.

(vii) On 19 November 1998, the Company announced that it had acquired 100% of
the share capital of Write Works Ltd. The consideration for the acquisition was
an initial payment of (pound)1 million in cash and approximately (pound)1.2
million by the issue of 694,025 Dialog shares, representing a value of
(pound)1.66 per share. A further consideration of up to a maximum of (pound)2.8
million in cash and (pound)1 million in shares is payable on the achievement of
Write Works' targets over the next two years.

(viii) 401(k) Investment Savings Plan contributions
The Company operates a defined contribution pension scheme in the US (the 401(k)
Investment Savings Plan). At various dates throughout 1999 the Company matched
employee contributions to this Plan partially with the allotment of new Ordinary
shares valued at market price at the time of issue and subsequently converted
into ADSs. A total of 246,620 Ordinary shares were issued during the year at an
aggregate market value of (pound)203,596.

(ix)     Employee Stock Purchase Plan
The Company operates an Employee Stock Purchase Plan for US employees as defined
by section 423(b) of the United States Internal Revenue Code of 1986. On 29 June
1999, 132,248 Ordinary shares for conversion into ADSs were issued at an
aggregate market value of (pound)120,346 to participants in the first offering
under the plan.

(x)      Save As You Earn Share Option Exercises
At various dates between 29 November and 17 December 1999, in accordance with
the Company's Save As You Earn Share Option Scheme, a number of eligible
employees exercised their share options. The options were exercised at
(pound)0.49 per share for a total consideration of (pound)41,399.

(xi) On 30 November 1999, the Company announced that it had acquired the
remaining 30% interest of the share capital of Muscat Ltd. The purchase
consideration for the 30% stake was (pound)2,500,737 satisfied by the issue of
3,012,936 Ordinary shares. Each Ordinary share of The Dialog Corporation plc was
valued at 83 pence, the average mid-market price of Ordinary shares of the
Company over the five trading days prior to 30 November 1999. The purchase
provides the Company with 100% ownership of Muscat Ltd after the initial
acquisition of 70% of the share capital in 1997 (see note (ii)).

As at 31 December 1999 the Company had in place five stock plans; the 1994
Executive Share Option Scheme, the 1994 Savings Related Share Option Scheme, the
1994 Unapproved Executive Share Option Scheme, the 1997 US Stock Option Plan and
the 1998 Employee Stock Purchase Plan. Options over the Company's Ordinary
shares were also granted as part of a rollover arrangement with employees of
Muscat Limited, and options over American Depositary Shares were granted to
certain non-executive directors of the Company's US subsidiary under individual
arrangements.

At 31 December 1999, options have been granted over the Company's Ordinary
shares as follows:
--------------------------------------------------------------------------------
                                     Exercisable   Earliest         Latest
                         Ordinary       price     exercisable     exercisable
Scheme                    shares       (pound)       date            date
--------------------------------------------------------------------------------
Executive Scheme          680,863        1.10  24 March 1997    24 March 2004
Executive Scheme           20,000        0.80  25 April 1998    25 April 2005
Executive Scheme          134,500        2.48   4 October 1998   4 October 2005
Executive Scheme          103,880        1.89  14 March 2000    14 March 2007
Executive Scheme          214,900        1.58   9 April 2001     9 April 2008
Executive Scheme          158,832        1.21   1 April 2002     1 April 2009
Executive Scheme           53,450        0.91   2 July 2002      2 July 2009
Executive Scheme           30,000        0.74  25 August 2002   25 August 2009
--------------------------------------------------------------------------------
Total                   1,396,425
================================================================================
<PAGE>

Annual Report 1999
Notes to the Financial Statements

www.brightstation.com
Technology born for business

53

18       Share Capital continued
--------------------------------------------------------------------------------
                                Exercisable     Earliest            Latest
                      Ordinary     price      exercisable        exercisable
Scheme                 shares     (pound)         date               date
--------------------------------------------------------------------------------
Unapproved Scheme     128,863       1.10     24 March 1997      24 March 2001
Unapproved Scheme      98,000       2.48     4 October 1998     4 October 2002
Unapproved Scheme      21,834       2.29     31 July 1999       31 July 2000
Unapproved Scheme      15,000       1.75     28 February 1999   28 February 2003
Unapproved Scheme     100,000       2.87     16 August 1999     16 August 2003
Unapproved Scheme     441,120       1.89     14 March 2000      14 March 2004
Unapproved Scheme       7,500       2.00     26 March 2000      26 March 2004
Unapproved Scheme     376,600       1.58     9 April 2001       9 April 2005
Unapproved Scheme     150,000       1.73     2 February 1999    30 April 2005
Unapproved Scheme      10,000       1.70     8 September 2001   8 September 2005
Unapproved Scheme     790,000       1.50     8 October 2001     8 October 2005
Unapproved Scheme     261,168       1.21     1 April 2002       1 April 2006
Unapproved Scheme      86,550       0.91     2 July 2002        2 July 2006
Unapproved Scheme   1,525,000       4.00     2 July 2002        2 July 2006
--------------------------------------------------------------------------------
Total               4,011,635
================================================================================

--------------------------------------------------------------------------------
                                Exercisable     Earliest            Latest
                      Ordinary     price      exercisable        exercisable
Scheme                 shares     (pound)         date               date
--------------------------------------------------------------------------------
Muscat Unapproved     128,270      44.00     1 October 2000     1 October 2004
Muscat Unapproved     168,077      43.00     20 October 1999    20 October 2004
Muscat Unapproved      88,462      59.00     1 January 2001     1 January 2005
Muscat Unapproved     132,693      67.00     1 April 2001       1 April 2005
Muscat Unapproved      36,859      67.00     1 September 2001   1 September 2005
Muscat Unapproved      58,974      67.00     1 November 2001    1 November 2005
Muscat Unapproved      29,487      67.00     1 December 2001    1 December 2005
--------------------------------------------------------------------------------
Total                 642,822
================================================================================

                                Exercisable     Earliest            Latest
                      Ordinary     price      exercisable        exercisable
Scheme                 shares     (pound)         date               date
--------------------------------------------------------------------------------
Sharesave Scheme      133,774       0.49     1 December 1999    31 May 2000
Sharesave Scheme       99,183       0.64     1 June 2000        30 November 2000
Sharesave Scheme        2,464       2.24     1 December 2000    31 May 2001
Sharesave Scheme       25,680       1.80     1 June 2001        31 November 2001
Sharesave Scheme        2,378       1.74     1 May 2002         31 October 2002
Sharesave Scheme       69,448       1.37     1 July 2001        31 December 2001
Sharesave Scheme       38,876       1.37     1 July 2003        31 December 2003
Sharesave Scheme      108,801       0.99     1 July 2002        31 December 2002
Sharesave Scheme      141,063       0.99     1 July 2004        31 December 2004
--------------------------------------------------------------------------------
Total                 621,667
================================================================================
<PAGE>

Annual Report 1999
Notes to the Financial Statements

www.brightstation.com
Technology born for business

54

18       Share Capital continued

<TABLE>
<CAPTION>
=============================================================================================
At 31 December 1999, options have been granted over the Company's American
Depositary Shares* as follows:
---------------------------------------------------------------------------------------------
                              American   Exercisable       Earliest              Latest
                             Depositary     price         exercisable          exercisable
Scheme                         Shares         $              date                  date
---------------------------------------------------------------------------------------------
<S>                          <C>         <C>           <C>                  <C>
Employee Stock Purchase Plan     4,577      10.49      30 September 2000    30 September 2000
Employee Stock Purchase Plan    13,072       8.50      22 April 2001        22 April 2001
Employee Stock Purchase Plan    32,134       3.79      4 October 2000       4 October 2000
US Option Plan                  94,375      11.00      9 April 1999**       9 April 2008
US Option Plan                   7,500      11.88      30 April 1999**      30 April 2008
US Option Plan                  18,000      11.82      8 September 1999**   8 September 2008
US Option Plan                 110,000       9.90      8 October 1999**     8 October 2008
US Option Plan                 147,750       8.00      1 April 2000**       1 April 2009
US Option Plan                  90,000       5.75      2 July 2000**        2 July 2009
US Option Plan                   6,250       4.75      25 August 2000**     25 August 2009
US Option Plan                 162,500      25.74      2 July 2002**        2 July 2006
Individual US arrangement        6,250      10.64      12 December 1997***  12 December 2007
Individual US arrangement        6,711      14.90      14 November 1998     14 November 2004
Individual US arrangement        4,232      11.81      8 September 1999     8 September 2005
Individual US arrangement        6,250       8.00      1 April 1999***      1 April 2009
---------------------------------------------------------------------------------------------
Total                          709,601
=============================================================================================
*   One American Depositary Share is equivalent to four Ordinary shares.
**  Options become exercisable in stages. After the first year up to one quarter
of the total number of options may be exercised. After every subsequent month
for the next three years an additional 1/48 of the total number of options may
be exercised.
*** Options become exercisable in cumulative monthly increments during the 12
month period following the date of grant.
---------------------------------------------------------------------------------------------
Total options granted over Ordinary share equivalents                               9,510,953
=============================================================================================
</TABLE>

1994 Executive Share Option Scheme
In March 1994, the Company adopted the 1994 Executive Share Option Scheme (the
"Executive Scheme"). Formal approval of the Executive Scheme was given by the
Inland Revenue in March 1994. Under the terms of the Executive Scheme, options
to acquire Ordinary shares may be granted at the discretion of the Remuneration
Committee of the Board of Directors to any employee, including full-time
employee Directors. The exercise price is determined at the date of grant of an
option and shall not be less than the higher of the par value of an Ordinary
share and the closing market price of an Ordinary share on the day preceding the
date of grant. Options under the Executive Scheme generally become exercisable
on the third anniversary of the date of grant and lapse on the tenth anniversary
of the date of grant. The number of options grantable under the Executive Scheme
and the aggregate exercise price of options grantable to any individual is now
limited to (pound)30,000 following the passing of the Finance Act 1996.
Transactions under the Executive Scheme for the three years ended 31 December
1999 were as follows:

--------------------------------------------------------------------------------
                                            Options
                                          outstanding
                                                          Exercise     Weighted
                                             Number         price       average
                                              000s         (pound)      (pound)
--------------------------------------------------------------------------------
At 31 December 1996                           2,033       0.80-3.41       1.42
Granted                                         176       1.89-2.20       1.93
Cancelled                                      (311)      0.80-3.41       2.12
Exercised                                      (424)      0.81-1.10       1.00
--------------------------------------------------------------------------------
At 31 December 1997                           1,474       0.80-3.41       1.45
Granted                                         334       1.58-1.70       1.59
Cancelled                                      (139)      1.10-2.87       1.89
Exercised                                      (200)           1.10       1.10
--------------------------------------------------------------------------------
At 31 December 1998                           1,469       0.80-2.48       1.49
Granted                                         294       0.74-1.21       1.11
Cancelled                                      (367)      1.10-2.48       1.68
--------------------------------------------------------------------------------
At 31 December 1999                           1,396       0.80-2.48       1.36
--------------------------------------------------------------------------------
Exercisable at 31 December 1997               1,047       1.10-2.48       1.15
Exercisable at 31 December 1998               1,027       0.80-2.48       1.40
--------------------------------------------------------------------------------
Exercisable at 31 December 1999                 835       0.80-2.48       1.32
================================================================================
Upon completion of the sale of the ISD, options held by employees who
transferred to Thomson became exercisable upon transfer and remain so until the
later of 12 months after the date of completion or four years after the date of
grant, whereupon they lapse.
<PAGE>

Annual Report 1999
Notes to the Financial Statements

www.brightstation.com
Technology born for business

55

18       Share Capital continued
================================================================================
1994 Unapproved Executive Share Option Scheme
In March 1994, the Company adopted the 1994 Unapproved Executive Share Option
Scheme (the "Unapproved Scheme"). Under the terms of the Unapproved Scheme,
options to subscribe for Ordinary shares may be granted at the discretion of the
Remuneration Committee of the Board of Directors to any employee, including
full-time employee Directors. The exercise price is determined at the date of
grant of an option and shall not be less than the higher of the par value of an
Ordinary share and the closing market price of an Ordinary share on the day
preceding the date of grant. Options under the Unapproved Scheme generally
become exercisable on the third anniversary of the date of grant and lapse on
the seventh anniversary of the date of grant. The number of shares over which
options may be granted under the Unapproved Scheme is consistent with
institutional investor guidelines in respect of overall limits applicable to
employee share schemes. The number grantable to any individual is also in line
with such limits. Transactions under the Unapproved Scheme for the three years
ended 31 December 1999 were as follows:
--------------------------------------------------------------------------------
                                                 Options
                                               outstanding
                                                            Exercise    Weighted
                                                   Number     price      average
                                                    000s     (pound)     (pound)
--------------------------------------------------------------------------------
At 31 December 1996                                  991    1.10-2.87      1.74
Granted                                              741    1.89-2.20      1.93
Cancelled                                           (150)   1.89-2.87      2.26
Exercised                                           (242)        1.10      1.10
--------------------------------------------------------------------------------
At 31 December 1997                                1,340    1.10-2.87      1.90
Granted                                            1,436    1.50-1.73      1.55
Cancelled                                           (209)   1.58-2.87      2.13
Exercised                                           (196)        1.10      1.10
--------------------------------------------------------------------------------
At 31 December 1998                                2,371    1.10-2.87      1.73
Granted                                            1,988    0.91-4.00      1.15
Cancelled                                           (348)   1.21-2.87      1.73
--------------------------------------------------------------------------------
At 31 December 1999                                4,011    0.91-4.00      3.34
================================================================================
Exercisable at 31 December 1997                      418    1.10-2.87      1.36
--------------------------------------------------------------------------------
Exercisable at 31 December 1998                      339    1.10-2.87      1.89
--------------------------------------------------------------------------------
Exercisable at 31 December 1999                      514    1.10-2.87      1.96
================================================================================
Upon completion of the sale of the ISD, options held by employees who
transferred to Thomson became exercisable upon transfer and remain so until the
later of 12 months after the date of completion or four years after the date of
grant, whereupon they lapse.

1998 Muscat Unapproved Scheme
In December 1999, the Company acquired the remaining 30% of the issued share
capital of Muscat Limited (see note 11). Pursuant to this transaction, various
employees holding in aggregate 436 options at exercise prices ranging from
(pound)627 to (pound)1,100 under the 1998 Muscat Unapproved Share Option Scheme
(the "Muscat Scheme") were offered and accepted a total of 642,822 replacement
options over Ordinary shares of the Company at exercise prices ranging from 43
pence to 67 pence per share. Transactions under the Muscat Scheme for the year
ended 31 December 1999 are as follows:
--------------------------------------------------------------------------------
                                                 Options
                                               outstanding
                                                            Exercise    Weighted
                                                   Number     price      average
                                                    000s     (pound)     (pound)
--------------------------------------------------------------------------------
At 31 December 1998                                  --            --        --
Granted                                             643     0.43-0.67      0.55
--------------------------------------------------------------------------------
At 31 December 1999                                 643     0.43-0.67      0.55
================================================================================
Exercisable at 31 December 1998                      --            --        --
--------------------------------------------------------------------------------
Exercisable at 31 December 1999                      42          0.43      0.43
================================================================================

Upon completion of the sale of the ISD, options held by employees who
transferred to Thomson became exercisable upon transfer and remain exercisable
for six months, whereupon they lapse.
<PAGE>

Annual Report 1999
Notes to the Financial Statements

www.brightstation.com
Technology born for business

56

18       Share Capital continued
================================================================================
1994 Savings Related Share Option Scheme
In March 1994, the Company adopted the 1994 Savings Related Share Option Scheme
(the "Sharesave Scheme") which was subsequently approved by the Inland Revenue.
Under the rules of the Sharesave Scheme, participation is offered to all UK
employees, including full-time employee Directors. All options are linked to a
contractual savings scheme. Participants may save between (pound)5 and
(pound)250 per month over a three or five year period at the end of which they
are granted a tax-free bonus. Participants may withdraw from the savings
contract at any time (although their option will then lapse) and are not obliged
to exercise their options at the date of maturity. The exercise price is
determined at the date of grant of an option and shall not be less than the
higher of the par value of an Ordinary share and 85% (formerly 80% up until
December 1995) of the market value of an Ordinary share at the date of
invitation. Options under the scheme become exercisable on the bonus date and
remain exercisable for a period of six months. The number of shares over which
options may be granted under the Sharesave Scheme are consistent with
institutional investor guidelines in respect of overall limits applicable to
employee share schemes. The number grantable to any individual is also in line
with such limits. Transactions under the Sharesave Scheme for the three years
ended 31 December 1999 were as follows:
--------------------------------------------------------------------------------
                                                 Options
                                               outstanding
                                                            Exercise    Weighted
                                                   Number     price      average
                                                    000s     (pound)     (pound)
--------------------------------------------------------------------------------
At 31 December 1996                                 824     0.49-2.24      0.76
Granted                                              85          1.74      1.74
Cancelled                                          (272)    0.49-2.24      0.79
Exercised                                            (8)    0.64-1.80      0.70
--------------------------------------------------------------------------------
At 31 December 1997                                 629     0.49-2.24      0.88
Granted                                             224          1.37      1.37
Cancelled                                          (157)    0.49-1.80      1.49
Exercised                                           (45)    0.49-0.64      0.49
--------------------------------------------------------------------------------
At 31 December 1998                                 651     0.49-2.24      0.93
Granted                                             312          0.99      0.99
Cancelled                                          (257)    0.49-1.80      1.14
Exercised                                           (84)         0.49      0.49
================================================================================
At 31 December 1999                                 622     0.49-2.24      0.93
================================================================================
Exercisable at 31 December 1997                      74     0.49-1.80      0.56
Exercisable at 31 December 1998                      --            --        --
--------------------------------------------------------------------------------
Exercisable at 31 December 1999                     134          0.49      0.49
================================================================================
Upon completion of the sale of the ISD, options held by employees who
transferred to Thomson became exercisable upon transfer to the value of
accumulated savings, and remain exercisable for six months, whereupon they
lapse.
<PAGE>

Annual Report 1999
Notes to the Financial Statements

www.brightstation.com
Technology born for business

57

18       Share Capital continued
================================================================================
1997 US Stock Option Plan
In November 1997, the Company adopted the 1997 US Stock Option Plan (the "US
Option Plan") which provides for the grant of both incentive and non-statutory
stock options to purchase the Company's American Depositary Shares (ADSs).
Incentive stock options granted under the US Option Plan are intended to qualify
as incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the 'Code'). Non-statutory stock options
granted under the US Option Plan are intended not to qualify as incentive stock
options under the Code. Under the terms of the US Option Plan, options to
acquire ADSs may be granted by the Remuneration Committee of the Board of
Directors to any US resident employee, including employee Directors.
         The exercise price of incentive stock and non-statutory stock options
under the US Option Plan may not be less than the fair market value of the ADSs
subject to the option on the date of the option grant, and in some cases, may
not be less than 110% of such fair market value. Options granted under the US
Option Plan may become exercisable ('vest') in cumulative increments determined
by the Remuneration Committee of the Board of Directors and lapse no later than
the tenth anniversary of the date of grant.
         The number of shares over which options may be granted under the US
Option Plan is consistent with the institutional investor guidelines in respect
of overall limits applicable to employee share schemes. The number grantable to
any individual is also in line with such limits. Transactions under the US
Option Plan up to 31 December 1999 were as follows:

--------------------------------------------------------------------------------
                                                 Options
                                               outstanding

                                                   Number   Exercise    Weighted
                                                  of ADSs     price      average
                                                    000s        $           $
--------------------------------------------------------------------------------
At 31 December 1996                                   --            --       --
Granted                                               63         14.90    14.90
--------------------------------------------------------------------------------
At 31 December 1997                                   63         14.90    14.90
--------------------------------------------------------------------------------
Granted                                              427    9.88-11.88    10.75
Cancelled                                           (122)   9.88-14.90    12.93
--------------------------------------------------------------------------------
At 31 December 1998                                  368    9.90-11.88    10.73
Granted                                              456    4.75-25.74    13.77
Cancelled                                           (187)   4.75-11.80    10.04
--------------------------------------------------------------------------------
At 31 December 1999                                  637    4.75-25.74    13.11
================================================================================
Exercisable at 31 December 1997                       --            --       --
Exercisable at 31 December 1998                       --            --       --
--------------------------------------------------------------------------------
Exercisable at 31 December 1999                       80    9.90-25.74    10.65
================================================================================
Upon completion of the sale of the ISD, options held by employees who
transferred to Thomson became exercisable upon completion, after which they
lapsed. Options held by individuals with change of control provisions in their
contracts remain exercisable until the later of 12 months after the date of
completion or four years after the date of grant, whereupon they lapse.
<PAGE>

Annual Report 1999
Notes to the Financial Statements

www.brightstation.com
Technology born for business

58

18       Share Capital continued
================================================================================
1998 US Employee Stock Purchase Plan
In June 1998 the Company adopted the 1998 US Employee Stock Purchase Plan (the
"Purchase Plan"), which provides for the grant of rights ('Rights') to purchase
ADSs in the Company. The Rights are intended to qualify as options issued under
'employee stock purchase plans' as defined in Section 423(b) of the Code.
Participation in the Purchase Plan is offered to all US resident employees,
including full-time employee Directors. The initial offering began on 17 June
1998 (the 'Offering Date') and ended on 31 June 1999 (the 'Purchase Date').
Thereafter, and subject to the discretion of the Board, offerings will begin
approximately every six months following the announcement of the interim and
final results. All Rights under an offering are linked to accumulated payroll
deductions over the course of the offering, and participants may withdraw from
the plan at any time during an offering (although their Rights will then lapse).
The purchase price of the ADSs is not less than the lesser of 85% of the fair
market value of the ADSs on either the Offering Date or the Purchase Date. The
purchase price may include any UK stamp duty reserve tax payable with respect to
the issue of the ADSs.
         Under US law, an individual may not purchase more than $25,000 worth of
ADSs in any calendar year (as determined by the fair market value on the
Offering Date). The number of shares over which the Rights may be granted under
the Purchase Plan is consistent with institutional investor guidelines in
respect of overall limits applicable to employee share schemes. The number
grantable to any individual is also in line with such limits. Transactions under
the Purchase Plan up to 31 December 1999 are as follows:

--------------------------------------------------------------------------------
                                                  Options
                                                outstanding

                                                   Number    Exercise   Weighted
                                                  of ADSs     price      average
                                                    000s        $           $
--------------------------------------------------------------------------------
At 31 December 1997                                  --            --        --
Granted                                              66    8.65-10.49      8.91
Cancelled                                            (9)         8.65      8.65
--------------------------------------------------------------------------------
At 31 December 1998                                  57    8.65-10.49      8.96
Granted                                              48    3.79- 8.50      5.36
Cancelled                                           (31)   8.50-10.49      2.47
Exercised                                           (33)         5.35      5.35
--------------------------------------------------------------------------------
At 31 December 1999                                  41    3.79-10.49      5.64
================================================================================
Exercisable at 31 December 1997                      --            --        --
Exercisable at 31 December 1998                      --            --        --
--------------------------------------------------------------------------------
Exercisable at 31 December 1999                      --            --        --
================================================================================
Rights to acquire ADSs matured on completion. Thereafter they lapsed.

Individual US arrangements
Between 1997 and 1999, options over ADSs were granted at the prevailing market
value to certain individuals who were Non-Executive Directors of The Dialog
Corporation, the Company's North American subsidiary. Transactions under these
individual US schemes up to 31 December 1999 were as follows:

--------------------------------------------------------------------------------
                                                  Options
                                                outstanding

                                                   Number    Exercise   Weighted
                                                  of ADSs     price      average
                                                    000s        $           $
--------------------------------------------------------------------------------
At 31 December 1996                                 --            --         --
Granted                                             13   10.63-14.90      12.84
--------------------------------------------------------------------------------
At 31 December 1997                                 13   10.63-14.90      12.84
Granted                                              4         11.81      11.81
--------------------------------------------------------------------------------
At 31 December 1998                                 17   10.63-14.90      12.59
Granted                                              6          8.00       8.00
--------------------------------------------------------------------------------
At 31 December 1999                                 23    8.00-14.90      11.37
================================================================================
Exercisable at 31 December 1997                      1         10.63      10.63
Exercisable at 31 December 1998                     13   10.63-14.90      12.84
--------------------------------------------------------------------------------
Exercisable at 31 December 1999                     23    8.00-14.90      11.37
================================================================================
Options granted under the individual arrangements were unaffected by the
transfer of the ISD to Thomson
<PAGE>

Annual Report 1999
Notes to the Financial Statements

www.brightstation.com
Technology born for business

59

18       Share Capital continued
================================================================================
Warrants
In connection with a new term facility of $25 million agreed between the Company
and Chase Manhattan Bank International Limited ("Chase") on 17 May 1999 (see
note 16), the Company issued to Chase between May 1999 and November 1999 a total
of 3 million warrants to subscribe for Ordinary shares in the Company. 1.5
million of those warrants entitle Chase to subscribe for Ordinary shares at any
time before 11 October 2002 (the "2002 Warrants"). The remaining 1.5 million
warrants entitle Chase to subscribe for Ordinary shares at any time up to 14 May
2004 (the "2004 Warrants"). The subscription price for an Ordinary share
subscribed on exercise of a Warrant is 90.6 pence per Ordinary share.
         In relation to both the 2002 Warrants and the 2004 Warrants, the number
of warrants and/or the exercise price may be adjusted on the occurrence of
certain events including, on any capital reorganisation of the Company or on any
distribution of assets to shareholders or on any issue of Ordinary shares for
cash at less than "Fair Market Value". For these purposes, "Fair Market Value"
means (whilst the Ordinary shares are listed) the average of the daily market
prices for an Ordinary share for the 30 consecutive dealing days commencing 45
dealing days before the relevant date.
         On 12 November 1999, warrants to subscribe to an aggregate of six
million Ordinary shares (the "2009 Warrants") were issued to the Company's
senior lenders, including to Chase Manhattan Bank, ABN AMRO Bank, NM Rothschild
& Sons, the Bank of Scotland and the Royal Bank of Scotland (the "Banks"). The
2009 Warrants were issued in consideration of the Banks agreeing to relax the
covenant arrangements in connection with the refinancing of the Company's senior
debt. The 2009 Warrants may be exercised, in whole or in part, at any time
before 12 November 2009. The subscription price for an Ordinary share subscribed
on exercise of a Warrant is 90.6 pence per Ordinary share.
         The terms of the 2009 Warrants contain provisions to protect the
holders of those warrants and for adjusting the subscription price and the
number of shares which are the subject of the 2009 Warrants in certain
circumstances to take into account alterations to the share capital of the
Company in the same way described above in relation to the 2002 Warrants and the
2004 Warrants.

         As at the date of this report no warrants had been exercised into
Ordinary shares of the Company.

19       Share premium
<TABLE>
<CAPTION>
==============================================================================================
                                                           1999          1998          1997
                                                       (pound) 000   (pound) 000   (pound) 000
----------------------------------------------------------------------------------------------
<S>                                                       <C>           <C>            <C>
Balance at 1 January                                      152,128       150,341        35,672
Premium arising on shares issued on exercise of options       350           632           691
Premium arising on shares issued on placing/flotation
     and acquisitions of fixed asset investments            2,471         1,155       124,038
Expenses of share issue                                         -             -       (10,060)
----------------------------------------------------------------------------------------------
Balance at 31 December                                    154,949       152,128       150,341
==============================================================================================
</TABLE>
<PAGE>

Annual Report 1999
Notes to the Financial Statements

www.brightstation.com
Technology born for business

60

20       Shares to be Issued
================================================================================
On 19 November 1998, the Company acquired all of the share capital of Write
Works for a maximum of (pound)6,015,000 to be paid over two years (see note 11).
The consideration was satisfied through an initial payment of (pound)965,000 and
(pound)1,150,000 by the issue of 694,025 new Ordinary shares.
         A further consideration of up to a maximum of (pound)3,800,000 in cash
and shares will be paid on the achievement of certain earnings targets over the
next two years.
--------------------------------------------------------------------------------
                                                                     (pound) 000
--------------------------------------------------------------------------------
Total future consideration                                                3,800
Cash payable within one year (see note 15)                               (1,437)
Cash payable after more than one year (see note 16)                      (1,396)
--------------------------------------------------------------------------------
Shares to be issued                                                         967
================================================================================
On 12 May 2000, the Company issued 420,508 new Ordinary shares as part
settlement of the deferred consideration at a price of 98.3 pence per share (see
note 31). The final tranche of shares are due to be issued in March 2001.

21       Profit and Loss Account
<TABLE>
<CAPTION>
=====================================================================================================
                                                                    1999         1998         1997
Group                                                           (pound) 000  (pound) 000  (pound) 000
-----------------------------------------------------------------------------------------------------
<S>                                                                <C>          <C>        <C>
Balance at 1 January                                              (249,427)   (243,524)    (10,561)
(Loss)/profit for the financial year                                (5,385)      4,439     (20,744)
Effect of exchange rate movements on net investment in foreign
         subsidiaries net of associated borrowings                     894      (1,586)     (2,015)
Goodwill written off                                                    --     (11,022)   (209,120)
Effect of exchange rate movements on goodwill written off           (6,385)      2,266      (1,084)
-----------------------------------------------------------------------------------------------------
Balance at 31 December                                            (260,303)   (249,427)   (243,524)
=====================================================================================================
</TABLE>
Cumulative goodwill written off at 31 December 1999 amounted to
(pound)219,316,000, comprising balances denominated in US Dollars of
$355,429,000 and balances denominated in Pounds Sterling of (pound)5,737,000
(1998: (pound)219,316,000, comprising balances denominated in US Dollars of
$355,429,000 and balances denominated in Pounds Sterling of (pound)5,737,000;
1997: (pound)210,605,000 comprising balances denominated in US Dollars of
$337,091,000 and balances denominated in Pounds Sterling of (pound)5,737,000).

<TABLE>
<CAPTION>
=====================================================================================================
                                                                    1999         1998         1997
Company                                                         (pound) 000  (pound) 000  (pound) 000
-----------------------------------------------------------------------------------------------------
<S>                                                                <C>          <C>        <C>
Balance at 1 January                                               (13,664)     (6,400)    (10,520)
(Loss)/profit for the financial year                              (103,340)     (9,016)      4,120
Effect of exchange rate movements on net debt                       (3,618)      1,752           -
-----------------------------------------------------------------------------------------------------
Balance at 31 December                                            (120,622)    (13,664)     (6,400)
=====================================================================================================
</TABLE>
<PAGE>

Annual Report 1999
Notes to the Financial Statements

www.brightstation.com
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61

22       Reconciliation of Movement in Ordinary Shareholders' Funds

<TABLE>
<CAPTION>
====================================================================================================================================
                                                                                                   1999         1998         1997
Group                                                                                          (pound) 000  (pound) 000  (pound) 000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                            <C>          <C>          <C>
(Loss)/profit for the financial year                                                              (5,385)       4,439      (20,744)
Consolidated translation differences on foreign currency net investments                          (5,491)         680       (3,099)
New share capital subscribed for cash                                                                355          637      120,586
New share capital subscribed on acquisition of subsidiaries and other fixed asset investments      2,501        1,162        4,719
Expenses of share issue                                                                                -            -      (10,060)
Shares to be issued                                                                                    -          967            -
Goodwill written off                                                                                   -      (11,022)    (209,120)
------------------------------------------------------------------------------------------------------------------------------------
Net movement in Ordinary shareholders' funds                                                      (8,020)      (3,137)    (117,718)
------------------------------------------------------------------------------------------------------------------------------------
Shareholders' funds at 1 January                                                                 (94,818)     (91,681)      26,037
------------------------------------------------------------------------------------------------------------------------------------
Shareholders' funds at 31 December                                                              (102,838)     (94,818)     (91,681)
====================================================================================================================================
</TABLE>

<TABLE>
<CAPTION>
===================================================================================================================================
                                                                                                  1999         1998        1997
Company                                                                                       (pound) 000  (pound) 000  (pound) 000
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                           <C>          <C>          <C>
(Loss)/profit for the financial year                                                            (103,340)      (9,016)       4,120
New share capital subscribed for cash                                                                355          637      120,586
New share capital subscribed on acquisition of subsidiaries and other fixed asset investments      2,501        1,162        4,719
Expenses of share issue                                                                                -            -      (10,060)
Effect of exchange rate movements on net debt                                                     (3,618)       1,752            -
Shares to be issued                                                                                    -          967            -
------------------------------------------------------------------------------------------------------------------------------------
Net movement in Ordinary shareholders' funds                                                    (104,102)      (4,498)     119,365
------------------------------------------------------------------------------------------------------------------------------------
Shareholders' funds at 1 January                                                                 140,945      145,443       26,078
------------------------------------------------------------------------------------------------------------------------------------
Shareholders' funds at 31 December                                                                36,843      140,945      145,443
====================================================================================================================================
</TABLE>

23       Minority Equity Interests
================================================================================
                                                           1999          1998
                                                       (pound) 000   (pound) 000
--------------------------------------------------------------------------------
Balance at 1 January                                       1,077          726
Profit attributed to the minorities                           50          356
Exchange adjustments                                          26           (5)
Arising from acquisitions during the year                   (610)           -
--------------------------------------------------------------------------------
Balance at 31 December                                       543        1,077
================================================================================
<PAGE>

Annual Report 1999
Notes to the Financial Statements

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62

24       Commitments under Operating Leases and Finance Leases
================================================================================
As at 31 December 1999, the Group had annual commitments under non-cancellable
operating leases as set out below:

--------------------------------------------------------------------------------
                                  1999         1999        1998          1998
                                Land and                 Land and
                               buildings       Other     buildings      Other
                              (pound) 000  (pound) 000  (pound) 000  (pound) 000
--------------------------------------------------------------------------------
Operating leases which expire:
Within 1 year                       31           -         1,138         220
In 2-5 years                     1,970          40         1,548          15
After 5 years                    3,700           -         1,694           -
--------------------------------------------------------------------------------
                                 5,701          40         4,380         235
================================================================================

The Group leases offices and operating facilities and certain equipment under a
variety of operating and finance leases that expire at various dates through to
2008. Future minimum lease payments under operating and finance leases with
initial or remaining non-cancellable terms of one or more years are as follows
as at 31 December 1999:

--------------------------------------------------------------------------------
                                                        Operating      Finance
                                                          leases        leases
Year ending 31 December                                (pound) 000   (pound) 000
--------------------------------------------------------------------------------
2000                                                      11,547        2,066
2001                                                      11,920        1,983
2002                                                      11,440        1,974
2003                                                      11,124          423
2004                                                      10,494          169
2005-2008                                                 22,906            -
--------------------------------------------------------------------------------
Total minimum lease payments                              79,432        6,615
Less: amount representing interest                             -         (249)
--------------------------------------------------------------------------------
Net minimum lease payments                                79,432        6,366
================================================================================

Rent expense under operating leases was(pound)4,613,000 (see note 4),
(pound)5,160,000, (pound)1,246,000 for the years ended 31 December 1999, 1998
and 1997 respectively.

25       Reconciliation of Operating Profit/(Loss) to Net Cash Inflow from
         Operating Activities

<TABLE>
<CAPTION>
=======================================================================================
                                                      1999         1998         1997
                                                  (pound) 000  (pound) 000  (pound) 000
---------------------------------------------------------------------------------------
<S>                                               <C>          <C>          <C>
Operating profit/(loss)                               15,115       23,026     (22,307)
Less: Restructuring costs (see note 5)                    --        2,583      18,550
---------------------------------------------------------------------------------------
Operating profit/(loss) before restructuring costs    15,115       25,609      (3,757)
Depreciation charges                                   7,482        7,962       2,877
Amortisation of development costs                      9,334        7,699       3,558
Amortisation of goodwill                                 415           61          --
Loss/(profit) on sale of tangible fixed assets           631           17         (15)
Decrease in stocks                                       167           11           1
Decrease/(increase) in debtors                        10,305       (1,077)     (1,651)
(Decrease)/increase in creditors                      (7,607)         (13)      4,156
Exchange variances                                       401          786         (60)
Cash costs of restructuring                           (2,660)      (6,904)     (1,934)
---------------------------------------------------------------------------------------
Net cash inflow                                       33,583       34,151       3,175
=======================================================================================
</TABLE>
<PAGE>

Annual Report 1999
Notes to the Financial Statements

www.brightstation.com
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63

26       Management of Liquid Resources

<TABLE>
<CAPTION>
=======================================================================================================================
                                                                                      1999         1998         1997
                                                                                  (pound) 000  (pound) 000  (pound) 000
-----------------------------------------------------------------------------------------------------------------------
<S>                                                                               <C>          <C>          <C>
Net withdrawals from short-term deposits over three months not repayable on demand      -          620         6,000
Net payments into short-term deposits over three months not repayable on demand         -            -          (620)
-----------------------------------------------------------------------------------------------------------------------
Net cash inflow from management of liquid resources                                     -          620         5,380
=======================================================================================================================
</TABLE>

Movements in all short-term deposits not repayable on demand are reported under
the heading of management of liquid resources.

27       Analysis of Changes in Net (Debt)/Funds

<TABLE>
<CAPTION>
==============================================================================================================================
                                                            Cash and       Debt due      Debt due
                                                 Bank          bank       within one    after one      Finance
                                   Cash        deposits      deposits        year          year         lease         Total
                               (pound) 000   (pound) 000   (pound) 000   (pound) 000   (pound) 000   (pound) 000   (pound) 000
------------------------------------------------------------------------------------------------------------------------------
<S>                            <C>           <C>           <C>           <C>           <C>           <C>           <C>
At 1 January 1997                  2,038         6,000         8,038            --             --      (2,150)          5,888
Cash flows                        10,832        (5,380)        5,452        (2,831)      (151,241)      1,491        (147,129)
Exchange movements                   232            --           232           (89)        (4,565)         --          (4,422)
Other non-cash changes                --            --            --          (119)            --        (122)           (241)
------------------------------------------------------------------------------------------------------------------------------
At 1 January 1998                 13,102           620        13,722        (3,039)      (155,806)       (781)       (145,904)
Cash flows                        (8,551)         (620)       (9,171)        2,770          6,812         547             958
Exchange movements                   (57)           --           (57)           81          1,671          --           1,695
Other non-cash changes                --            --            --           (44)          (902)         --            (946)
Other movements                       --            --            --       (14,446)        14,446          --              --
------------------------------------------------------------------------------------------------------------------------------
At 1 January 1999                  4,494            --         4,494       (14,678)      (133,779)       (234)       (144,197)
Reclassification of loan from
         other creditors              --            --            --          (894)            --          --            (894)
Cash flows                         6,304            --         6,304         1,404         (6,933)     (2,533)         (1,758)
Exchange movements                  (277)           --          (277)         (465)        (4,515)         15          (5,242)
Other non-cash changes                --            --            --            --         (1,274)     (3,614)         (4,888)
Other movements                       --            --            --       (16,942)        16,942          --              --
------------------------------------------------------------------------------------------------------------------------------
At 31 December 1999               10,521            --        10,521       (31,575)      (129,559)     (6,366)       (156,979)
==============================================================================================================================
</TABLE>

28       Major Non-Cash Transactions
================================================================================
The consideration for the purchase of the remaining 30% of the UK subsidiary
Muscat Limited comprised shares. Further details of the acquisition are set out
in Note 11.

29       Capital Commitments
================================================================================
Capital commitments as at 31 December 1999 were as follows:
--------------------------------------------------------------------------------
                                                           1999          1998
                                                       (pound) 000   (pound) 000
--------------------------------------------------------------------------------
Authorised and contracted for                               403          139
--------------------------------------------------------------------------------
Authorised but not contracted for                             -          344
================================================================================
<PAGE>

Annual Report 1999
Notes to the Financial Statements

www.brightstation.com
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64

30 Summary of differences between UK and US Generally Accepted Accounting
Principles (GAAP)
================================================================================
Accounting principles
These consolidated financial statements have been prepared in accordance with UK
GAAP which differs in certain significant respects from US GAAP. A description
of the relevant accounting principles which differ materially is given below.

Turnover
It is the Company's policy to recognise online subscriptions in full when
contractually due and invoiced and to provide in full for the cost of related
service obligations. Under US GAAP, online subscription revenues are recognised
rateably over the subscription term which is usually 12 months. No adjustment is
required under US GAAP for the 'modular pricing' subscriptions since these
subscriptions are recognised rateably over the subscription term.
         In 1999, the Company has recognised revenue in respect of technology
sales and exclusive distribution rights when contractually due and invoiced.
Under US GAAP, this revenue is deferred over the contract period of ten years.

Intangible fixed assets
It is the Company's policy to capitalise costs associated with the development
of the host computer system and product development and amortise over a period
of five and three years, respectively. Under US GAAP, costs associated with the
host computer are expensed as incurred, as are product development costs
incurred to establish technological feasibility. Statement of Financial
Accounting Standards No. 86 requires that product development costs incurred
subsequent to establishing technological feasibility up until the product's
general release are capitalised; however in the Company's case the period
between the establishment of technical feasibility, as evidenced by a product
design and the completion and testing of a working model, and the product's
release is short and the associated costs insignificant. Consequently, under US
GAAP, no product development costs have been capitalised. Product development
costs capitalised under UK GAAP include interest (note 6) which would not be
capitalisable under US GAAP. These amounts are included in this adjustment.

Indexing costs
The Company's policy is to defer database indexing costs and amortise these
costs on a straight line basis over two years. Under US GAAP, database indexing
costs are expensed as incurred.

Deferred taxation
Under UK GAAP, deferred taxes are accounted for to the extent that it is
considered probable that a liability or asset will crystallise in the
foreseeable future. Under US GAAP, deferred taxes are accounted for on all
temporary differences and a valuation allowance is established to reduce
deferred tax assets to the amount which 'more likely than not' will be realised
in future tax returns. Deferred tax amounts also arise as a result of the other
US GAAP adjustments.

The UK deferred tax liability can be reconciled as follows to the US GAAP net
deferred tax asset:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
                                                         1999          1999          1998          1998
                                                     (pound) 000   (pound) 000   (pound) 000   (pound) 000
----------------------------------------------------------------------------------------------------------
<S>                                                  <C>           <C>           <C>           <C>
UK liability                                                           (89)                        (128)
Liabilities not provided for under UK GAAP                          (2,704)                      (1,530)
----------------------------------------------------------------------------------------------------------
Full potential deferred tax liability under UK GAAP                 (2,793)                      (1,658)

Unprovided deferred tax asset on tax losses             18,594                       9,090

Tax effects of US GAAP adjustments:
Revenue recognition                                      5,695                       1,045
System and product development costs                     8,109                       8,804
Deferred indexing costs                                     89                         168
Acquisition accounting                                  31,819                      17,745
Sale and leaseback                                         298                           -
----------------------------------------------------------------------------------------------------------
Gross deferred tax asset in accordance with US GAAP                 64,604                       36,852
----------------------------------------------------------------------------------------------------------
Total net deferred tax asset under US GAAP                          61,811                       35,194
Deferred tax asset valuation allowance                             (61,811)                     (35,194)
----------------------------------------------------------------------------------------------------------
Net deferred tax asset in accordance with US GAAP                        -                            -
==========================================================================================================
</TABLE>

Management believes that the available objective evidence creates sufficient
uncertainty regarding realisability of these items so that a full valuation
allowance has been recorded.
<PAGE>

Annual Report 1999
Notes to the Financial Statements

www.brightstation.com
Technology born for business

65

30 Summary of differences between UK and US Generally Accepted Accounting
Principles (GAAP) continued
================================================================================
The US GAAP basis tax provision is comprised as follows:
--------------------------------------------------------------------------------
                                             1999          1998          1997
                                         (pound) 000   (pound) 000   (pound) 000
--------------------------------------------------------------------------------
Current:
UK corporation tax                           (65)            -             -
Non-UK tax                                 1,569           776           332
--------------------------------------------------------------------------------
                                           1,504           776           332
================================================================================

The US GAAP tax provision is reconciled to the benefit derived by applying the
UK statutory rate to the US GAAP loss before tax as follows:
--------------------------------------------------------------------------------
                                             1999          1998          1997
                                         (pound) 000   (pound) 000   (pound) 000
--------------------------------------------------------------------------------
US GAAP amounts at UK statutory rate of
     30% (1998: 31%; 1997: 31.5%)          (18,166)      (10,223)       (7,877)
Disallowed expenditure                         989         1,306           304
Differential tax rates                       1,747        (3,277)            -
Change in valuation allowance               16,899        12,897         8,006
Other                                           35            73          (101)
--------------------------------------------------------------------------------
US GAAP tax provision                        1,504           776           332
================================================================================

Acquisition accounting
Under UK GAAP, the Company has written off purchased goodwill, defined as the
excess of the acquisition price over the fair value of the net assets acquired,
against reserves for all acquisitions made prior to 31 December 1997. For US
GAAP purposes, the acquisition price is allocated to all tangible and intangible
assets acquired based on their fair value, including in-process research and
development. Amounts allocated to in-process research and development are then
immediately expensed.
         Goodwill and other acquisition-related intangible assets are recognised
on the balance sheet and amortised by charges against income over its estimated
useful life, not to exceed 40 years.
         Under UK GAAP, for all acquisitions made since 1 January 1998, goodwill
is capitalised and subsequently written off over its estimated useful life,
which currently ranges from 10 to 20 years.
         The Group has accounted for its acquisition of KRII in accordance with
FRS7, 'Fair values in acquisition accounting'. This standard sets out rules for
accounting for acquisitions in consolidated financial statements and states that
the fair value balance sheet of an acquired company cannot include provisions
for integration and reorganisation costs set up by the acquiring company. Under
US GAAP, certain integration and reorganisation costs may be considered
liabilities assumed and included in the allocation of the acquisition cost.

Employee costs
During 1993, certain share allocations were made to certain of the Company's
employees at par value which were below deemed market value. Under UK GAAP these
share issues were recorded at their par value, whereas under US GAAP the
difference between the par value and the deemed market value is considered to be
employee compensation and expensed in total in the year.
         In addition, prior to December 1995, options were granted under the
Sharesave Scheme at a 20% discount (15% with effect from December 1995 onwards)
from the fair market value of the stock at the date of grant. Under UK GAAP, the
share issues are recorded at their discounted price when the options are
exercised. Under US GAAP, the discount is considered to be employee compensation
and is expensed over the five year savings period of the scheme.
         Under US GAAP, the Company applies Accounting Principle Board Opinion
No. 25 'Accounting for Stock Issued to Employees' and related interpretations in
accounting for its schemes. Had compensation expense for the Company's share
option schemes been determined based upon the fair value at the grant date for
awards under these schemes consistent with the methodology prescribed under SFAS
No. 123 'Accounting for Stock-Based Compensation', the Company's US GAAP net
loss and loss per share would have been increased in 1999 by (pound)1,615,000
and 1.1 pence per share (1998: (pound)995,000 and 0.7 pence per share; 1997:
(pound)369,000 and 0.2 pence per share).
         The fair value of the options granted has been estimated using the
Black-Scholes option pricing model with the following assumptions: dividend
yield of 0% (1998 and 1997: 0%), volatility of 79% (1998: 63%; 1997: 59%),
risk-free investment rate of 5.5% (1998: 5.5%; 1997: 6.5%), assumed forfeiture
rate of 0% (1998 and 1997: 0%) and an expected life of six years (1998 and 1997:
six years). The average value of the options granted during 1999 is estimated as
being 107 pence (1998: 113 pence; 1997: 119 pence) for each Ordinary share.
<PAGE>

Annual Report 1999
Notes to the Financial Statements

www.brightstation.com
Technology born for business

66

30 Summary of differences between UK and US Generally Accepted Accounting
Principles (GAAP) continued
================================================================================
Investments in debt and equity securities Under UK GAAP, fixed asset investments
are held at cost unless there is a permanent diminution in value where upon
provision is made for such diminution through the profit and loss account. Under
US GAAP, debt and equity investments that meet the definition of
'available-for-sale securities', as defined by Statement of Financial Accounting
Standards No. 115 ('SFAS 115'), are held at their market value; unrealised
holding gains and losses are excluded from earnings and reported as a net amount
as a component of shareholders' equity until realised.

Consolidated statement of cash flows
The consolidated statement of cash flows prepared in accordance with FRS 1
(revised) presents substantially the same information as that required under US
GAAP. Under US GAAP, however, there are certain differences from UK GAAP with
regard to the classification of items within the cash flow statement and with
regard to the definition of cash and cash equivalents.
         Under UK GAAP, cash flows are presented separately for trading
activities, returns in investments and servicing of finance, taxation, capital
expenditure and financial investment, acquisition and disposals, equity
dividends paid, management of liquid resources and financing activities.
         Under US GAAP, however, only three categories of cash flow activity are
reported, being operating activities, investing activities and financing
activities. Cash flows from taxation and returns on investments and servicing of
finance would be included under operating activities under US GAAP.
         Under US GAAP, cash and cash equivalents do not include overdrafts, but
do include investments repayable within three months of maturity when acquired.

Set out below, for illustrative purposes, is a summary consolidated statement of
cash flows under US GAAP:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
                                                         1999          1998          1997
Year ended 31 December                                (pound) 000   (pound) 000   (pound) 000
--------------------------------------------------------------------------------------------
<S>                                                   <C>           <C>           <C>
Net cash provided by/(used in) operating activities      3,746        5,240           (122)
Net cash used in investing activities                   (5,646)      (4,120)      (256,054)
Net cash provided by/(used in) financing activities      8,205       (9,671)       263,128
--------------------------------------------------------------------------------------------
Net (decrease)/increase in cash and cash equivalents     6,305       (8,551)         6,952
Cash and cash equivalents at beginning of period         4,494       13,722          6,538
Effect of foreign exchange rate changes                   (278)        (677)           232
--------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period              10,521        4,494         13,722
============================================================================================
</TABLE>

Fair value of financial instruments
The carrying amounts and estimated fair values of the Group's financial
instruments at 31 December 1999 and 1998 are as follows:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
                                   Carrying        Fair        Carrying        Fair
                                    amount         value        amount        value
                                     1999          1999          1998          1998
                                 (pound) 000   (pound) 000   (pound) 000   (pound) 000
--------------------------------------------------------------------------------------
<S>                                 <C>           <C>            <C>          <C>
Cash and bank deposits              10,521        10,521         4,494        4,494
Senior Credit Facility             (55,424)      (55,424)      (46,052)     (46,052)
Senior Subordinated Notes         (111,663)      (53,598)     (108,186)    (104,399)
Obligations under finance leases    (6,366)       (6,366)         (234)        (234)
Interest rate cap agreement             --            30           148           34
--------------------------------------------------------------------------------------
</TABLE>
The amounts in the table are stated gross of unamortised finance costs

         The carrying amounts of Senior Subordinated Notes were based on the
quoted market prices for these instruments.
         The carrying amount of cash and bank deposits is a reasonable estimate
of fair value.
         The Senior Credit Facility bears interest on a floating rate basis
based on the current value of US Dollar LIBOR. Therefore the fair value of this
instrument is considered to approximate its carrying amount.
         In the opinion of the Directors, the market value of the finance lease
obligations approximates the carrying amount, having regard to the interest
rates available to the Group for similar borrowings at the balance sheet date.
         The fair value of the interest rate cap agreement has been estimated
upon the available market price for a similar instrument at 31 December 1999 and
1998.
<PAGE>

Annual Report 1999
Notes to the Financial Statements

www.brightstation.com
Technology born for business

67

30 Summary of differences between UK and US Generally Accepted Accounting
Principles (GAAP) continued
================================================================================
Exceptional items
Under UK GAAP, certain exceptional items are shown separately on the face of the
profit and loss account after operating profit and before interest. Under US
GAAP, exceptional items should be included as a normal operating item so that
operating profit/(loss) includes these costs. The adjustments to operating
profit/(loss) under US GAAP can be reconciled as follows:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
                                                      1999          1998          1997
Year ended 31 December                             (pound) 000   (pound) 000   (pound) 000
-----------------------------------------------------------------------------------------
<S>                                                <C>           <C>           <C>
Operating profit/(loss) in accordance with UK GAAP   15,115        20,726       (22,307)
Reclassification of exceptional item                   (911)        2,069         4,035
-----------------------------------------------------------------------------------------
Operating profit/(loss) in accordance with US GAAP   14,204        22,795       (18,272)
=========================================================================================
</TABLE>

Sale and leaseback transactions
Under UK GAAP, impairment of fixed assets is measured by comparing the carrying
value of the fixed asset with its recoverable amount. The recoverable amount is
the higher of the amounts that can be obtained from selling the fixed asset (net
realisable value) or using the fixed asset (value in use). However, under US
GAAP, when the fair value of assets subject to a sale and leaseback transaction
is less than the book value, a loss needs to be recognised in the profit and
loss account.

Recent accounting pronouncements
In December 1999, the United States Securities and Exchange Commission ("SEC")
issued SAB 101, "Revenue Recognition", which summarises certain of the SEC staff
views in applying generally accepted accounting principles to revenue
recognition in financial statements. The SEC staff issued SAB 101B in June 2000.
SAB 101B delays the implementation date of SAB 101 until no later than the
fourth fiscal quarter of fiscal years beginning after 15 December 1999. The
Company is currently in the process of determining what the impact of such
adoption will have on these financial statements.
         On 19 May 1999, the Financial Accounting Standards Board decided to
delay the effective date of SFAS 133, "Accounting for Derivative Instruments and
Hedging Activities", to all fiscal quarters of all fiscal years beginning after
15 June 2000. SFAS 133 requires that all derivative financial instruments be
recognised as either assets or liabilities on the balance sheet at their fair
values and that accounting for the changes in their fair values is dependent
upon the intended use of the derivatives and their resulting designations. The
new standard will supersede or amend existing standards that deal with hedge
accounting and derivatives. The Company has not determined the effect that
adopting this standard will have on its financial statements.

The adjustments to net loss and shareholders' equity under US GAAP can be
reconciled as follows:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
                                                         1999          1998          1997
Year ended 31 December                                (pound) 000   (pound) 000   (pound) 000
--------------------------------------------------------------------------------------------
<S>                                                   <C>           <C>           <C>
Adjustments to net loss
Retained (deficit)/profit in accordance with UK GAAP    (5,385)        4,439       (20,744)

US GAAP adjustments:
Revenue recognition                                    (15,614)          667          (405)
System and product development costs:
-        capitalised during the year                   (12,734)      (11,762)       (3,964)
-        amortisation                                    9,391         8,308        11,548
Deferred indexing costs                                    245           312          (151)
Acquisition accounting                                 (36,963)      (36,037)      (14,606)
Fair value adjustments                                       -             -         3,029
Employee costs                                             (29)          (28)          (23)
Loss on sale and leaseback transaction                    (991)            -             -
Income taxes                                               (26)           (7)           (9)
--------------------------------------------------------------------------------------------
Net loss in accordance with US GAAP                    (62,106)      (34,108)      (25,325)
============================================================================================
Net loss per share in accordance with US GAAP (pence)    (40.9)       (22.65)       (25.06)
============================================================================================
</TABLE>
<PAGE>

Annual Report 1999
Notes to the Financial Statements

www.brightstation.com
Technology born for business

68

30       Summary of differences between UK and US Generally Accepted Accounting
         Principles (GAAP) continued
<TABLE>
<CAPTION>
============================================================================================================
                                                                         1999          1998          1997
                                                                      (pound) 000   (pound) 000   (pound) 000
------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>           <C>           <C>
Adjustments to shareholders' equity
Ordinary shareholders' funds in accordance with UK GAAP                (102,838)     (94,818)      (91,681)

US GAAP adjustments:
Revenue recognition                                                     (18,984)      (3,370)       (4,037)
Capitalised system and product development costs net of amortisation    (27,030)     (23,154)      (21,624)
Deferred indexing costs                                                    (296)        (541)         (853)
Acquisition accounting                                                  163,449      194,242       221,540
Investment in available-for-sale securities                                   -            -          (681)
Loss on sale and leaseback transaction                                     (993)           -             -
Income taxes                                                                 89          120           119
------------------------------------------------------------------------------------------------------------
Shareholders' equity in accordance with US GAAP                          13,397       72,479       102,783
============================================================================================================
</TABLE>

31       Subsequent events
================================================================================

Disposal of ISD
On 23 March 2000 the Company announced the restructuring of the Group through
the proposed sale of the ISD to Thomson for $275 million in cash. In connection
with this transaction, the Company launched a cash tender offer and consent
solicitation on 24 March 2000 to the holders of its $180 million 11% Senior
Subordinated Notes which was accepted by the bondholders on 20 April 2000. The
proposals were approved by the Company's shareholders at an Extraordinary
General Meeting held on 27 April 2000, and the transfer was completed on 4 May
2000.
         On completion of the sale, the Company and Thomson formed a strategic
alliance, involving Thomson licensing and acting as reseller for the
technologies of the Company and the Company acting as reseller of Thomson's
content. The proceeds of the sale enabled the Group to repay in full all of its
outstanding senior and high yield debt of approximately $275 million. As part of
the transaction, Thomson agreed to subscribe for 9,297,290 new Ordinary shares
in the Company at 170.5 pence per Ordinary share, for an aggregate cash
consideration of (pound)15.9 million. Thomson's holding as a percentage of the
issued share capital is shown on page 22 of this report.
         On completion of the sale, Jiyu Holdings, a private investment company
unconnected to any of the Company's existing shareholders or investors, also
agreed to subscribe for 7,038,123 new Ordinary shares at a subscription price of
170.5 pence per Ordinary share, for an aggregate cash consideration of (pound)12
million. Jiyu's holding as a percentage of the issued share capital is shown on
page 22 of this report.
         During the first quarter of 2000, the Company provided (pound)106
million in respect of the loss on this disposal. The loss arises as a result of
the reinstatement of goodwill previously written off to reserves upon the
acquisition of KRII.
         As a result of the sale of the ISD to Thomson, Jason Molle, Ciaran
Morton and Stephen Maller resigned as directors of the Company upon their
transfer with the ISD to Thomson. Patrick Sommers also transferred to Thomson
but remains a Non-Executive Director of the continuing Group. On completion of
the sale, the Company paid Patrick Sommers a bonus of $1.5 million, half in cash
and the remainder by the issue of 71,361 ADSs, equivalent to 285,444 Ordinary
shares, credited as fully paid, at a price of 168 pence per share, such price
being the average mid market closing price for the Ordinary shares during the
period from 8 March 2000 to 7 April 2000. Patrick Sommers is restricted from
disposing of the Ordinary shares for a period of 12 months from the date of
issue. The Company also agreed to grant options to Patrick Sommers, in
connection with the sale, to subscribe for an additional 71,361 ADSs, equivalent
to 285,444 Ordinary shares at a strike price of 168 pence per share, which
become exercisable 12 months after issue and expire 7 years after issue.

Deferred consideration
On 12 May 2000, the Company settled the first of two deferred consideration
instalments relating to the acquisition of Write Works (see note 11). The total
amount of consideration was (pound)1,673,000 being 91% of the maximum. This
consideration was settled through a cash payment of (pound)1,260,000 and the
issue of 420,508 new Ordinary shares at a price of 98.3 pence per share. This
led to a write-off of goodwill arising on the acquisition of Write Works of
(pound)152,000. Following this payment, the remaining deferred consideration
instalment has a maximum potential value of (pound)1,990,000 and is dependent
upon the achievement of an earnings target during the year ended 31 December
2000. Payment of the final instalment is due in March 2001.
<PAGE>

Annual Report 1999
Notes to the Financial Statements

www.brightstation.com
Technology born for business

69

31       Subsequent events continued
================================================================================
Significant acquisition
On 30 May 2000, the Company announced that it had agreed to acquire key
eCommerce technology assets and associated intellectual property rights of
boo.com, from KPMG, the company's provisional liquidators for (pound)250,000.
The Company has subsequently negotiated with several of boo.com's lessors to
acquire computer hardware and office equipment for a sum of approximately
(pound)1.2 million. It is the Company's intention to incorporate these
technology assets into Sparza, the Company's existing eCommerce technology
business to provide a business to consumer element to complement Sparza's
existing business to business software solution.

32       Contingent Liabilities
================================================================================
On 22 October 1997, immediately prior to the Company's acquisition of KRII, a
class action was instituted against KRII and its subsidiary, The UnCover
Company, in the United States District Court for the Northern District of
California. The class action was instituted by Joan Ryan, Jim Tunney, Arlie
Russell Hochschild, Lyn Hejinian and Ronald Silliman, all individuals, and on
behalf of all those similarly situated against CARL Corporation, a Colorado
corporation, individually and doing business as The UnCover Company, and The
UnCover Company, a Colorado corporation, The Uncover Company, a partnership and
KRII, a California corporation.
         Plaintiffs are the authors of certain written material which was being
distributed by defendants pursuant to licenses obtained from the publishers of
such material. Plaintiffs alleged copyright infringement on the theory that
Plaintiffs (as authors of the written material in question) are the rightful
owners of the copyright and therefore the only party with the right to license
the distribution rights to the material. Plaintiffs sought unspecified statutory
damages.
         The Company sold The UnCover Company in 1998 and has agreed to
settlement terms with the representative plaintiffs. The settlement must be
submitted to class members for objection and must ultimately be approved by the
trial court. Under the terms of the settlement, the Company's monetary
contribution will not be material. If the settlement is not approved, continued
litigation could result in a judgment that would have a material adverse effect
on the Company. The Company believes that its ultimate exposure in this matter
could be reduced as a result of indemnity and insurance claims it has against
third parties.
         The Company and its subsidiaries are also parties to legal proceedings
that are considered to be ordinary routine litigation incidental to their
business and not material to the Group's financial position.

33       FinanciaI Instruments
================================================================================
The Group's principal financial instruments comprise a Senior Credit Facility,
incorporating a bank overdraft (see note 16), Senior Subordinated high-yield
notes (see note 16), finance leases (see note 24) and cash and short-term
deposits. The main purpose of the Senior Credit Facility and high yield notes
was to finance the acquisition of KRII. Finance leases are used to finance major
asset purchases. The group has various other financial instruments, such as
trade debtors and trade creditors, that arise directly from its operations.
         The Group is exposed to a number of different market risks including
interest rates and foreign currency rates. The Board reviews and agrees policies
managing each of the risks. The key risks are:

Interest rate risk
The Group borrows in appropriate currencies at both fixed and floating rates of
interest and uses interest rate cap agreements to generate an appropriate
interest profile and to manage the Group's exposure to interest fluctuations.

Foreign currency risk
The Group mitigates the effect of foreign currency exposure by arranging to
match assets owned in foreign countries with borrowings in that same currency.

Credit risk
The Group's policy is to place its cash and investments with high-quality
financial institutions in order to limit the amount of credit exposure. The
Group performs ongoing evaluations of its customers' financial condition and
maintains provisions against potential credit losses. Such losses in the
aggregate, have not exceeded management expectations. Financial instruments
which expose the Group to credit risk are cash, investments and trade debtors,
which generally are not collateralised.
<PAGE>

Annual Report 1999
Notes to the Financial Statements

www.brightstation.com
Technology born for business

70

33       Financial Instruments continued
================================================================================
Liquidity risk
The Group maintains a balance between continuity of funding and flexibility
through the use of borrowings with a range of maturities. Short-term flexibility
is achieved by overdraft facilities.

Short-term debtors and creditors have been excluded from this note as permitted
under FRS 13.

As permitted by FRS 13, comparative figures have not been provided.

Interest rate risk profile of financial liabilities
The interest rate risk profile of financial liabilities of the Group at 31
December 1999 was as follows:

--------------------------------------------------------------------------------
                                         Fixed rate   Floating rate
                                          financial     financial
                                         liabilities   liabilities      Total
Currency                                 (pound) 000   (pound) 000   (pound) 000
--------------------------------------------------------------------------------
US Dollar                                  114,550        52,910       167,460
Euro related                                    47             -            47
--------------------------------------------------------------------------------
Total                                      114,597        52,910       167,507
================================================================================

--------------------------------------------------------------------------------
                                                Fixed rate financial liabilities
--------------------------------------------------------------------------------
                                                                     Weighted
                                                      Weighted    average period
                                                       average   for which rates
                                                   interest rate    are fixed
Currency                                                  %           Years
--------------------------------------------------------------------------------
US Dollar                                               11.0           6.7
Euro related                                            11.4           1.7
--------------------------------------------------------------------------------
Average                                                 11.0           6.7
================================================================================
The floating rate financial liabilities principally comprise the US Dollar
denominated Senior Credit Facility (including overdraft) bearing interest at
rates from 2.25 to 4.5 percentage points above US Dollar LIBOR (see note 16).

Interest rate risk of financial assets
The interest rate risk of financial assets of the Group at 31 December 1999 was
as follows:
--------------------------------------------------------------------------------
                                                                     Cash and
                                                                   bank deposits
Currency                                                            (pound) 000
--------------------------------------------------------------------------------
Sterling                                                                4,404
Euro related                                                              797
US Dollar                                                               5,055
Other                                                                     265
--------------------------------------------------------------------------------
Total                                                                  10,521
================================================================================
At 31 December 1999, no interest was paid on any of the Group's cash balances.

Currency exposures
At 31 December 1999, the Group bears a translation exposure only on the balance
of its US denominated debt. Subsequent to the year end, these balances have been
repaid in full (see note 31).

Maturity of financial liabilities
The maturity profile of the Group's financial liabilities at 31 December 1999 is
shown in note 16 to the financial statements.

Fair values of financial assets and financial liabilities
A comparison by category of book values and fair values of all the Group's
financial assets and financial liabilities at 31 December 1999 is shown in note
30 to the financial statements.
<PAGE>

Annual Report 1999

www.brightstation.com
Technology born for business

71

Shareholder Information
Nature of Trading Market
The Company's Ordinary shares are traded on the London Stock Exchange, under the
symbol "BSN" (formerly "DLG") and American Depositary Shares ("ADSs"), each
representing four Ordinary shares, are listed for trading in the NASDAQ National
Market System under the symbol, "BSTN" (formerly "DIAL"). The ADSs are evidenced
by ADRs issued by The Bank of New York, as Depositary, under a Deposit Agreement
dated as of 21 November 1995 among M.A.I.D, the Depositary and the holders from
time to time of ADRs. The ADSs are registered under the Securities Exchange Act
of 1934, as amended.
         The following tables set forth, for the periods indicated, (1) the
reported high and low closing sale prices for the Ordinary shares based on the
Daily Official List of the London Stock Exchange and (2) the reported high and
low closing sale prices of the ADSs on NASDAQ since the commencement of trading
of the ADSs on 22 November 1995. The tables do not reflect trading after the
official close of the London Stock Exchange and NASDAQ for which no official
quotations exist.

--------------------------------------------------------------------------------
                            The London Stock Exchange          NASDAQ
                                 Pounds Per Share       U.S. Dollars per ADS
--------------------------------------------------------------------------------
                                  High    Low               High    Low
--------------------------------------------------------------------------------
2000
2nd Quarter                       1.44    0.59           8-15/16   3-3/4
1st Quarter                       2.33    0.90                15   5-3/4
--------------------------------------------------------------------------------
1999
4th Quarter                       1.06    0.63             6-7/8       4
3rd Quarter                       0.95    0.61           51-5/16   3-1/2
2nd Quarter                       1.48    0.85             9-3/4   5-3/8
1st Quarter                       1.22    0.57            8-1/16    41/4
--------------------------------------------------------------------------------
1998
4th Quarter                       1.83    0.47            12-1/8       3
3rd Quarter                       2.36    1.48            16-1/4   9-5/8
2nd Quarter                       1.95    1.41                14   9-1/8
1st Quarter                       1.88    1.32           12-5/16   8-7/8
--------------------------------------------------------------------------------
1997
4th Quarter                       2.37    1.39                14   8-3/4
3rd Quarter                       2.37    1.52            15-1/8  10-1/4
2nd Quarter                       2.46    1.50            16-3/8  10-1/4
1st Quarter                       2.05    1.50            13-3/8      10
--------------------------------------------------------------------------------
1996
4th Quarter                       3.14    1.86            20-3/8  12-1/2
3rd Quarter                       3.28    2.59            20-1/2  15-3/4
2nd Quarter                       3.41    1.96            20-1/2  11-3/4
1st Quarter                       2.49    1.53            14-7/8   9-3/8
--------------------------------------------------------------------------------
1995
4th Quarter                       3.54    2.13            18-1/4* 13-1/8*
3rd Quarter                       2.56    0.82               --       --
2nd Quarter                       0.90    0.77               --       --
1st Quarter                       0.85    0.63               --       --
--------------------------------------------------------------------------------
1994
4th Quarter                       0.71    0.45               --       --
3rd Quarter                       0.81    0.46               --       --
2nd Quarter                       0.87    0.43               --       --
1st Quarter                       1.10**  0.87**             --       --
--------------------------------------------------------------------------------
On 30 June 2000, the closing market price of the Company's Ordinary shares was
(pound)0.825 per share and the ADS price was $5-3/16 per ADS. On such date,
992,508 Ordinary shares and ADRs evidencing 2,647,745 ADSs (representing
10,590,980 Ordinary shares) were held of record in the US. These Ordinary shares
and ADRs were held by 31 record holders and 39 record holders, respectively, and
represented 0.575% and evidenced ADSs representing 6.136% respectively, of the
total number of Ordinary shares outstanding. Since certain of these Ordinary
shares and ADRs were held by brokers or other nominees, the number of record
holders in the US may not be representative of the number of beneficial holders
or of where the beneficial holders are resident.

 *(from 22 November)
**(from 25 March)
<PAGE>

Annual Report 1999
Shareholder Information

www.brightstation.com
Technology born for business

72

Exchange Controls and Other Limitations Affecting Security Holders
There are currently no United Kingdom foreign exchange control restrictions on
remittances of dividends on Ordinary shares or on the conduct of the Group's
operations.
         Under English Law and the Company's Memorandum and Articles of
Association, persons who are neither residents nor nationals of the United
Kingdom may freely hold, vote and transfer their Ordinary shares in the same
manner as United Kingdom residents or nationals.

Taxation
The following is a summary of certain US Federal income and UK tax consequences
generally applicable to ownership by a beneficial owner of ADSs representing
Ordinary shares and of Ordinary shares not in ADS form that is not resident in
the United Kingdom and is (i) a citizen or resident of the United States, (ii) a
corporation created or organised in the United States or under the laws of the
United States or of any state, or (iii) an estate or trust, the income of which
is included in gross income for United States federal income tax purposes
regardless of its source ("US Holder") for the purpose of the current double
taxation convention between the United States and the United Kingdom (the
"Convention"). The summary is based on tax laws in effect in the United Kingdom,
the provisions of the US Internal Revenue Code of 1986, as amended (the "Code"),
the final, temporary and proposed US Treasury regulations under the Code and the
administrative and judicial interpretations thereof, and the Convention, all as
in effect as of the date of this report, and all of which are subject to change
(possibly on a retroactive basis) and to differing interpretations. There can be
no assurance that the taxing authority of the United Kingdom or the US Internal
Revenue Service (the "IRS") will not take a contrary view, and no ruling from
such taxing authorities has been or will be sought.
         This summary assumes a US holder holds ADSs as a capital asset, and
elects to credit, rather than deduct, foreign income taxes against the US tax
liability.
         The following discussion does not consider all aspects of United States
Federal income taxation that may be relevant to holders in light of their
personal circumstances. Further, it does not consider holders in special tax
situations, (including dealers in securities, financial institutions, insurance
companies, tax exempt organisations, holders of securities held as part of a
"straddle", "hedge" or "conversion transaction" with other investments, US
holders liable to Alternative Minimum Tax, US holders who are domestic
corporations and actually or constructively own 10% or more of the voting shares
of the Company, or situations in which the "functional currency" within the
meaning of Section 985(b) of the Code of an investor is not the US dollar). This
summary also does not discuss the source of gain or loss from the disposition of
ADSs for purposes of foreign tax credit limitations. The following summary does
not discuss the United States estate or gift tax consequences or state and local
tax consequences of holding or disposing of ADSs representing Ordinary shares or
Ordinary shares not in ADS form, or tax consequences in countries other than the
United Kingdom or the United States. This summary does not address aspects of US
taxation other than US Federal income taxation that may be relevant to a US
holder, such as state and local taxation. Holders of ADSs should consult their
own tax advisers as to the particular tax consequences to them of ownership of
the ADSs or the Ordinary shares.
         For the purposes of the Convention and the Code, beneficial owners of
ADSs who are US persons will be treated as the beneficial owners of the
underlying Ordinary shares represented by the ADSs evidenced by the ADRs.

Taxation of Dividends Under UK Law and Refunds of Tax Credits
The Company does not expect to pay dividends for the foreseeable future.
         Should the Company begin paying dividends, under current UK taxation
legislation, no tax will be withheld from dividend payments by the Company. It
should be noted that, due to a change in UK tax legislation, dividends paid
after 5 April 1999 no longer carry a requirement to account for advance
corporation tax.
         There is a tax credit in respect of any dividend paid by the Company at
a rate of 10% of the sum of the dividend and the tax credit on it (equivalent to
11.11% of the cash dividend).
         US residents may in certain circumstances be able to recover part of
the tax credit ("tax credit refund") under The Convention, as follows:
(a) Under the Convention, a US Holder which is a US corporation which, alone or
together with one or more associated corporations, controls, directly or
indirectly, at least 10% of the voting shares of the Company, and whose holding
is not effectively connected with a permanent establishment in the UK through
which it carries on business, will generally be entitled to receive a tax credit
refund equal to one half of the tax credit to which a UK resident individual
would be entitled, subject to a withholding tax equal to 5% of the aggregate of
the dividend and the refunded half of the tax credit. Thus on a dividend of
(pound)100 (chosen for illustrative purposes only), the US Holder will be
entitled to receive a tax credit refund of (pound)0.28. The procedure for
obtaining the repayment will be by completion of "US Corporation Credit" Form
(FD13).
(b) Under the Convention, a US Holder who is an individual or corporation (other
than a corporation falling within paragraph (a) above) will generally not be
entitled to receive a tax credit refund.
         Special rules also apply to a US Holder which is a US corporation and
(a) is a resident of the UK, or (b) at least 25% of the capital of which is
held, directly or indirectly, by persons that are not individual residents or
citizens of the United States, and (i) which has imposed on it by the United
States in respect of a dividend a tax substantially less than the tax generally
imposed
<PAGE>

Annual Report 1999
Shareholder Information

www.brightstation.com
Technology born for business

73

by the United States on corporate profits, or (ii) which receives more than 80%
of its gross income from sources outside the United States as determined in
accordance with the Convention. Additional special rules apply if the US Holder
is exempt from US Federal income tax on the dividend received or if the US
Holder owns 10% or more of the class of shares in respect of which the dividend
is paid. All such US Holders should consult their own tax advisors with respect
to such rules.
         Under Section 812 of the Income and Corporation Taxes Act of 1988, the
UK Treasury has power to deny the payment of tax credit refunds under the UK's
income tax conventions to certain corporations if they or an associated company
(as described in Section 812) have qualifying presence in a state which operates
a unitary system of corporation taxation. These provisions come into force only
if the UK Treasury so determines by statutory instrument. No determination has
been made to date.

UK Taxation of Capital Gains
All US Holders, who are not resident or ordinarily resident in the United
Kingdom for UK tax purposes, provided that they have not recently left the UK
and intend to return within five years of departure and that they were not
resident in the UK for four out of the seven years prior to their departure from
the UK, will not be liable for UK tax on capital gains realised on the disposal
of their ADSs or Ordinary shares unless the ADSs or Ordinary shares are held in
connection with a trade, profession or vocation carried on in the United Kingdom
through a UK branch or agency. Generally, gains realised in the course of
dealing in securities will be regarded as arising in the course of carrying on a
trade. In this case, a different UK treatment applies.

US Federal Income Taxation of Dividends
The gross amount of any dividend paid to a US Holder (that is, the amount of the
dividend plus the related tax credit and before reduction for withholding tax)
will be included in gross income and treated as foreign source dividend income
of such US Holder for US Federal income tax purposes. For US Federal income tax
purposes, a distribution will constitute a dividend only to the extent paid out
of current or accumulated earnings and profits of the Company (as determined for
US Federal income tax purposes). The dividend will not be eligible for the
dividends received deduction allowed to US corporations. The amount includable
in income will be the US Dollar value of the payment (as of the time of payment)
regardless of whether the payment is in fact converted into US Dollars.
Generally, any gain or loss resulting from currency exchange fluctuations during
the period from the date of the dividend payment to the date such dividend
payment is converted into US Dollars will be treated as ordinary income or loss.
Subject to certain limitations, the applicable UK withholding tax will be
treated as a foreign tax eligible for credit against the US Holder's Federal
income tax. Special rules apply for purposes of determining the foreign tax
credit available to a US corporation which controls 10% or more of the voting
shares of the Company.

US Federal Income Taxation of Gains from Sale
A US Holder will, upon the sale or exchange of an ADS or an Ordinary share,
recognise the gain or loss for US Federal income tax purposes in an amount equal
to the difference between the amount realised (or the US dollar value of the
consideration received determined at the spot rate on the date of disposition if
the amount realised is denominated in a foreign currency) and the US Holder's
tax basis (determined in US Dollars) in the ADS or the Ordinary share. Except as
described below under "US, Passive Foreign Investment Company Status", the gain
or loss will be a capital gain or loss if the ADS or the Ordinary share was a
capital asset in the hands of the US Holder and will be long-term if the ADS or
the Ordinary share was held for more than 12 months. Special rules apply to US
persons holding 10% or more of the stock, if the company is a Controlled Foreign
Corporation.
         If a US Holder receives any foreign currency on the sale of ADSs or
Ordinary shares, the US Holder may recognise an ordinary gain or loss as a
result of currency fluctuations between the date of the sale and the date the
sale proceeds are converted into US Dollars.
         Neither the surrender of ADSs in exchange for the deposited Ordinary
shares represented by the surrendered ADSs nor the deposit of Ordinary shares
for ADSs representing the Ordinary shares will be a taxable event for purposes
of US Federal income tax, UK income and corporation tax or UK capital gains tax.
Accordingly, US Holders will not recognise any gain or loss upon the surrender
of ADSs for Ordinary shares or the deposit of Ordinary shares for ADSs. See "UK
Stamp Duty and Stamp Duty Reserve Tax".

US Passive Foreign Investment Company Status
Because the Company will receive interest income and may receive royalties and
other passive types of income, the Company may be, or may in the future become,
a Passive Foreign Investment Company ("PFIC") for US Federal income tax
purposes. The Company will be a PFIC if either 75% or more of its gross income
in a tax year is passive income or the average percentage of its assets (by
value or, if the PFIC elects, the adjusted tax basis) which produce or are held
for the production of passive income is at least 50%. The Company will monitor
its status and will, promptly following the end of any taxable year for which it
determines it was a PFIC, notify US Holders of such status.
<PAGE>

Annual Report 1999
Shareholder Information

www.brightstation.com
Technology born for business

74

If the Company is a PFIC, the direct and certain indirect US Holders must either
(i) elect to report currently their pro rata share of the Company's ordinary
earnings and net capital gain even if they do not receive distributions from the
Company (the "qualified election"), or (ii) upon disposition of the Ordinary
shares or ADSs or receipt of an "excess distribution" (as defined in the Code),
be subject generally to tax as if the gain or distribution were ordinary income
earned rateably over the period in which the Ordinary shares or ADSs were held
(including payment of an interest charge on the deferred tax) and face other
adverse tax consequences.
         The qualified election is made on a shareholder-by-shareholder basis.
Each shareholder should consult with its own tax adviser to decide whether to
make the qualified election. This election is made by attaching the shareholder
election statement, the PFIC annual information statement and Form 8621 to such
shareholder's timely filed income tax return with a copy of the shareholder
election statement being sent to the Internal Revenue Service Center, P.O. Box
21086, Philadelphia, Pennsylvania 19114. If the Company is (or under the
circumstances described above, was) a PFIC, copies of the Form 8621 must also be
filed every year, both with such shareholder's tax return and with the Internal
Revenue Service Center in Philadelphia, whether or not the qualified election is
made.
         A shareholder may recognise foreign currency gain or loss, if any, with
respect to income included if the "qualified election" is made at the time it
received an actual distribution form the Company.
         If the Company is a US controlled foreign corporation (see below), the
PFIC rules only apply for any shareholder who owns less than 10% of the voting
stock of the Company.

US Controlled Foreign Corporations
If a US Holder owns 10% or more of a "controlled foreign corporation" (i.e., a
foreign corporation more than 50% of the vote or value of which is held
(directly, indirectly or constructively) by "United States Shareholders" as
defined in Section 951(b) of the Code and hereinafter referred to as a "US
Shareholder" and such controlled foreign corporation has certain types of
earnings or "United States property" (as defined in Section 956(c) of the Code)
then US Shareholders may have to include certain amounts in their gross income,
irrespective of whether the controlled foreign corporation has made
distributions. Further, US persons who directly, indirectly or constructively
own at least 10%, or have acquired at least 5% in the year, of the voting shares
of a non-US corporation may be required to file Form 5471 with the IRS.

US Foreign Personal Holding Company
If at any time during a taxable year more than 50% of the total combined voting
power or the total value of the Company's outstanding shares is owned, directly
or indirectly, by five or fewer individuals who are citizens or residents of the
United States and 60% or more of the Company's gross income for such year was
derived from certain passive sources (e.g., from dividends received from its
subsidiaries), the Company would be treated as a "foreign personal holding
company". In that event, US Holders that hold shares of the Company would be
required to include in gross income for such year their allowable portions of
such passive income to the extent the Company does not actually distribute such
income.

US Foreign Investment Company
If 50% or more of the combined voting power or total value of the Company's
outstanding shares are held, directly or indirectly, by citizens or residents of
the United States domestic partnerships or corporations, or estates or trusts
other than foreign estates or trusts (as defined by the Code Section
7701(a)(31)), and the Company is found to be engaged primarily in the business
of investing, reinvesting, or trading in securities, commodities, or any
interest therein, it is possible that the Company might be treated as a "foreign
investment company" as defined in Section 1246 of the Code, causing all or part
of any gain realised by a US Holder selling or exchanging shares of the Company
to be treated as ordinary income rather than capital gain.

Backup Withholding and Information Reporting
In general, information reporting requirements will apply to dividend payments
(or other taxable distribution) in respect of ADSs made within the US to a
non-corporate US person, and "backup withholding" at a rate of 31% will apply to
such payments if the holder or beneficial owner fails to provide an accurate
taxpayer identification number in the manner required by US law and applicable
regulations, if there has been notification from the Internal Revenue Service of
a failure by the holder or beneficial owner to report all interest or dividends
required to be shown on its federal income tax returns or, in certain
circumstances, if the holder or beneficial owner fails to comply with applicable
certification requirements. Certain corporations and persons that are not US
persons may be required to establish their exemption from information reporting
and backup withholding by certifying their status on Internal Revenue Services
Forms W-8 BEN or W-9. The term "US person" means a citizen or resident of the
US, a domestic partnership, a domestic corporation, and any estate or trust
(other than a foreign estate or trust).
         In general, payment of the proceeds from the sale of ADSs to or through
a US office of a broker is subject to both US backup withholding and information
reporting unless the holder or beneficial owner certifies its non-US status
under penalties of perjury or otherwise establishes an exemption. US information
reporting and backup withholding generally will not apply to a payment made
outside the US of the proceeds of a sale of ADSs through an office outside the
US of a non-US broker. However, US information reporting requirements (but not
backup withholding) will apply to a payment made outside
<PAGE>

Annual Report 1999
Shareholder Information

www.brightstation.com
Technology born for business

75

the US of the proceeds of a sale of ADSs through an office outside the US of a
broker that is a US person, that derives 50% or more of its gross income for a
specified three year period from the conduct of a trade or business in the US,
or that is a "controlled foreign corporation" as to the US, unless the broker
has documentary evidence in its files that the holder or beneficial owner is a
non-US person or the holder or beneficial owner otherwise establishes an
exemption.
         Amounts withheld under the backup withholding rules may be credited
against a holder's tax liability, and a holder may obtain a refund of any excess
amounts withheld under the backup withholding rules by filing the appropriate
claim for refund with the US Internal Revenue Service.

UK Estate and Gift Tax
UK Inheritance ("IHT") is a tax levied at death on the value of an individual's
estate at death. IHT is also levied in respect of any gifts made within seven
years before an individual's death. It may also apply to certain lifetime
transfers or to property comprised in a trust or settlement. An American
domiciliary need only be concerned about liability for IHT to the extent he is
or is deemed to be also a UK domiciliary (or was a UK domiciliary at the time he
created any trust or settlement) or otherwise to the limited extent of his UK
assets. Under the Convention between the US and the UK relating to estate and
gift taxes, ADSs or Ordinary shares held by an individual who is domiciled for
the purpose of the Convention in the United States and is not for the purposes
of the Convention a national of the United Kingdom will not, provided any
applicable US tax is paid, be subject to IHT on the individual's death or on a
gift of the ADSs or the Ordinary shares within seven years of his death unless
the ADSs or the Ordinary shares form part of the business property of a
permanent establishment of the individual in the United Kingdom or, in the case
of a holder who performed independent personal services, pertain to a fixed base
in the United Kingdom used for the performance of independent personal services.
In the exceptional case where the ADSs or Ordinary shares are subject both to
IHT and to US Federal gift or estate tax, the Convention generally provides for
tax paid in the United Kingdom to be credited against tax payable in the United
States or for tax paid in the United States to be credited against tax payable
in the United Kingdom based on priority rules set forth in the Convention.

UK Stamp Duty and Stamp Duty Reserve Tax
UK stamp duty is payable in respect of certain documents and UK Stamp Duty
Reserve Tax ("SDRT") is imposed in respect of certain transactions in
securities. Transfers of the Ordinary shares will be subject to ad valorem stamp
duty at the rate of (pound)0.50 per (pound)100 (or part of (pound)100) of the
full consideration given irrespective of the identity of the parties to the
transfer and the place of execution of any instrument of transfer.
         There is generally no ad valorem stamp duty on a gift or on an
instrument of transfer which is neither a sale nor made in contemplation of
sale. In those cases, the instrument of transfer will either be exempt from
stamp duty or a fixed stamp duty of (pound)0.50 ((pound)5.00 on or after 1
October 1999) per instrument of transfer will be payable.
         An agreement to transfer the Ordinary shares or any interest therein
(but not an agreement to transfer an interest in an ADS) for money or money's
worth will normally give rise to a charge to SDRT at the rate of 0.5% of the
amount or value of the consideration given. The charge will generally not arise,
however, if an instrument transferring the Ordinary shares is executed in
pursuance of the agreement and is duly stamped.
         Charges to stamp duty at the rate of (pound)1.50 per (pound)100 (or
part of (pound)100) or SDRT at the rate of 1.5% of the transfer price or value
or of the issue price will generally arise on the transfer or issue of Ordinary
shares to, or a deposit of Ordinary shares with, the Depositary or certain
persons providing clearance services (or their nominees or agents). In
accordance with the terms of the Deposit Agreement, any tax or duty payable by
the Depositary on deposits of the Ordinary shares will be charged by the
Depositary to the party to whom ADRs are delivered against the deposits.
         No UK stamp duty will be payable on the transfer of, or agreement to
transfer, an ADS or beneficial ownership of an ADS, so long as the instrument of
transfer and/or written agreement to transfer remains at all times outside the
UK, and so long as any instrument of transfer an/or written agreement to
transfer is not executed in the UK and the transfer does not relate to any
matter or thing done or to be done in the UK. In any other case, the transfer
of, or agreement to transfer, an ADS or beneficial ownership of an ADS could,
depending on all the circumstances of the transfer, give rise to a charge to ad
valorem stamp duty. The current rate of ad valorem stamp duty on a transfer of
stock or marketable securities, which would include the Ordinary shares and
ADSs, is (pound)0.50 per (pound)100 (or part of (pound)100) of the value of the
consideration (a transfer in contemplation of sale being stampable by reference
to the value of the property transferred).
         A transfer of Ordinary shares underlying ADSs by the Depositary at the
direction of the ADS seller directly to a purchaser may give rise to a liability
to ad valorem stamp duty. A transfer of Ordinary shares from the Depositary to a
US Holder or registered holder of an ADS upon cancellation of the ADS is subject
to a fixed UK stamp duty of (pound)0.50 ((pound)5.00 on or after 1 October 1999)
per instrument of transfer.
<PAGE>

Annual Report 1999
Shareholder Information

www.brightstation.com
Technology born for business

76

Selected Financial Data

Consolidated Statements of Income Data In thousands, except for per Share and
per ADS Data

<TABLE>
<CAPTION>
==============================================================================================================================
Amounts in accordance with UK GAAP:
------------------------------------------------------------------------------------------------------------------------------
                                                              1995         1996            1997         1998           1999
Year ended 31 December                                    (pound) 000   (pound) 000    (pound) 000   (pound) 000    (pound) 000
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>           <C>            <C>            <C>           <C>
Revenues                                                      13,642       21,443          46,082        170,762       174,452
Cost of Sales                                                 (5,231)      (7,237)        (17,166)       (71,618)      (68,174)
-------------------------------------------------------------------------------------------------------------------------------
Gross profit                                                   8,411       14,206          28,916         99,144       106,278
Selling and marketing expenses                                (6,063)      (9,933)        (17,013)       (21,560)      (22,118)
General and administrative expenses                           (5,742)      (9,975)        (22,662)       (46,798)      (54,677)
Amortisation of development costs                               (744)      (2,170)        (11,548)        (7,760)       (9,749)
Amounts written off investments                                   --           --              --         (2,300)       (4,619)
-------------------------------------------------------------------------------------------------------------------------------

(Loss)/income from operations                                 (4,138)      (7,872)        (22,307)        20,726        15,115
Exceptional item
- provision for closure of business                               --           --              --             --          (911)
- gain on sale of fixed asset investment                          --           --           4,035          2,069            --
Interest Income                                                  388        1,027             338            205           305
Interest Expense                                                (295)        (189)         (2,498)       (17,436)
-------------------------------------------------------------------------------------------------------------------------------

(Loss)/income before benefit/(provision) for income taxes     (4,045)      (7,034)          5,564         (3,857)       (3,857)
Benefit/(provision) for income taxes                             416         (164)           (323)          (769)       (1,478)
-------------------------------------------------------------------------------------------------------------------------------
                                                              (3,629)      (7,198)        (20,755)         4,795        (5,335)
-------------------------------------------------------------------------------------------------------------------------------

Minority equity interest                                          (5)         (28)             11           (356)          (50)
Net (loss)/income                                             (3,634)      (7,226)        (20,744)         4,439        (5,385)
-------------------------------------------------------------------------------------------------------------------------------
Net (loss)/income per share                                   (0.044)      (0.078)         (0.205)         0.029        (0.035)
-------------------------------------------------------------------------------------------------------------------------------
Shares used to compute net (loss)/income per share            82,183       92,364         101,077        150,579       151,929

Equivalent net (loss)/income per ADS                          (0.177)      (0.313)         (0.821)         0.118        (0.142)
===============================================================================================================================
</TABLE>
<PAGE>

Annual Report 1999

www.brightstation.com
Technology born for business

77

Consolidated Balance Sheets Data Amounts in accordance with UK GAAP:

<TABLE>
<CAPTION>
==================================================================================================
                                      1995          1996          1997          1998          1999
Year ended 31 December         (pound) 000   (pound) 000   (pound) 000   (pound) 000   (pound) 000
--------------------------------------------------------------------------------------------------
<S>                            <C>           <C>           <C>           <C>           <C>
Working capital                   21,313        9,581         19,957       (10,357)      (24,303)
Total assets                      39,035       33,705        124,510       109,542       108,079
Long-term liabilities              1,742          938        170,264       144,438       138,800
Ordinary shareholders' equity     31,659       26,037        (90,955)      (93,741)     (102,295)
==================================================================================================
</TABLE>

Dividends
The Company has never declared or paid any cash dividends on its Ordinary
shares. Any payment of dividends would be subject, under English law, to the
Companies Act 1985, which requires that all dividends must be approved by the
Company's Board of Directors and, in some cases, the shareholders, and may only
be paid from the Company's distributable profits and only to the extent that the
Company has retained earnings, both determined on an unconsolidated basis.

Exchange Rates
The following table sets forth, for the period and dates indicated, the average,
high, low and end of period Midmarket Rates for Pounds Sterling expressed in US
Dollars per Pound Sterling. These translations should not be construed as a
representation that the Pounds Sterling amounts actually represent such Dollar
amounts or could be converted into Dollars at such rates. Such rates are not
used by the Company in the preparation of its Financial Statements included
elsewhere herein.
--------------------------------------------------------------------------------
                                        Average(1)   High      Low   Period end
Year ended 31 December                      $          $        $        $
--------------------------------------------------------------------------------
1995                                      1.578      1.641    1.527    1.553
1996                                      1.562      1.711    1.497    1.711
1997                                      1.634      1.711    1.578    1.645
1998                                      1.658      1.719    1.615    1.664
1999                                      1.614      1.679    1.547    1.612
2000                                      1.570      1.657    1.466    1.518(2)
================================================================================

(1)  Represents the average of the Midmarket Rates on the last day of each month
     during the relevant period.
(2)  On 30 June 2000 the Midmarket Rate was $1.518 to(pound)1.00.

Fluctuations in the exchange rate between the Pound Sterling and the US Dollar
will affect the US Dollar amounts received by holders of the ADSs upon
conversion by the Depositary of cash dividends paid in Pounds Sterling on the
Ordinary shares represented by the ADSs in the event of dividends being declared
and may affect the relative market prices of the ADSs in the US and the Ordinary
shares in the UK
         The Company does not believe that changes in the exchange rates have
had a material effect on operating results from international operations.
However, management anticipates that the continued strength of Sterling in the
first quarter of 2000 will have an adverse impact on future reported revenues.
<PAGE>

Annual Report 1999

www.brightstation.com
Technology born for business

78

Five Year Financial Summary

<TABLE>
<CAPTION>
====================================================================================================================================
                                                               Restruc-                                   Restruc-
                                                                turing                                     turing
                                                   Total       costs and      Total         Total         costs and       Total
                                                   before        other        after         before          other         after
                                               restructuring  exceptional  restructuring  restructuring  exceptional   restructuring
                                                    costs         items       costs          costs         items         costs
                                        1999        1998          1998        1998            1997          1997          1997
                                    (pound) 000 (pound) 000   (pound) 000  (pound) 000     (pound) 000   (pound) 000   (pound) 000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                 <C>        <C>            <C>          <C>            <C>            <C>           <C>
Turnover                              174,452     170,762            -      170,762          46,082             -        46,082
Cost of sales                         (68,174)    (71,618)           -      (71,618)        (17,166)            -       (17,166)
------------------------------------------------------------------------------------------------------------------------------------
Gross Profit                          106,278      99,144            -       99,144          28,916             -        28,916
Distribution costs                    (22,118)    (21,605)          45      (21,560)        (15,700)       (1,313)      (17,013)
Administrative expenses               (54,677)    (44,170)      (2,628)     (46,798)        (13,415)       (9,247)      (22,662)
Amortisation of
         development costs             (9,749)     (7,760)           -       (7,760)         (3,558)       (7,990)      (11,548)
Amounts written off investments        (4,619)          -       (2,300)      (2,300)              -             -             -
------------------------------------------------------------------------------------------------------------------------------------
Operating Profit/(Loss)                15,115      25,609       (4,883)      20,726          (3,757)      (18,550)      (22,307)
Exceptional item
- provision for closure of business      (911)          -            -            -               -             -             -
- gain on sale of fixed asset
         investment                         -           -        2,069        2,069               -         4,035         4,035
Interest receivable                       305         205            -          205             338             -           338
Interest payable and
         similar charges              (18,366)    (17,436)           -      (17,436)         (2,498)            -        (2,498)
------------------------------------------------------------------------------------------------------------------------------------
(Loss)/Profit on Ordinary
         Activities before taxation    (3,857)      8,378       (2,814)       5,564          (5,917)      (14,515)      (20,432)
Taxation on (loss)/profit on
         ordinary activities           (1,478)       (769)           -         (769)           (323)            -          (323)
------------------------------------------------------------------------------------------------------------------------------------
(Loss)/Profit on Ordinary
         Activities after taxation     (5,335)      7,609       (2,814)       4,795          (6,240)      (14,515)      (20,755)
Minority equity interests                 (50)       (356)           -         (356)             11             -            11
------------------------------------------------------------------------------------------------------------------------------------
Retained (Deficit)/Profit              (5,385)      7,253       (2,814)       4,439          (6,229)      (14,515)      (20,744)
====================================================================================================================================
(Loss)/Earnings per share (pence)        (3.5)        4.8            -          2.9            (6.2)            -         (20.5)
====================================================================================================================================

<CAPTION>

=============================================================
                                        1996          1995
                                    (pound) 000   (pound) 000
-------------------------------------------------------------
<S>                                 <C>           <C>
Turnover                               21,443        13,642
Cost of sales                          (7,237)       (5,231)
-------------------------------------------------------------
Gross Profit                           14,206         8,411
Distribution costs                     (9,933)       (6,063)
Administrative expenses                (9,975)       (5,742)
Amortisation of
         development costs             (2,170)         (744)
Amounts written off investments             -             -
-------------------------------------------------------------
Operating Profit/(Loss)                (7,872)       (4,138)
Exceptional item
- provision for closure of business         -             -
- gain on sale of fixed asset
         investment                         -             -
Interest receivable                     1,027           388
Interest payable and
         similar charges                 (189)         (295)
-------------------------------------------------------------
(Loss)/Profit on Ordinary
         Activities before taxation    (7,034)       (4,045)
Taxation on (loss)/profit on
         ordinary activities             (164)          416
-------------------------------------------------------------
(Loss)/Profit on Ordinary
         Activities after taxation     (7,198)       (3,629)
Minority equity interests                 (28)           (5)
-------------------------------------------------------------
Retained (Deficit)/Profit              (7,266)       (3,634)
=============================================================
(Loss)/Earnings per share (pence)        (7.8)         (4.4)
=============================================================
</TABLE>
<PAGE>

Annual Report 1999

www.brightstation.com
Technology born for business

79

Accounting Glossary

<TABLE>
<S>                                                         <C>
Terms used in Annual Report                                 US equivalent or brief description
-----------------------------------------------------------------------------------------------------------------------------
Administration expenses                                     General and administration expenses
-----------------------------------------------------------------------------------------------------------------------------
Allotted                                                    Issued
-----------------------------------------------------------------------------------------------------------------------------
Called up share capital                                     Ordinary shares, issued and fully paid
-----------------------------------------------------------------------------------------------------------------------------
Capital allowances                                          Tax term equivalent to US tax depreciation allowances
-----------------------------------------------------------------------------------------------------------------------------
Cash at bank and in hand                                    Cash
-----------------------------------------------------------------------------------------------------------------------------
Class of business                                           Industry segment
-----------------------------------------------------------------------------------------------------------------------------
Creditors                                                   Accounts payable
-----------------------------------------------------------------------------------------------------------------------------
Creditors: Amounts falling due after more than one year     Long-term liabilities
-----------------------------------------------------------------------------------------------------------------------------
Creditors: Amounts falling due within one year              Current liabilities
-----------------------------------------------------------------------------------------------------------------------------
Debtors                                                     Accounts receivable
-----------------------------------------------------------------------------------------------------------------------------
(Deficit)/retained profit                                   Net (loss)/income
-----------------------------------------------------------------------------------------------------------------------------
Distribution costs                                          Selling and marketing expenses
-----------------------------------------------------------------------------------------------------------------------------
Destination (of revenue)                                    The geographical area to which goods or services are supplied
-----------------------------------------------------------------------------------------------------------------------------
Finance lease                                               Capital lease
-----------------------------------------------------------------------------------------------------------------------------
Interest payable and other similar charges                  Interest expense
-----------------------------------------------------------------------------------------------------------------------------
Interest receivable                                         Interest income
-----------------------------------------------------------------------------------------------------------------------------
Operating (loss)/profit                                     (Loss)/income from operations
-----------------------------------------------------------------------------------------------------------------------------
Profit                                                      Income
-----------------------------------------------------------------------------------------------------------------------------
Profit and loss account                                     Income statement
-----------------------------------------------------------------------------------------------------------------------------
Profit and loss reserve (under 'capital and reserves')      Retained earnings
-----------------------------------------------------------------------------------------------------------------------------
Share capital                                               Ordinary shares, capital stock or common stock issued
                                                            and fully paid
-----------------------------------------------------------------------------------------------------------------------------
Share premium account                                       Additional paid-in capital or paid-in surplus (not distributable)
-----------------------------------------------------------------------------------------------------------------------------
Shares in issue                                             Shares outstanding
-----------------------------------------------------------------------------------------------------------------------------
Source (of revenue)                                         The geographical area from which goods or services are
                                                            supplied to a third party or another geographical area
-----------------------------------------------------------------------------------------------------------------------------
Stocks                                                      Inventories
-----------------------------------------------------------------------------------------------------------------------------
Tangible fixed assets                                       Property and equipment
-----------------------------------------------------------------------------------------------------------------------------
Taxation on (loss)/profit on ordinary activities            (Provision)/benefit for income taxes
-----------------------------------------------------------------------------------------------------------------------------
Turnover                                                    Revenues
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>

Annual Report 1999

www.brightstation.com
Technology born for business

80

The Bright Station plc Proposed Long Term Incentive Plan, Subsidiary Share
Option Schemes, Employee Benefit Trust and Proposed Amendments to Existing Share
Schemes

Following the recent reorganisation of the Company, the Remuneration Committee
(the "Committee") believes that this is an appropriate time to establish
powerful incentive arrangements which will strengthen the union of interest
between the shareholders and key executives. Consequently, the Company proposes
to introduce a new long term incentive arrangement, the Bright Station plc Long
Term Incentive Plan (the "LTIP") and new Subsidiary Share Option Schemes in
respect of four designated subsidiaries of the Company. Under these
arrangements, which will operate in conjunction with the Company's existing
share schemes (the "Existing Share Schemes"), participants will only benefit if
testing performance criteria are achieved. It is also proposed that the Company
establish an Employee Benefit Trust which will be operated in conjunction with
the LTIP, and where appropriate, any other share based schemes operated by the
Company.

         Shareholders are also being asked to consider and, if thought
appropriate, approve certain amendments to the provisions in the rules of the
Existing Share Schemes relating to the limits on the number of shares that may
be issued under such schemes.

The Bright Station Long Term Incentive Plan

The key features of the LTIP are detailed below. The LTIP will be administered
by the Committee, all the members of which are non-executive directors. While
the LTIP is open to all employees who are key to the future success of the
business, it is the present intention of the Committee that initial grants will
be restricted to a small group of senior individuals. Future participation in
both the LTIP and the Subsidiary Share Option Schemes is not precluded but any
such multiple participation will be coordinated by the Committee to produce a
single rational remuneration package. Neither awards granted under the LTIP nor
the Subsidiary Share Option Schemes will be pensionable.

         Under the LTIP, awards will normally be made annually at the discretion
of the Committee. The value of the shares that are the subject of an annual
award cannot exceed two times a participant's "Basic Salary" (as such term is
defined in the rules of the LTIP) and will only vest subject to the achievement
of predetermined performance criteria. In the case of the first award,
performance will be measured against the growth in value of the Company's share
price against specific targets.

Subsidiary Share Option Schemes

The Board have identified certain parts of the Group's continuing activities as
areas requiring a distinct development strategy. Briefly, these areas are:

-        WebTop

WebTop.com (www.webtop.com) is an Internet search engine that combines Muscat's
"concept based" retrieval technology with InfoSort's powerful indexing system to
return accurate results from the Internet grouped into different "zones".
WebTop.com has three main components - the WebTop.com search engine itself, the
customisable WebCheck application it distributes, and real estate called "zones"
on the WebTop.com site. The Company believes that WebTop.com is an Internet
search engine that will gain a wider audience because of its "concept based"
searching, accurate results, and ease of further refining searches using
InfoSort.

-        OfficeShopper

OfficeShopper.com (www.officeshopper.com) is the UK's first fully integrated
online shop for over 40,000 office products offering medium-sized businesses a
supremely cost-effective way of managing all their office purchases. The service
features an enhanced, user-friendly interface and search capability, making
business purchasing quick and easy. In addition, users are able to create
personalised catalogues and access automatically generated "frequent buy" lists.
Customers are also able to track, control and authorise purchasing online by
employee, department or product, using OfficeShopper's live budget control
features which enable businesses to effectively manage purchasing costs.

         The Company expects to accelerate the growth of business in the UK
through investment in sales staff and by the recent addition of 10,000 new
product items in the software and computer consumables area. In addition, the
Company will continue to pursue strategic alliances, such as the Freeserve
alliance, as a means of broadening its online user base.

-        Smartlogik

As companies begin to rely more on their intranets to share and distribute
information and on the management of externally sourced information, the Company
believes that there will be a growing demand for automatic sorting and
intelligent search technologies such as the range of products offered by
Smartlogik.

         Smartlogik's products - InfoSort, Discovery and Alert - address the
processes of information categorisation, retrieval and alerting. These solutions
leverage the InfoSort and Muscat technologies for the knowledge management,
corporate intranet and Internet markets, collecting data from external feeds,
internal databases, internal documentation on corporate intranets, or the Web.
This information is then filtered through Smartlogik's indexing and search
tools to deliver the right information to the right employee at the right time.
An organisation may adopt the full suite, or opt to utilise an appropriate
selection, depending on its requirements.
         Current customers include the BBC, NASA, BAA and the British Library.

-        Sparza

In 1999, Sparza Limited (www.sparza.com) was established as a dedicated
business, licencing the suite of Sparza eCommerce technologies to offer software
solutions to manufacturers, wholesalers, resellers and retailers.

         Sparza provides the means for businesses to go online, offering them
the highest levels of control and profitability. Each of the four modules in the
suite is linked to a different point in the supply chain: Sparza Buy; Sparza
Sell; Sparza Resell and Sparza Host. Each solution is supported by Sparza's own
professionals, who are able to tailor solutions to specific requirements and
help buyers and sellers create a free-flowing, low cost electronic supply chain.

         Sparza provides eCommerce technologies to enable manufacturers and
wholesalers to more efficiently and profitably manage their supply chain.
OfficeShopper, using Sparza technology, illustrates the powerful capabilities of
this technology.

In May 2000, Sparza acquired the technology assets from
<PAGE>

Annual Report 1999

The Bright Station plc Proposed Long Term Incentive Plan, Subsidiary Share
Option Schemes, Employee Benefit Trust and Proposed Amendments to Existing Share
Schemes

www.brightstation.com
Technology born for business

81

boo.com, the online fashion retailer, which significantly enhanced the Company's
capabilities and product offerings.

The Board consider that in order to maximise shareholder value these businesses
should be developed as separate entities within the Group with the expectation
that they will be eventually floated or sold. The Board have invested
considerable time in assembling management teams for each of the businesses who
have the expertise and ambition to drive them forward. An important factor in
ensuring the success of the Board's strategy is to tie the fortunes of the
management teams to the success of the ventures for which they have day to day
responsibility. After much consideration as to how best to accomplish this
objective, the Board consider that this will be best achieved by establishing
share option schemes under which options may be granted to the management teams
over each of the relevant business subsidiary's shares, up to a maximum of 15%
of the subsidiary's issued share capital (the "Equity Pool"). The Equity Pool
will be allocated between the management team at the discretion of the Board.
The proportion which may be allocated to any individual member of the team will
not be limited as the Board believe that the traditional individual limits on
participation are not appropriate for the following reasons:-

- it is essential that awards granted to the members of the management teams are
  market competitive and sufficient to truly incentivise them to drive the value
  of their respective subsidiary and, therefore, shareholder value;

- in determining the price at which options are granted, it is the intention of
  the Board to treat the fair market value of the subsidiary's shares as a
  minimum benchmark. Where appropriate, options will be granted at a premium to
  this figure.

         The Board believe that the creation and allocation of an Equity Pool in
respect of each of the relevant subsidiaries is the most appropriate way to
ensure the management's commitment to the success of their respective business
units and, as a result, generate shareholder value in a cost effective and
targeted manner.

Employee Benefit Trust (the "Trust")

Where appropriate, the shares for the LTIP and any other share based schemes
operated by the Company will be subscribed for or purchased in the market by the
Trust, although any such subscription will be subject to certain limits. A
summary of the main terms of the Trust can be found below.

Amendments to the Rules of the Existing Share Schemes The Company currently
operates the following share schemes:-

- the Bright Station plc 1994 Unapproved Executive Share Option Scheme;

- the Bright Station plc 1994 Executive Share Option Scheme;

- the Bright Station plc 1994 Savings Related Share Option Scheme;

- the Bright Station plc 1997 Stock Option Plan; and

- the Bright Station plc 1998 Employee Stock Purchase Plan.

The rules of each of the Existing Share Schemes contain limits on the number of
shares that may be issued to satisfy awards made under these schemes. The rules
of the LTIP (as described more fully below) also contain limits on the number of
shares that may be issued to satisfy awards made under that arrangement, save
that for the purposes of the limits in the rules of the LTIP there shall be
ignored awards made under any employees' share scheme operated by the Company
prior to the date on which the LTIP is adopted by the Company to individuals who
ceased employment with any Group Company as a result of the disposal by the
Company of the ISD to Thomson.

         So as to ensure continuity between the rules of the Existing Share
Schemes and the rules of the LTIP, it is proposed that the relevant rules of the
Existing Share Schemes relating to the limits on the number of shares that may
be issued to satisfy awards made under these schemes be amended so that, for the
purposes of these limits, there shall also be ignored awards made under these
schemes to individuals who ceased employment with any Group Company as a result
of the disposal by the Company of the ISD to Thomson.

Summary of the Bright Station Long Term Incentive Plan

1.       Eligible Employees

The Committee, all the members of which are non-executive directors, will select
those key executives who are to participate in the LTIP from those employees who
are required to devote substantially the whole of their working time to the
business of the Group.

2.       Awards

Awards will take the form of either nil cost options or a deferred promise by
the Company to provide shares for no cost, both subject to the satisfaction of
the predetermined performance criteria described below. Awards will be made
under the LTIP, at the Committee's discretion, following the adoption of the
LTIP by shareholders.

3.       Form and Vesting of Awards

Awards will be made under the LTIP in respect of a specified number of Ordinary
shares which will normally vest following the achievement of the predetermined
performance criteria described below and generally provided that the participant
is still in the employment of the Company or any other Group Company.

         However, on release of awards, benefits will be provided either in the
form of Ordinary shares of the Company or cash at the discretion of the Company.

4.       Performance Criteria in Respect of the Awards

No award will normally vest unless the predetermined performance criteria set by
the Committee have been achieved. The performance criteria relating to
subsisting awards may be varied if events occur which cause the Committee to
consider that the existing performance criteria have become inappropriate, save
that any varied performance requirements will not be materially more or less
difficult to satisfy than was originally intended.

         For the initial grant of awards, it is proposed that the release of
such awards shall be dependent upon whether the price of an Ordinary share in
the capital of the Company has risen to certain predetermined levels during the
three year period following the date on which the award is made (the
<PAGE>

Annual Report 1999

The Bright Station plc Proposed Long Term Incentive Plan, Subsidiary Share
Option Schemes, Employee Benefit Trust and Proposed Amendments to Existing Share
Schemes

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82

"Restricted Period").
         It is the Committee's present view that the target share prices that
are chosen should represent a substantial premium to current share price so as
to ensure that benefits are only provided to participants under the LTIP if
there is a material increase in the current value of a shareholder's investment
over the Restricted Period.
         For the purposes of the initial grant of awards, to ensure that the
release of such awards is not disproportionately biased by any volatility in the
Company's share price at the end of the Restricted Period, it is proposed that
the final share price will be calculated by averaging the mid market quotations
of an Ordinary share in the capital of the Company over a period of no longer
than six months prior to the date on which the Restricted Period expires as
determined by the Committee.
         Any portion of the Award that is not released shall lapse on the expiry
of the Restricted Period.

5.       Individual Limits
The maximum value of awards (calculated by reference to the average mid market
quotations of an Ordinary share in the capital of the Company over a period of
no longer than 12 months prior to the date of grant) made to a participant in
any year in which the LTIP operates shall be determined by the Committee but
shall not exceed 200% of a participant's Basic Salary (as such term is defined
in the rules of the Plan).
         It is the Committee's current view that initial awards of up to 200% of
the participant's Basic Salary are appropriate, followed with subsequent annual
awards to a value of 100% thereafter. The vesting of all awards will be tied to
testing performance criteria.

6.       Plan Limits
In respect of awards that may be satisfied by the issue of shares in the
Company, no such award shall be granted on any date of grant which causes, when
such number of shares in the Company over which the Award is made is aggregated
with the number of shares in the Company issued or remaining issuable pursuant
to rights to subscribe for shares in the Company granted under the LTIP, or any
other employees' share scheme established by the Company during the preceding 10
years, to exceed 10% of the number of shares in the Company in issue from time
to time on the relevant date of grant.
         For the purposes of this limit there shall be ignored the following:-
- awards that may be satisfied by the issue of shares in the Company and any
other rights granted under any employees' share scheme which have lapsed, become
void, been cancelled or which have otherwise become incapable of release or
exercise; and
- awards made under any employees' share scheme operated by the Company prior to
the date on which the LTIP was adopted by the Company to individuals who ceased
employment with any Group Company as a result of the disposal by the Company of
the ISD to Thomson.

7.       Release in Exceptional Circumstances
If a participant leaves employment before awards have been released, such awards
will normally lapse unless the Committee determines that the reason for the
cessation of employment is such that it would be appropriate to allow the award
(or part thereof) to be released or made subject to the achievement of such
amended performance criteria or other requirements as the Committee may
determine.
         In the event of a take-over, reconstruction, amalgamation or winding up
of the Company, or in the event of any of the businesses of the Group being
merged or demerged, the Committee shall determine in their absolute discretion
the extent to which awards are released (if at all) and shall take into account
when making such determination how the growth in the price of a share between
the date of grant and the occurrence of the relevant event compares to the share
price growth that would be required during the Restricted Period to achieve the
predetermined share price targets (assuming a straight-line growth in share
price during the Restricted Period).

8.       Non-Transferability of Awards
Awards are not transferable (except that in the case of a participant for whom a
trustee is acting, in which case the trustee will be able to transfer the
benefit to the participant).

9.       Duration of the LTIP
Awards may not be granted under the LTIP more than five years after its adoption
by the Company, unless the LTIP is extended pursuant to a shareholder authority
for a further period of five years.

10. Grant of Awards
Awards will only be made at times permitted by the Model Code contained in the
Listing Rules issued by the Financial Services Authority (as amended from time
to time) or any code adopted by the Company or order or regulation governing
dealing in shares that may be issued from time to time.
         Awards released in the form of shares may be in the form of newly
subscribed shares or shares bought in the market.

11. Adjustment of Awards
On a variation of the capital of the Company or a demerger, the price payable
(if any) by participants on release of an award and/or the number of shares the
subject of an award may be adjusted in such manner as the Committee determines
and the external advisors of the Company confirm, in their opinion, to be fair
and reasonable.

12. Amendments to the Plan
The LTIP will be administered by the Committee. Amendments to the rules may be
made at their discretion, but the basic structure and in particular the
limitations on participation, eligibility to participate, the basis for
determining a participant's entitlement to an award, the maximum value of awards
that may be made to participants, the adjustments that may be made following a
rights issue or any other variation of capital and the limitations on the number
of shares that may be issued, cannot be altered to the advantage of participants
without prior shareholder approval except for minor amendments to benefit the
administration of
<PAGE>

Annual Report 1999
The Bright Station plc Proposed Long Term Incentive Plan, Subsidiary Share
Option Schemes, Employee Benefit Trust and Proposed Amendments to Existing Share
Schemes

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83

the LTIP, to take account of a change in legislation or to obtain or maintain
favourable tax, exchange control or regulatory treatment for participants or for
the Group.
         The Committee may add, vary or amend the rules of the LTIP by way of a
separate schedule (should the Company wish to extend the LTIP overseas), in each
country so that the LTIP may operate to take account of local legislative and
regulatory treatment for participants or the relevant Group Company provided
that the parameters of these arrangements are not such that they would require
approval by shareholders.

13. Allotment and Transfer of Shares
Shares subscribed will not rank for dividends payable by reference to a record
date falling before the date on which the shares are acquired but will otherwise
rank pari passu with existing shares.
         Application will be made to the London Stock Exchange for admission to
the Official List for shares that are to be issued following the release of
Awards.

Summary of the Subsidiary Share Option Schemes
1.       Introduction
The proposal is to establish share option schemes (the "Schemes") in respect of
four designated subsidiaries of Bright Station: WebTop; OfficeShopper;
Smartlogik and Sparza. The rules of each scheme shall be in the same form, the
principal terms of which are described below.
         Under the Schemes, eligible employees may be granted options to acquire
Ordinary shares in the relevant subsidiary ("Ordinary shares"). The Schemes will
be administered by the Board of Directors of Bright Station (the "Board") in
accordance with the rules of the Schemes. The Schemes will not be approved by
the Inland Revenue pursuant to Schedule 9 of the Income and Corporation Taxes
Act 1988.
         Benefits under the Schemes are not pensionable.

2.       Share Rights
Shares allotted on the exercise of options granted under the Schemes will rank
pari passu in all respects with Ordinary shares then in issue, but will not
participate in any dividend or other rights attaching to shares by reference to
a record date preceding the date of exercise of an option.

3.       Eligibility
Under the Schemes all bona fide employees of the Group are eligible to
participate. The Board may at its discretion grant options under the Scheme to
any eligible person but will do so on the basis of their contribution to the
relevant subsidiary.

4.       Individual Limit on Participation
There will be no limit on the value of options that may be granted to an
individual under the Schemes.

5.       Grant/Exercise Price
Options may be granted within 42 days from adoption of the Schemes. Thereafter
Options may be granted in the period of 42 days following the announcement of
Bright Station's quarterly results.
         No payment will be required for the grant of an option.

The price at which Ordinary shares may be subscribed for on exercise of options
by participants cannot be less than the higher of: (a) the aggregate nominal
value of the Ordinary shares under option; or (b) the aggregate market value of
the Ordinary shares under Option at the date of grant as determined by the
Board.
         In determining the price at which options are granted, it is the
intention of the Board to treat the fair market value of the subsidiary's shares
at a minimum benchmark. Where appropriate, options will be granted at a premium
to this figure.

6.       Limits
The limits on the number of shares which may be issued pursuant to options
granted under the Schemes are that in any ten year period, no more than 15% of
the relevant subsidiary's issued ordinary share capital for the time being may
be allocated under employee share schemes;
         No options may be granted under the Schemes more than 10 years after
the date on which options are first granted without further authorisation from
shareholders.

7.       Non transferability
An option may only be exercised by the person to whom it is granted or his
personal representatives and is not transferable.

8.       Exercise Rights
Options may be exercised at the time or times specified by the Board. Options
not exercised before the expiry of ten years from the date of grant shall lapse.
However, no option may be exercised (subject to paragraph 9 below) unless the
relevant subsidiary's shares are listed or traded on an exchange which qualifies
as recognised exchange for the purposes of the Financial Services Act 1986
("Listing"). The Board retains a discretion to vary or waive this performance
target in the event that they consider that a Listing is no longer a strategic
goal of the relevant subsidiary. If the Board does waive the performance target,
options will become exercisable from the date specified by the Board at grant.
If options are exercised in these circumstances the Board has a discretion to
pay the cash equivalent of any gain in the value of the Ordinary shares under
option between the date of grant and the date of exercise.
         If a participant ceases to hold an office or employment within the
Group, options which would have been exercisable but for a Listing (i.e.
vested), remain exercisable for a period of three years subject to the Listing
requirement. If a participant leaves for a specified reason (e.g. serious
misconduct) any unexercised options (whether vested or not) lapse. All unvested
options lapse from the date of leaving irrespective of the reason for such
cessation.

9.       Early exercise
Exercise of options before the shares would otherwise become exercisable (i.e.
prior to a Listing) is only permitted where there is a change in control of the
Company or a voluntary winding-up of the Company. In the event of a change in
control, participants may release their options in substitution for the grant of
equivalent options over shares in the acquiring
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Annual Report 1999
The Bright Station plc Proposed Long Term Incentive Plan, Subsidiary Share
Option Schemes, Employee Benefit Trust and Proposed Amendments to Existing Share
Schemes

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Technology born for business

84

company, subject to the consent of the acquiring company. Alternatively, rather
than allotting new shares under a Scheme, the Board has a discretion to pay the
cash equivalent of any gain in the value of the Ordinary shares under option
between the date of grant and the change of control.

10.      Variation of capital
In the event of any variation in the share capital of the relevant subsidiary,
including a capitalisation or rights issue, the number of shares subject to any
option and the exercise price relating to it may be adjusted subject to (except
in the case of a capitalisation issue) the auditors confirming in writing that
such adjustment is, in their opinion, fair and reasonable.

11.      Alterations to the Schemes
The Board may amend the Schemes as they consider appropriate except that any
alteration to the advantage of participants to the provisions relating to (i)
the persons who may be granted an option (ii) the limitations on the grant of an
option (iii) the adjustment of the number of Ordinary shares subject to an
option and (iv) the rights attaching to shares subject to an option or the
provisions of the amendment rules requires the prior approval of shareholders
(unless they are minor amendments to benefit the administration of the Schemes,
to take account of a change in legislation or to obtain or maintain favourable
tax, exchange control or regulatory treatment for the Company or any Group
company or any participant).

Summary of the Bright Station plc Employee Benefit Trust (the "Trust")
1.       Beneficiaries
Potential beneficiaries will be employees of the Company or other Group Company,
ex-employees of such companies and the spouse and dependants of such employees
or ex-employees.

2.       Function of the Trust
The purposes of the Trust are to facilitate and encourage the ownership of
shares by employees of the Group. This will be achieved by the Trust acquiring
shares in the Company subject to certain limits and distributing such shares in
accordance with the terms of employee share schemes.

3.       Limits
The number of shares that may be held by the Trust at any time shall not exceed
10% of the issued share capital. Similar limits as are contained in the rules of
the LTIP shall limit the number of shares that can be subscribed for by the
Trust.

4.       Amendments
The Trust may be amended by the Company and the trustees provided that no
amendment shall have the effect of causing the Trust to cease to be an
employees' share scheme within the meaning of section 743 of the Companies Act
1985 and the limitations on the number of shares that may be issued to the Trust
cannot be altered without prior shareholder approval.

5.       Administration
The trustee will be independent of the Company and the general operation and
administration of the Trust will be monitored by the Committee.

Note: The above summarise the main features of the rules of the Bright Station
Long Term Incentive Plan, the Subsidiary Share Option Schemes and the Bright
Station plc Employee Benefit Trust, but do not form part of them and should not
be taken as affecting the interpretation of the detailed terms and conditions
constituting the rules or Trust deed. Copies of the rules of the LTIP, the
Subsidiary Share Option Schemes, Trust deed and the rules of the Existing Share
Schemes marked to show the proposed amendments to these schemes will be
available for inspection at the registered office of the Company during usual
business hours on weekdays (Saturdays, Sundays and Bank Holidays excepted) up to
the date of the meeting, and at the meeting itself. The Directors reserve the
right up to the time of the meeting to make such amendments and additions as
they may consider necessary or desirable, provided that such amendments and
additions do not conflict in any material respect with the summaries set out
above.
<PAGE>

Annual Report 1999

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85

Notice of Annual General Meeting

Notice is hereby given that the Annual General Meeting of the Company will be
held at The Institute of Directors, 116 Pall Mall, London SW1Y 5ED, on Tuesday 5
September at 10.0 a.m. for the following purposes:

Ordinary Business
1. To receive the Accounts for the year ended 31 December 1999, together with
the reports of the Directors and Auditors thereon.

2. To re-elect Allen Thomas as a Director (Mr Thomas being due to retire in
accordance with the Company's Articles of Association).

3. To re-appoint PricewaterhouseCoopers as auditors of the Company and to
authorise the Directors to set their remuneration.

To consider and, if thought fit, to pass the following resolutions which will be
proposed as Ordinary Resolutions:

Special Business
4. That the Subsidiary Share Option Schemes (the "Schemes"), in the form of the
Rules produced to the meeting and signed for the purposes of identification by
the Chairman hereby be approved and that the Directors be authorised to do all
acts and things necessary to establish the Schemes and carry such schemes into
effect.

5. That the Bright Station Long Term Incentive Plan (the "LTIP"), in the form of
the Rules produced to the Meeting and signed by the Chairman for the purpose of
identification, be and is hereby approved and adopted and that the Directors be
authorised to do all acts and things necessary to establish the LTIP and carry
such plan into effect.

6. That the Bright Station Employee Benefit Trust (the "Trust"), and the Trust
deed in the form produced to the Meeting and signed by the Chairman for the
purpose of identification, be and are hereby approved and adopted and that the
Directors be authorised to do all acts and things necessary to establish the
Trust and carry such trust into effect.

7. That the rules relating to the limits on the number of shares that may be
issued to satisfy awards made under the Bright Station plc 1994 Unapproved
Executive Share Option Scheme, the Bright Station plc 1994 Executive Share
Option Scheme, the Bright Station plc 1994 Savings Related Share Option Scheme,
the Bright Station plc 1997 Stock Option Plan and the Bright Station plc 1998
Employee Stock Purchase Plan be amended so that, for the purposes of these
limits, there shall be ignored awards made under these schemes to individuals
who ceased employment with any Group Company as a result of the disposal by the
Company of the Information Services Division to The Thomson Corporation.

By order of the Board

/s/ J Ball
J Ball
Company Secretary
14 July 2000

Registered Office:
The Communications Building
48 Leicester Square
London WC2H 7DB
<PAGE>

Annual Report 1999
Notice of Annual General Meeting

www.brightstation.com
Technology born for business

86

Notes
1. Pursuant to Regulation 34 of the Uncertificated Securities Regulations 1995,
the Company hereby specifies that a person must be the registered holder of
Ordinary shares of the Company at 10.0 a.m. on 3 September 2000 in order to be
entitled to attend and vote at the meeting or adjourned meeting in respect of
those shares. Changes to entries on the register of members after 10.0 a.m. on 3
September 2000 shall be disregarded in determining the rights of any person to
attend or vote at the meeting.

2. A member entitled to attend and vote may appoint a proxy or proxies, who need
not be a member of the Company, to attend (and on a poll to vote) instead of him
or her.

3. A proxy form accompanies this notice which, in order to be valid, must be
deposited together with any authority under which it is executed (or a copy of
the authority notarially certified or in some other way approved by the Board)
with Computershare Services PLC, PO Box 457, Owen House, 8 Bankhead Crossway
North, Edinburgh EH11 0XG not later than 48 hours before the time appointed for
the meeting. Completion of a form of proxy will not preclude a member from
attending and voting in person at the meeting or any adjournment thereof.

4. Brief biographical details of all the Directors, including those who present
themselves for election or re-election, are set out on page 18.

5. In accordance with the Companies Act 1985 and with the requirements of the
London Stock Exchange, copies of the following documents will be available for
inspection at the Company's Registered Office and at the offices of Theodore
Goddard, 150 Aldersgate Street, London, EC1A 4EJ during normal business hours
from the date of this notice until the date of the Annual General Meeting and
will also be available at the place of the meeting for inspection for at least
15 minutes prior to and during the meeting:
(i) The Register of Directors' Interests in the share capital and debentures of
the Company; and (ii) Copies of service agreements under which Directors of the
Company are employed and terms of engagement for non-executive Directors; and
(iii) Copies of the Rules of the 1994 Savings Related Share Option Scheme, the
1994 Executive Share Option Scheme, the 1994 Unapproved Executive Share Option
Scheme, the 1997 US Stock Option Plan and the 1998 Employee Stock Purchase Plan,
the Subsidiary Share Option Schemes, the Long Term Incentive Plan and the Bright
Station Employee Benefit Trust.

6. Establishment of Subsidiary Share Option Schemes (the "Schemes") (item 4 on
the agenda). The ordinary resolution at item 4 seeks authority for the Board to
establish new discretionary share-option schemes in respect of four designated
subsidiaries of Bright Station - WebTop, OfficeShopper, Smartlogik and Sparza
for the incentivisation and benefit of key management and personnel within these
subsidiaries. The strategy of the Board is to develop these businesses as
separate entities within the Group with the expectation that they will
eventually be floated or sold. The Board considers that an important factor in
ensuring the success of this strategy is to tie the fortunes of the management
teams to the success of the ventures for which they have specific responsibility
by granting options over shares in the relevant business. Details of the the
proposed Schemes are on pages 80-84.

7. Establishment of Bright Station Long Term Incentive Plan (item 5 on the
agenda). The ordinary resolution at item 5 seeks authority for the Board to
establish a new discretionary share-based incentive arrangement which the Board
believes will meet its objective of incentivising senior employees to generate a
material increase in the current value of a shareholder's investment. A summary
of the main features of the LTIP are summarised on pages 80-84.

8. Establishment of an Employee Benefit Trust (item 6 on the agenda). The
ordinary resolution at item 6 seeks authority for the establishment of an
Employee Benefit Trust for the subscription or purchase of Bright Station shares
for the equity incentive schemes operated by the Company. The main features of
the Trust are summarised on pages 80-84.

9. Amendment of the Rules of the Company's existing share option schemes (item 7
on the agenda). The ordinary resolution at item 7 seeks authority for the Board
to amend the rules of the existing share schemes to ensure continuity amongst
all the Company's equity incentive plans. To this end, it is proposed that
awards made to individuals who no longer work for the Company as a result of the
sale of the ISD to Thomson shall be disregarded for the purposes of calculating
the maximum scheme limits. Details of the proposed amendments are set out on
pages 80-84.

10. Please note that the Institute of Directors operates a dress code of shirt
and tie with suit or sports jacket for men. The IoD reserves the right to refuse
admission for failure to adhere to its dress code.
<PAGE>

Annual Report 1999           www.brightstation.com                            87
                             Technology born for business

                             Shareholders Contacts

<TABLE>
<CAPTION>
<S>                                    <C>                             <C>
Directors and Advisors                 Investor Relations              Registrar/Depositary:
Allen Thomas* Chairman                 Nick Chaloner                   for duplicate mailings and address
Daniel Wagner Chief Executive          Bright Station plc              changes Ordinary shares
David Mattey Chief Financial Officer   The Communications Building     Computershare Services plc
Patrick Sommers*                       48 Leicester Square             PO Box 435
Ian Barton*                            London WC2H 7DB                 Owen House
Marmaduke Hussey*                                                      8 Bankhead Crossway North
Richard Swank*                         Tel: +44 (0)20 7930 6900        Edinburgh EH11 4BR
                                       Fax: +44 (0)20 7925 7700
*Non-Executive                                                         Tel: +44 870 702 0010
                                       John Olsen                      Fax: +44 131 442 4924
Company Secretary and                  Hogarth Partnership Limited
Registered Office                      The Butlers Wharf Building      American Depositary Shares
Jonathan Ball                          36 Shad Thames                  The Bank of New York
The Communications Building            London SE1 2YE                  Investor Relations Department
48 Leicester Square                                                    PO Box 11258
London WC2H 7DB                        Tel: +44 (0)20 7357 9477        Church Street Station
                                       Fax: +44 (0)20 7357 8533        New York
Register Number                                                        NY 10286 - 1258
1890236                                David Collins/Robert Rinderman
                                       Jaffoni & Collins Incorporated  Tel: +1 402 963 9394
Auditors                               104 Fifth Avenue - 14th Floor   or toll free for US residents only
PricewaterhouseCoopers                 New York, NY 10011              1-888-BNY-ADRS
1 Embankment Place                                                     Fax: +1 212 815 4023
London WC2N 6NN                        Tel: +1 212 835 8500
                                       Fax: +1 212 835 8525            Listings
Principal Bankers                                                      London Stock Exchange
The Royal Bank of Scotland plc         Home Page                       Ordinary shares
London Belgravia Branch                http://www.brightstation.com    Symbol: BSN (previously DLG)
24 Grosvenor Place
London SW1X 7HP                                                        NASDAQ
                                                                       American Depositary Shares
Stockbroker                                                            Symbol: BSTN (previously DIAL)
Hoare Govett Limited
250 Bishopsgate
London EC2M 4AA

Legal Advisors
UK
Theodore Goddard
150 Aldersgate Street
London EC1A 4EJ

Mishcon De Reya
21 Southampton Row
London WC1B 5HS

US
Shearman & Sterling
599 Lexington Avenue
New York
NY 10022
USA
</TABLE>
<PAGE>

Annual Report 1999

www.brightstation.com
Technology born for business

Information for Investors

Form 20-F
Filed with US Securities and Exchange Commission. Form 20-F corresponds to the
Form 10-K filed by US public companies. Available from the registered office of
Bright Station plc;

Low-cost dealing service
Hoare Govett Limited has established a low-cost dealing service which enables
investors to buy or sell certified holdings of the Company's shares in a simple
economic manner. Basic commission is 1% with a minimum charge of (pound)10.
Transactions are executed and settled by Pershing Securities Limited. Forms can
be obtained from Hoare Govett Limited, 250 Bishopsgate, London EC2M 4AA (Tel:
020 7678 8000).

Share price information
Share price information about Bright Station plc is available with the following
references:
Ordinary shares:
Reuters RIC Code - BSN.L (previously DLG.L)

Ordinary shares: London Stock
Exchange SEDOL code - 558-305

ADSs traded on NASDAQ - BSTN (previously DIAL)

Shareholder information on the Internet
Holders of Ordinary shares in Bright Station plc can access details of their
shareholding at http://www.computershare.com. This site also includes
information on recent trends in the Company's share price.

Financial Diary for 2000
23 March          Results for the year ended 31 December 1999 announced
27 April          EGM to approve the sale of the ISD to Thomson
30 June           First quarter trading statement issued
3 August          Annual report/20F posted to shareholders
Mid-August        Results for the first six months of 2000 announced
5 September       Annual General Meeting
Mid-November      Third quarter trading statement issued
<PAGE>

                                                  Photography by Chris Moyse
                                                  Printed by Hyway Pennington

London
Bright Station plc
The Communications Building
48 Leicester Square
London
WC2H 7DB

Tel: +44 (0)20 7930 6900
Fax: +44 (0)20 7925 7700

Oxford (eCommerce)
Bright Station
Meridian House
Weston Business Park
Weston on the Green
Oxon
OX6 8SY

Tel: +44 (0)1869 342342
Fax: +44 (0)1869 342343

Cambridge (Web Solutions)
Bright Station
Part 2/nd/ Floor, Block D
The Westbrook Centre
Milton Road
Cambridge
CB4 1YG

Tel: +44 (0)1223 715000
Fax: +44 (0)1223 715001
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www.brightstation.com

[BRIGHTSTATION LOGO APPEARS HERE]<PAGE>

                                                                    Exhibit 10.4

Following are portions (indicated by reference to the original page numbers) of
the Company's listing particulars issued April 3, 2000, which was attached as
Exhibit 99.1 to the Company's Report on Form 6-K dated April 10, 2000:

<PAGE>

PAGE 45:
______________

The Senior Subordinated Notes are for a term of 10 years and interest is fixed
at 11 per cent. throughout the term.

The Senior Credit Facility is repayable over five years and interest is fixed
every three to six months at a rate of 2.25 percentage points over US Dollar
LIBOR. The Company has entered into an interest rate cap agreement that limits
the exposure of 75 per cent. of the balance of the Senior Credit Facility to a
maximum US Dollar LIBOR rate of 6.50 per cent.

Repayments on the Senior Subordinated Notes and Senior Credit Facility fall due
as follows:

                                            GROUP                 COMPANY
                                      1998        1997        1998        1997
                                   GBP'000     GBP'000     GBP'000     GBP'000

Within 1 year                       13,158       3,039      13,158       3,039
Within 1 - 2 years                  13,158      15,193      13,158      15,193
Within 2 - 5 years                  19,736      37,985      19,736      37,985
After 5 years                      108,186     109,396     108,186     109,396
                                   -------     -------     -------     -------
                                   154,238     165,613     154,238     165,613
Less: Unamortised finance costs     (5,779)     (6,768)     (5,779)     (6,768)
                                   -------     -------     -------     -------
                                   148,459     158,845     148,459     158,845
                                   =======     =======     =======     =======

The Company's obligations with respect to the Senior Credit Facility and finance
leases are secured on the assets of the Company and certain of its subsidiaries.
The Senior Subordinated Notes are unsecured.

Obligations under finance leases are due as follows:

                                                    GROUP            COMPANY
                                                1998     1997     1998    1997
                                             GBP'000  GBP'000  GBP'000 GBP'000

Within 1 year                                    222      491      210      --
Within 1 - 2 years                                12      278       12      --
Within 2 - 5 years                                --       12       --      --
                                               -----    -----    -----   -----
                                                 234      781      222      --
                                               =====    =====    =====   =====
<PAGE>

PAGE 75:
______________

        MUSCAT UNAPPROVED SCHEME

In November 1999, the Company acquired the remaining 30 per cent. of the issued
share capital of Muscat Limited. Pursuant to this transaction, various employees
holding in aggregate 436 options at exercise prices ranging from GBP627 to
GBP1,100 under the 1998 Muscat Unapproved Share Option Scheme were offered and
accepted a total of 642,822 replacement options over ordinary shares of The
Dialog Corporation plc at exercise prices ranging from 43p to 67p per share.

<PAGE>

PAGE 82-84
________________

(iii)   On 24 March 2000, the Company launched a cash tender offer and consent
        solicitation relating to its $180,000,000 11% Senior Subordinated Notes
        due 2007 (the "Notes"). The cash tender offer consists of an offer to
        purchase any or all of the outstanding Notes tendered pursuant to the
        offer at a price of $1,000 per $1,000 principal amount of the Notes
        together with accrued and unpaid interest thereon up to but not
        including the date of payment. In conjunction with the tender offer, the
        Company is also soliciting consents from the holders of the Notes to the
        adoption of certain proposed amendments to the Indenture governing the
        Notes. These proposed amendments if adopted, would have the effect of
        eliminating or amending certain covenants and eliminating or amending
        certain events of default in the Indenture. The tender offer will remain
        open until 12:00 midnight (New York City time) on 20 April 2000 (the
        "Expiration Date") unless extended. The tender offer is subject to a
        number of conditions including:

        -       that at least 95 per cent. of the outstanding principal amount
                of the Notes be validly tendered and not withdrawn prior to the
                Expiration Date;

        -       receipts of consents from the holders of a majority of the
                outstanding principal amount of the Notes and the execution of
                the Supplemental Indenture providing for those amendments;

        -       the consummation of the Sale with the Thomson Corporation; and

        -       the repayment of all obligations of the Company, including the
                payment of any unpaid and accrued interest and fees, to the
                extent such fees are not waived, under and in respect of the
                Company's Facility Agreement.

(iv)    an agreement dated 13 October 1999 between the Company and the holders
        of the shares in Muscat Limited (the "Vendors") pursuant to which the
        Company purchased 30% of the issued share capital of Muscat Limited for
        consideration of GBP2.5 million, giving the Company 100% ownership. The
        consideration was satisfied by the issue of 3,012,936 Ordinary
        Shares....

(vi)    an Agreement dated 23 March 2000 between the Company (1), and Thomson
        (2) pursuant to which the Company has agreed to sell to Thomson and
        Thomson has agreed to purchase Dialog's Information Services Division
        comprising the entire issued share capitals of The Dialog Corporation
        and various subsidiaries of The Dialog Corporation plc and Dotcom
        Investments BV together with the business of the Information Services
        Division as carried on by The Dialog Corporation plc comprising the
        business of "Dialog", "Profound" and "Datastar" for a consideration of
        $115 million payable in cash and the repayment to the Company of
        intra-group debt totalling $160 million on Completion. The consideration
        is subject to adjustment in accordance with the provisions of clause 4
        of the Agreement having reference to Working Capital. The ISD will also
        be sold cash free which together with the working capital adjustment
        allows Dialog to retain the benefit of operating profits made by the ISD
        up to Completion.

        Pursuant to the terms of the Sale Agreement Dialog has also agreed on
        Completion to allot to Thomson 9,297,290 Ordinary Shares (conditional on
        Admission) for a total subscription price of GBP15,851,879 million
        payable on Admission.

        The Sale Agreement contains warranties given by Dialog to Thomson in
        respect of the Companies and the Business being sold. The warranties are
        given at the date of the Agreement and are to be repeated on the
        Business Day prior to Completion. Dialog's liability under such
        warranties is limited to $150 million. Also, no liability shall attach
        to Dialog unless the aggregate amount of such liability under the
        warranties shall exceed $2.5 million and $250,000 in respect of taxation
        claims. Other limitations on Dialog's liability are contained in Clause
        7 of the Agreement.

        Under certain circumstances, and in particular if there has been a
        material breach of the warranties or a claim for class action
        litigation, as described in paragraph 9(b)(i) above, before Completion,

<PAGE>

        Thomson may rescind the contract. If Thomson rescinds the Agreement,
        Dialog has agreed to indemnify Thomson against all costs, charges and
        expenses incurred by Thomson in connection with the negotiation,
        preparation and rescission of the Agreement.

        Completion is conditional upon:

        -       the shareholders of the Company approving the Sale;

        -       all filings having been made and all or any appropriate waiting
                periods under the US Hart Scott Rodino Anti-Trust Improvements
                Act 1976 having expired, lapsed or been terminated in respect of
                the Sale;

        -       the agreement of the London Stock Exchange to admit the shares
                to be subscribed by Thomson and by Jiyu to listing on the London
                Stock Exchange;

        -       Dialog having received consents from the holders of a majority
                of the Notes to the adoption of various proposed amendments to
                the Indenture, the Trustee having executed a supplemental
                indenture in connection with such proposed amendments, and
                Noteholders holding at least 95% (or such lesser percentage as
                the Company may agree but not less than a majority) of the
                outstanding principal of the Notes having tendered and not
                withdrawn their Notes for redemption;

        -       each of the Banks and the Facility Agent (both as defined in the
                Facility Agreement dated 17 October 1997 (as amended) ("Facility
                Agreement ") having executed a letter providing for the waiver
                of certain provisions of, and payment and satisfaction of
                Dialog's obligations under, the Facility Agreement;

        -       there having been no transfer of intellectual property rights
                since 1 March 2000 and the Facility Agent having confirmed this
                in writing to Thomson; and

        -       approval from the German Federal Cartel Office in terms
                reasonably satisfactory to Thomson.

        all such conditions having been met or waived by or on 15 June 2000.

        If the condition as to Shareholders' approval is not satisfied and the
        Directors have ceased to recommend the Shareholders to approve the Sale,
        Dialog has undertaken to pay forthwith the sum of US$2.75 million to
        Thomson as compensation for Thomson's costs and expenses incurred in
        connection with the Sale. The Sale Agreement contains certain
        restrictions on Dialog including preventing it for 30 months after
        Completion from engaging in or operating a business that engaging in or
        operating any business which directly or indirectly aggregates, stores
        and distributes for general consumption information similar to that
        offered by the Seller in relation to the Business or the companies being
        sold prior to Completion.

        On Completion, Dialog is under an obligation to enter into the following
        agreements:

        -       a Tax Deed which will operate to indemnify Thomson for certain
                tax liabilities in connection with the Information Services
                Division;

        -       a Distribution Agreement between the Company and The Dialog
                Corporation Inc (the "Licensor") for the distribution by the
                Company of the Licensed Information. Under the Distribution
                Agreement, the Company will be granted a world-wide right and
                non-exclusive licence to distribute all information made and
                distributed by the Licensor in connection with the products and
                services controlled and operated by the Company. The term of the
                Distribution Agreement will be for an initial period of three
                years automatically renewable for further three year periods
                thereafter subject to termination by either party on not less
                than 12 months' written notice immediately prior to the
                expiration of the then current term. Dialog will have the right
                to determine the prices at which it sells the products and
                services and the licensed information contained therein. Dialog
                will pay the Licensor a distribution fee equivalent to 75 per
                cent. of the Licensor's list price for the licensed information
                (as amended from time to time) such fee to be paid monthly
                within 45 days of demand. Either party may terminate the
                Agreement for an unremedied material breach by or liquidation of
                the other;

(vii)   a Software Licence and Maintenance Agreement between Dialog and a
        Thomson Nominated Subsidiary ("Licensee") whereby Dialog will grant to
        the Licensee and its present and future subsidiaries a non-exclusive,
        non-transferable, non-assignable, royalty-free, perpetual and world wide
        licence to use software owned by Dialog in relation to the business of
        its Information Services Division carried on by Dialog immediately prior
        to the date of the agreement or 1 May 2000 ("Effective Date") comprising
        the business of "Dialog", "Profound", and "DataStar". The agreement will
        commence on the Effective Date and will continue in force until

<PAGE>

        terminated by either party in accordance with its terms, namely, 30
        days' written notice on the occurrence of an unremedied or a breach
        incapable of remedy. Under the agreement, Dialog will agree to provide
        to the Licensee various maintenance services in respect of the InfoSort
        software used in connection with the products the subject of the
        agreement. Fees are to be paid by the Licensee to Dialog within 30 days
        of invoice. The agreement will contain limited warranties given by
        Dialog to the licensee in respect of the software. Licensor's liability
        for breach of warranty, shall for each event or series of connected
        events be limited to the amount of fees paid to the Licensor under the
        agreement; and

(viii)  a subscription agreement dated 23 March 2000 between the Company and
        Jiyu Holdings for either, at Jiyu's option, such number of ordinary
        shares of 1 pence each in the capital of the Company whose value when
        ascertained in accordance with the terms of the agreement shall be
        nearest to but not less than GBP12,000,000 or up to 10 million ordinary
        shares of 1 pence each in the capital of the Company at a price per
        share calculated in accordance with the terms of the agreement but not
        to exceed GBP12,000,000.

        The agreement is conditional upon completion of the Sale, the provision
        of evidence reasonably required by Jiyu that the bond tender was
        successful, the Company's senior indebtedness has been repaid, the
        creation by the Company of an internet/e-commerce incubator fund,
        shareholder approval for the issue of the New Shares, admission of the
        New Shares to the Official List, no breach of the warranties as
        contained in the subscription agreement, and Thomson having entered into
        an agreement with the Company to subscribe ordinary shares in the
        capital of the Company having an aggregate subscription price of not
        less than $15,000,000. All such conditions are to be satisfied by 5 June
        2000, or such later date as may be agreed in writing.

        The subscription agreement gives Jiyu, whilst it holds not less than 70
        per cent. of the shares issued to it under the agreement, an entitlement
        to nominate a representative to sit on the investment committee of the
        Company's new internet/e-commerce incubator fund.

        The Company gives certain warranties to Jiyu on the basis that they will
        remain true and accurate from 6 March 2000 to completion of the
        subscription. No liability shall attach to the Company for a claim under
        the warranties unless it materially adversely affects the interests of
        Jiyu in the context of the subscription. No liability under the
        warranties shall arise unless a claim exceeds GBP100,000 in which case
        the Company is liable for the whole amount and not just the excess. The
        Company's liability under the warranties is capped at the total
        subscription price, and expires on 31 August 2001.

(b)     INFORMATION SERVICES DIVISION
The following contracts have been entered into by companies comprised within the
Information Services Division otherwise than in the ordinary course of business,
which (a) have been entered into in the two years immediately preceding the date
of this document and which are or may be material and/or (b) contain provisions
under which any such company has any obligation or entitlement which is material
to the Information Services Division as at the date of this document:

(i)     On 10 November 1999, the Company entered into an outsourcing agreement
        with ICL whereby ICL has agreed to manage the Company's data centre in
        Palo Alto, California, host to the Dialog information services. Under
        the terms of the agreement, Dialog received an initial payment of $4.0
        million (GBP2.5 million) for the transfer of management of the data
        centre and its assets to ICL. In addition, ICL will invest $3.5 million
        (GBP2.2 million) to upgrade the data centre hardware and systems.
        Pursuant to the agreement, Dialog continues to maintain the lease on the
        property.

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