London, 30 March 2000. SDL plc ("SDL" or "the Company"), today announced that it has entered into a conditional agreement to acquire ITP, a provider of globalization solutions, for a consideration of IR£18.4 million (£14.25 million). The Company also announces the successful raising of £22.0 million by way of a 1 for 6 rights issue and announces its maiden unaudited preliminary results for the twelve months ended 31 December 1999, the first results since its flotation on the Official List in December 1999.

 Commenting on the acquisition, fund raising and preliminary results, Mark Lancaster, Chairman and Chief Executive of SDL, said:

"Following the launch of SDLWebFlow in January, SDL has received significant interest from corporates who recognize the necessity for multilingual web sites and require an efficient means of maintaining quality content in international markets. The acquisition of ITP allows the Company to not only supply the leading technology available in the market but also to maintain existing and new clients' globalization demands and to provide an excellent platform to launch new workflow technology in the near future.

"We have been delighted by the positive response from investors and the funds raised will give us the critical mass required in a fast growing B2B area in the technology arena.

"We are also pleased that our results reflect a strong final quarter of trading, a trend which has continued through to the current financial year".

For further information please contact:

Mark Lancaster Tel: 01628 410127

Chairman & Chief Executive


The following has been extracted from the Prospectus which will be sent to shareholders following this announcement:

• The acquisition of ITP
• Information on ITP
• Acquisition strategy
• Details on the fund raising
• Preliminary unaudited Results
• Chairman & Chief Executive's Statement
• Unaudited consolidated profit and loss account
• Unaudited consolidated balance sheet
• Summarized cash flow statement

  
The Acquisition of ITP

The consideration for the Acquisition of ITP is IR£18.4 million (£14.25 million) payable in cash on Completion. In view of the size of the transaction, the Acquisition is conditional upon, inter alia, the necessary approval being given by shareholders at the Extraordinary General Meeting of the Company to be held at 11.00am on 17 April 2000 at the offices of Olswang, 90 Long Acre, London WC2 9TT. The Acquisition is also conditional on the Underwriting Agreement becoming unconditional and not having been terminated in accordance with its terms. Completion is expected to occur by 16 May 2000.

The Directors believe that the Acquisition offers SDL an opportunity to accelerate its development and maintain its position as a leading provider of globalization solutions in its chosen markets. ITP will bring to the Group complimentary technology and service support which the Directors believe will assist in the rapid introduction of SDLWebFlow into the market place and to raise the Company's profile in its chosen markets.

Information on ITP

ITP provides a range of globalization services and has developed certain internal proprietary technology, the main two being a Web-based asset management system and a Web-based workflow management system. It has a number of large multinational clients primarily within the Information Technology industry. It is a subsidiary of DCC plc, a company quoted on the Dublin Stock Exchange, which controls 90 per cent. of the issued share capital with the remaining 10 per cent. is held by Enterprise Ireland. ITP was established in 1989 in Dublin, Ireland to deliver localization services to the Information Technology sector. ITP has since grown into an organization with over 220 employees servicing its clients in approximately 40 languages from offices in Europe, US and Asia. Its key customers include Oracle, Lexmark, Sybase and Hewlett Packard.

The business of ITP comprises:

Technology
Web based management system

This system has been developed for use by clients to address their need to identify, manage and re-use translated materials. It also addresses the need for localization industry leaders to create a global workflow localization solution.

The technology stores information assets in multiple languages (English is the source, many other languages are the targets) and enables comprehensive e-review and e-approval work flow. It can be customized to reflect the client's corporate image and it features sophisticated search capabilities for content retrieval and viewing.

Web based workflow management system

This technology is designed to achieve increased levels of productivity and turnaround speeds on localization projects by using workflow techniques.

Web translation services

ITP provides two fundamental approaches to Internet Web localization:

• consulting-led approach comprising analysis of a client's existing site and methods, planning and application selection, as well as site localization and maintenance. These services are charged on a time and materials basis; and
• a product-oriented approach in which ITP designs a Web localization solution, builds the solution and manages it on an on-going basis.

Web-sites and e-commerce databases often change or grow monthly, weekly or even daily. A site is often created by a variety of authors using a variety of tools, and contains multiple data sources and file types. Because they are usually sales and marketing-oriented, Web sites need to be correctly adapted to the culture, not just the language, of the target market. Web sites often contain artwork with text. This does not allow simple translation, as each picture may need to be rebuilt from scratch in the new language. ITP is capable of localizing clients' Web sites into a number of languages simultaneously.

Localization services

ITP offers software globalization services to its clients. The company receives the client's product and localizes and re-engineers it to create a product that is a recreation of the original, reflecting the language, culture and business practices of the target market.

In addition, ITP provides simultaneous shipment capability, thereby allowing work to begin on internationalizing and localizing releases that are still in its clients' work in progress. This enables a simultaneous global shipment of its clients' globalized products.

FastTrack Localization

In addition to the larger scale localization services detailed above, ITP provides a rapid turn-around translation service for smaller to medium software or hardware projects (up to 2,500 words) at a fixed price. The text file or software is submitted on-line by the client to the ITP Web-site and an initial quote is provided on-line. ITP's centralized localization group then carries out its evaluation of the project, contacts the client with a confirmed quotation and subsequently returns the translated product on-line to clients within 72 hours.

Financial information

For the 9 months ended 31 December 1999, ITP incurred a loss before taxation of IR£2.3 million (£2.0 million) (year ended 31 March 1999: IR£1.7 million (£1.5 million), on turnover of £IR 9.8 million (£8.1 million) (year ended 31 March 1999: IR£13.8 million (£12.0 million)). Net liabilities at 31 December 1999 were IR£1.3 million (£1.0 million) (31 March 1999: net assets of £IR 1.1 million (£0.9 million)). Irish punts amounts have been translated into Sterling using average rates for the respective periods in relation to losses and turnover and at closing rates in relation to the net assets/liabilities.

Strategy behind the acquisition

SDL has developed rapidly since its incorporation and during this time has expanded both its customer base and activities and has developed new technologies to provide globalization solutions in a dynamic market place. At the time of the Listing in December 1999, SDL stated that the access to equity finance to enable expansion through acquisitions in its chosen market was one of the reasons for the flotation. The Acquisition fits closely with this stated strategy.

The market for globalization solutions is consolidating rapidly and, in order for SDL to continue to be a leading player in this market, the Directors believe it is necessary to be at the forefront of this consolidation. The acquisition of ITP offers an excellent opportunity for SDL to further increase its market presence. The technologies developed by ITP will improve the product solutions, such as SDLWebFlow, which are currently offered by SDL.

The increased infrastructure and skills base will enable the Enlarged Group to offer a more comprehensive and wider range of globalization solutions to its customers. This increased distribution network will, in the Directors' opinion, also enable SDL to roll out SDLWebFlow and its other localization services more quickly through ITP's client base as well as develop an increased presence in more geographical markets.

In addition, the Directors consider that the business of ITP is a good strategic fit with that of the existing SDL businesses. Although certain reorganization and restructuring will be required, the businesses together will be able to benefit from the relevant strengths of each in certain markets. ITP has over the last two years been loss-making, and the Directors are confident that a larger business can be created with a lower aggregate cost base benefiting from the economies of scale resulting from the merger of the two businesses.

Fund raising

The Company proposes, by way of the Rights Issue, to raise £22.0 million (approximately £21.2 million net of expenses) by offering up to 5,638,470 new Ordinary Shares (representing approximately 16.7 per cent. of the existing issued ordinary share capital of the Company) at 390p per share payable in full on acceptance. The Rights Issue will be made on the following basis: 1 Rights Issue Share for every 6 Existing Ordinary Shares held by Qualifying Shareholders on the Record Date, and so in proportion for any other number of Ordinary Shares then held. The Rights Issue Shares will, when issued and fully paid, be identical to and will rank pari passu in all respects with the Existing Ordinary Shares, including the right to receive in full all dividends thereafter declared on the Existing Ordinary Shares.

The Directors (save for Christopher Batterham and David Svendsen) together with their associated interests have irrevocably undertaken renounce, in favor of certain institutional investors procured by Collins Stewart, their entitlements to Rights Issue Shares. Christopher Batterham has irrevocably undertaken not to take up (and to renounce in favor of certain institutional investors procured by Collins Stewart) such numbers of Rights Issue Shares as will enable him to realize sufficient funds to enable him to subscribe for the balance of his entitlement to Rights Issue Shares. David Svendsen has undertaken to take up all his entitlements.

The placing of the entitlements referred to above will be effected by Collins Stewart at a price of 10p per Rights Issue Share.

The Rights Issue has been fully underwritten by Collins Stewart. Any Rights Issue Shares not taken up under the Rights Issue will be dealt with pursuant to the provisions of the Underwriting Agreement.

The Rights Issue is conditional upon:

• the passing of the resolution to be proposed at the Extraordinary General Meeting;
• the Underwriting Agreement having become unconditional and not having been terminated in accordance with its terms prior to Admission; and
• Admission of the Rights Issue Shares, nil paid, being granted and having become effective by 8.00 am on 18 April 2000 (or such later time as Collins Stewart may agree but, in any event, not later than 8.00 am on 2 May 2000).
• Application has been made to the London Stock Exchange for the Rights Issue Shares to be admitted to the Official List. It is expected that Admission will take place and that dealings will commence in the Rights Issue Shares, nil-paid, on 18 April 2000.
  

Preliminary unaudited results

SDL's preliminary unaudited results for the year ended 31 December 1999 are as follows:

		Unadjusted
		Forecast
	Year to	Year to	Year to
	31 December	31 December	31 December
	1999	1999	1999
	£'000	£'000	£'000
Net Turnover	12,960	12,650	10,098
Operating (loss)/profit before provision for NIC on share options	-525	-565	292
(see note 2 to financial statements below)
(Loss)/profit before taxation	-796	-615	209
(Loss)/profit after taxation	-762	-623	109
Basic (loss)/profit per share (pence)	-2.63	-2.15	0.41

Statement of Chairman and Chief Executive, Mark Lancaster

I am pleased to be able to report on an extremely dynamic year for SDL and its subsidiaries, culminating in the successful flotation of the business on the London Stock Exchange in early December. The Group has continued to develop since the year end and we are today announcing that we have entered into a conditional agreement to acquire ITP Limited ('ITP'), a group operating in similar areas of globalization to SDL, for IR£18.4 million (£14.25 million).

The SDL Group and its business

SDL trades under the name of SDL International and is a provider of globalization solutions to a wide variety of multinational businesses. Globalization solutions have moved beyond translation services to encompass product solutions, localization, including re-engineering and translation of user interfaces, on-line help and databases, and internationalization, including re-engineering source code so that compatibility is maintained with country-specific operating systems and software.

SDL has been at the forefront of the development of product-based solutions for globalization, and significant investment and management time has been invested in earlier years and through 1999 in the development of software products to maintain the Group's position. This investment resulted in the launch of SDL WebFlow in January 2000 and of version 3.0 of SDLX in February 2000. The combination of these products enables clients to maintain their multilingual web sites synchronized with the language and content of the host site. In particular SDLWebFlow automates the processes involved in maintaining multilingual web sites and allows the Group to leverage its existing skills and resources to the Internet market. To support this client need, the Group now operates from 14 offices in 8 countries in Europe, United States of America and Asia.

The evolution of the Internet and the expansion of the global market place has significantly increased the need for product solutions offered by focused businesses such as SDL. The globalization industry remains fragmented, but consolidation is increasing rapidly and the developments by SDL over the past year will enable it to remain in the forefront of this process.
Flotation

The flotation in December 1999 raised approximately £7 million (before costs) for the Company, with the main objectives being to market and further develop SDLWebflow; to purchase bolt-on acquisitions that will enable the Group to expand its global reach and increase the solutions offered to its client base; and to enable the Group to increase its critical mass and presence so as to remain in the consolidation arena. Since the flotation your Board has put this money to good use with the formal launch and marketing of SDLWebFlow and the acquisition of ATR Information, AB and Aslan Localization Services Limited. In addition to these specific transactions the Group has moved to strengthen its sales presence in the US market place and has increased its business from its existing customers.

The launch of SDLWebFlow in January 2000 was earlier than anticipated and has attracted considerable interest from web and internet-related businesses as well as from within the Group's traditional business arenas. This has resulted in contracts in excess of US$3 million.
The acquisition of ATR, based in Stockholm, for a consideration of £335,000 satisfied in shares and cash, has added a Nordic hub to the Group's infrastructure, considerably strengthening its Scandinavian offering as well as bringing a number of new clients. Aslan, which specializes in localization testing, responds to the needs of a number of clients and potential clients wishing to outsource their localization testing needs. The consideration for the acquisition amounted to IR £257,000 (£209,000) again partly in shares and partly in cash.

Financial performance and review

The revenues we are announcing today are ahead of the forecast made in the prospectus at the time of the Flotation. Sales for the year amounted to £13.0 million, 28 per cent. ahead of the 1998 sales of £10.1 million. The loss before taxation amounted to £796,000 (1998 profit of £209,000). As noted above, in 1999 the Group has concentrated on the development of its product solutions and the implementation of the appropriate management structure to manage this development and in preparation for the flotation. This has resulted in the losses as reported, with approximately £847,000 (1998 £662,000) being spent on product development. However, despite this strategy the Group maintained the gross margin at 44 per cent. (1998 42 per cent.)

The sales benefited from the earlier commencement of a significant contract where the Company had not originally anticipated obtaining the client product information and instructions to commence localization until early in 2000. In addition the Company had allowed for the anticipated effects of Y2K concerns, which in the event were not as noticeable as expected.

While the loss before taxation benefited from the earlier commencement noted above, the final loss was in excess of the forecast in the prospectus as a result of an adjustment to increase the provision for potential National Insurance Contributions (NIC) arising on employee share options. Current taxation legislation requires the Company to provide NIC on the potential gain between the market prices at the point of grant and exercise of options. The Group has certain options capable of exercise between 2 and 4 years of grant and provides for this NIC based on the year end share price. At the time of the forecast made by the Directors in the prospectus, the best estimate of this future price was the proposed pricing at Impact Date. The share price subsequently rose from £1.34 at Impact Date to £4.06 at 31 December 1999, resulting in an increased provision to £282,000.

The 1999 results prior to goodwill and the NIC on employee share options noted above show a loss of £190,000 (1998: profits £362,000). The goodwill figure in the current year arises as a result of a change in the Group's estimate of amortization from 20 to 8 years and hence £115,000 relating to previous years.

The loss per share for the year was 2.63p (1998: profit per share of 0.41p), with a fully diluted loss per share of 2.63p (1998: profit per share of 0.38p). The loss per share for the year before goodwill, flotation costs and NIC on employee share options was 0.66p (1998 - profit per share of 0.67p).

As at 31 December 1999 the Group had shareholder funds of £9.3 million (1998: £3.3 million) and net cash balances of £7.8 million (1998: £0.9 million). The net cash flow from operating activities amounted to £937,000 (1998: £733,000).

Acquisition of ITP

SDL has today announced that it has entered into a conditional agreement to acquire the whole of the issued share capital of ITP for IR£18.4 million (£14.25 million). ITP provides a range of globalization services and has developed certain technology which assists in the provision of such services. It has a wide range of multinational clients, primarily in the IT industry, and its turnover for the 9 months ended 31 December 1999, the latest audited numbers, was IR£9.8 million. ITP is based in Dublin and has a global organization employing over 220 employees servicing clients in approximately 40 languages.

The acquisition fits closely with the strategy indicated at the time of the flotation to expand through acquisition in SDL's chosen market place. This enables SDL to remain a leading player in the consolidating globalization market place and increase its market presence. The increased infrastructure and skills base will enable the enlarged group to offer a more comprehensive range of globalization solutions to its customers. The technologies developed by ITP will improve the product solutions, such as SDLWebFlow, offered by SDL. The increased distribution network created by the enlarged group will enable the roll out of SDLWebFlow and the associated localization services more quickly.

The Board consider that the business of ITP is compatible with that of the existing SDL Group businesses. Certain reorganization and restructuring will be required and, while ITP has been loss-making over the last two years, the Directors are confident that a larger business can be created with lower aggregate cost base, with economies of scale resulting from the merger.

To fund the acquisition of ITP and to provide necessary working capital to integrate the business, the Company proposes to raise £22 million (before expenses) by way of a Rights Issue by offering 5,638,470 new ordinary shares (representing approximately 16.7 per cent. of the existing issued ordinary share capital of the Company) at 390p per share payable in full on acceptance. The Rights Issue will be made on the basis of 1 new ordinary share for every 6 existing ordinary shares.

Full details of the proposed acquisition of ITP, the Rights Issue and the notice of an Extraordinary Meeting to approve the Acquisition are set out in the circular of today's date which accompanies this Preliminary Results Announcement.

Your Board, which has been advised by its financial adviser Collins Stewart, considers the proposals for the acquisition of ITP to be in the best interests of the Company and the Shareholders as a whole.

Management and Employees

I would like to take this opportunity to thank the management and employees for all their continuing efforts and dedication in assisting your Board develop the Group over the past year. This has manifested itself in the successful flotation of the business and the fact that the Group is poised to continue to hold its leadership position in the globalization industry.

The Future

As more companies get a better understanding of the Internet and the value it can bring to their business, we will find not only that the larger corporations will be able to take advantage of the significant opportunities the global web provides, but also, and probably more importantly, the smaller companies will have access to a global market with far lower barriers to entry. The Internet will become central to its company's philosophy and its ability to reach customers, partners and employees instantly world-wide. The task of controlling the content of a multi-language website is enormous. The requirements for advanced multilingual content management for the web will therefore become a necessity in a 1-2 year timeframe as people start to adopt the web in earnest.

Mark Lancaster

Chairman

Unaudited consolidated profit and loss account for year ended 31 December 1999
	Year ended	Year ended
	31 December	31 December
	1999	1999
	£'000	£'000
Net Turnover	12,960	10,098
Operating (loss)/profit	-808	292
Interest payable less interest receivable (net)	11	-83
(Loss)/profit on ordinary activities before taxation	-796	209
Taxation on profit/loss on ordinary activities	34	-100
(Loss)/profit on ordinary activities after tax	-762	109
(Loss)/profit attributable to shareholders	-762	109
Unaudited consolidated balance sheet as at 31 December 1999
	Year ended	Year ended
	31 December	31 December
	1999	1999
	£'000	£'000
Fixed Assets
Intangible Fixed Assets	1,044	1,334
Tangible Assets	1,006	1,080
Investments	12	-
	2,062	2,414
Current Assets
Debtors	2,536	2,096
Cash at bank and in hand	7,826	861
	10,362	2,957
Creditors: amounts falling due within one year	-2,547	-1,695
Net current assets	7,815	1,262
Total assets less current liabilities	9,877	3,676
Creditors: amounts falling due after more than one year	-254	-415
Provision for liabilities and charges	-282	-
Net assets	9,341	3,261
Capital and reserves
Called up share capital	369	49
Share premium account	9,576	2,479
Profit and loss account	-604	733
Capital employed	9,341	3,261
Summarized cash flow statement for year ended 31 December 1999
	Year ended	Year ended
	31 December	31 December
	1999	1998
	£'000	£'000
Net cash inflow/(outflow) from operating activities	937	733
Returns on investment and servicing of finance	11	-83
Taxation	-106	-74
Capital expenditure and financial investment
Purchase of tangible fixed assets	-540	-568
Payments to acquire investments	-12	-
Receipts from sale of tangible fixed assets	77	-
Acquisitions and disposals
Purchase of subsidiary undertaking	-	-8
Cash inflow/(outflow) before financing	367	-
Financing	6,584	680
Increase/(decrease) in cash in the period	6,951	680
Notes to unaudited financial statements
1. These preliminary financial statements do not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985 and are unaudited. The statements have, with the following exception, been prepared on the same basis as set out in the previous year's annual accounts. The exception relates to the amortization of goodwill under FRS10, where the goodwill relating to the acquisition of SDL Sheffield Ltd. is now being amortized over 8 years (previously 20 years). As a consequence an additional sum of £115,000 has been charged to the Profit & Loss account in the year. Financial information for the 12 months ending 31 December 1998 has been extracted from the statutory accounts which have been filed with the Registrar of Companies. The auditor's report on those accounts was unqualified and did not contain any statement under section 237 of the Companies Act 1985. The audit report for the year ending 31 December 1999 has yet to be signed.
The preliminary financial statements for the year ending 31 December 1999 were approved by the Board on 29 March 2000.
2. In the Prospectus dated 2 December 1999, the Directors forecast that unadjusted actual turnover for the year ending 31 December 1999 would be not less than £12,650,000 and that the unadjusted actual loss on ordinary activities before and after taxation of the group would not be more than £615,000 and £623,000 respectively. The financial statements indicate that the unadjusted actual turnover amounted to £12,960,000, and the unadjusted loss before and after taxation was £796,000 and £762,000 respectively.
The turnover benefited from the earlier commencement of a material contract where the Company had not originally anticipated obtaining the client product information and instructions to commence localization until early in 2000. In addition the Company had allowed for the anticipated effects of Y2K concerns which in the event were not as noticeable as expected.
While the loss before taxation benefited from the earlier commencement noted above, the final result was reduced by the effects of an adjustment to increase the provision for potential National Insurance Contributions arising on employee share options (see Note 8). At the time the forecast was prepared the Company assumed a provision based on the anticipated share price at impact date as being the best estimate of the likely price at 31 December 1999. In the event the market price at 31 December 1999 was £4.06 against an impact price of £1.34. In consequence the company was required to increase its provision to £282,000.
3. Loss per Ordinary Share
	Year ended	Year ended
	31 December	31 December
	1999	1998
	£'000	£'000
(Loss)/profit for the year before amortization of goodwill	-190	180
and provision for NIC on share options
Goodwill amortization	-290	-71
Provision for NIC on share options (note 8)	-282	-
(Loss)/profit for the period	-762	109
Weighted average number of shares in the year:
Basic	28,919,110	26,910,153
Diluted	28,919,110	28,420,389
Basic (loss)/profit per share before amortization of goodwill	(0.66p)	0.67p
and provision for NIC on share options
Goodwill amortization	(1.0p)	(0.26p)
Provision for NIC on share options	(0.97p)	-
Basic (loss)/profit per share	(2.63p)	0.41p
Diluted (loss)/profit per share before amortization of goodwill	(0.66p)	0.63p
and provision for NIC on share options
Goodwill amortization	(1.0p)	(0.25p)
Provision for NIC on share options	(0.97p)	-
Diluted (loss)/profit per share	(2.63p)	0.38p
The weighted average number of shares have been restated to reflect the 899 for 1 bonus issue in December 1999 and the consolidation from .01p shares into 1p shares at the same time.
4. Share Capital and Reserves
	Share Capital	Share Premium	Profit & Loss Account
	£'000	£'000	£'000
At 1.1.1999	49	2,479	733
Retained loss for year	-	-	-762
Shares issued on flotation	337	7,909	-
Flotation charges	-	-529	-
Repurchase of shares	-17	-283	-575
At 31.12.1999	369	9,576	-604
By special resolution passed on 1 December 1999 the shareholders resolved to increase the share capital of the company from £55,500 to £500,000 by the creation of an additional 4,989,500,000 share of 0.1p each. On 7 December 1999 £283,264.83p was capitalised from the amount standing to the Company's share premium account and was distributed to the holders of .01p ordinary shares by the allotment of 2,832,648,312 ordinary shares. Following this capitalisation the 2,835,799,200 ordinary shares in existence were consolidated into 28,357,992 ordinary shares of 1p each.
On 7 December 1999 5,223,841 Ordinary Shares were allotted in accordance with the placing and admission document, which resulted in the listing of the Company's shares on the London Stock Exchange.
5. Reconciliation of movements in shareholders' funds
	Year ended	Year ended
	31 December	31 December
	1999	1998
	(£'000)	(£'000)
Opening shareholders' funds	3,261	2,652
(Loss)/profit for year	-762	109
Proceeds from issue of shares	8,246	500
Flotation charges	-529	-
Own share purchase	-875	-
Closing shareholders' funds	9.341	3.261
6. Operating profit is stated after charging:
	Year ended	Year ended
	31 December	31 December
	1999	1998
	(£'000)	(£'000)
Research & Development Expenditure	847	662
Depreciation of owned assets	537	517
Depreciation of assets held under hire purchase	4	15
Provision for NIC on share options	282	-
Amortization of goodwill	290	70
7. Net cash flow from operating activities
	Year ended	Year ended
	31 December	31 December
	1999	1998
	(£'000)	(£'000)
Operating (loss)/profit before interest	-808	177
Depreciation	542	532
Amortization of Goodwill	290	71
(Profit)/loss on disposal of assets	-5	-
(Increase) in Debtors	-407	-104
Increase/(Decrease) in creditors and provisions	1,325	-58
Net cash flow from operating activities	937	618

8. Future liabilities
The provision for National Insurance contributions arises on the potential requirement for the Company to pay NIC on the exercise of certain employee share options. From 6 April 1999 the UK Government introduced a requirement for NIC to be due and payable by employers at the point at which employees exercise share options granted under an unapproved share option scheme. The gain, based on the difference between the market price at the time of exercise and the grant price, is treated as income in the hands of the employee, and the employer is required to pay the relevant NIC. The options in question vest over a 2 to 4 year period and are exercisable for up to 10 years from grant. As a best estimate of the liability that the Company will have to pay, the share price at 31 December 1999 has been used. This provision will be reviewed in the future, in the light of changes in the options issued and the movements in the share price.