UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

(Mark One)

¨ Registration statement pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934

or

x Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended November 27, 2004

or

¨ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                     to

Commission file number 333-9268

TM Group Holdings PLC

(Exact name of Registrant as specified in its charter)

England and Wales

(Jurisdiction of incorporation or organization)

TM House, Ashwells Road, Brentwood, Essex CM15 9ST, England

(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
None	None

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

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

11% Senior Notes Due May 15, 2008,

12¼% Senior Subordinated Notes Due May 15, 2008

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

Ordinary Shares of 1p each 21,234,550

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

Indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 ¨ Item 18 x

TM Group Holdings PLC (the “Company”) is a public limited company organised under the laws of England and Wales.

In this Annual Report on Form 20-F (the “Form 20-F”), references to the “Senior Notes” are to the 11% Senior Notes due May 15, 2008 and references to the “Senior Subordinated Notes” are to the 12¼ % Senior Subordinated Notes due May 15, 2008 (together with the Senior Notes, the “Notes”), each issued by the Company.

The Company publishes its Financial Statements in pounds sterling. In this Form 20-F, references to “pounds sterling” or “£” are to currency of the United Kingdom and references to “US dollars” or “$” are to United States currency. For the convenience of the reader, this Form 20-F contains translations of certain pounds sterling amounts into US dollars at the specified rates. These translations should not be construed as a representation that such pound sterling amounts actually represent such US dollar amounts or could be, or could have been, converted into US dollars at the rates indicated or at any other rate. On March 22, 2005, the Noon Buying Rate was $1.8997 = £1.00. See Item 3. “Key Information—Exchange Rates” for information regarding the rates of exchange between the US dollar and the pound sterling.

The Company’s Financial Statements included in this Form 20-F have been prepared in accordance with accounting principles generally accepted in the United Kingdom (“UK GAAP”), which differ in certain respects from generally accepted accounting principles in the United States (“US GAAP”) (see Note 29 of Notes to the Financial Statements). Unless otherwise stated herein, all financial information presented in this Form 20-F has been prepared in accordance with UK GAAP.

The Company’s fiscal year ends on the last Saturday in November each year. Thus, for example, “Fiscal 2004” refers to the fiscal year ended November 27, 2004. References in this Annual Report to a particular year are to the fiscal year unless otherwise indicated.

CAUTIONARY STATEMENT FOR PURPOSES OF THE “SAFE HARBOR” PROVISIONS OF THE UNITED STATES PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. This Annual Report on Form 20-F contains certain forward looking statements as defined in section 27A of the Securities Act and in section 21E of the United States Securities Exchange Act of 1934. These forward looking statements are accompanied by, and should be read in conjunction with, an explanation of factors that could cause actual results to differ materially from those expressed as such forward looking statements. By their nature, forward looking statements involve risk and uncertainty, and the factors described in the context of such forward looking statements, and other factors referred to in this Annual Report on Form 20-F, particularly in Item 4. “Information on the Company” and Item 5. “Operating and Financial Review and Prospects,” could cause actual results and developments to differ materially from those expressed in or implied by such forward looking statements. The Company is claiming the benefits of the safe harbor provisions referred to above.

The Company’s registered office is located at TM House, Ashwells Road, Brentwood, Essex CM15 9ST, England; telephone 011 44 1277 372916.

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TABLE OF CONTENTS

Name		Page
Table of Contents		3
Part I		4
Item 1.	Identity of Directors, Senior Management and Advisers	4
Item 2.	Offer Statistics and Expected Timetable	4
Item 3.	Key Information	4
Item 4.	Information on the Company	14
Item 5.	Operating and Financial Review and Prospects	29
Item 6.	Directors, Senior Management and Employees	39
Item 7.	Major Shareholders and Related Party Transactions	42
Item 8.	Financial Information	43
Item 9.	The Offer and Listing	43
Item 10.	Additional Information	43
Item 11.	Quantitative and Qualitative Disclosures about Market Risk	54
Item 12.	Description of Securities other than Equity Securities	54
Part II		55
Item 13.	Defaults, Dividend Arrearages and Delinquencies	55
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	55
Item 15.	Controls and Procedures	55
Item 16.	[Reserved]
Item 16A.	Audit Committee Financial Expert	55
Item 16B.	Code of Ethics	55
Item 16C.	Principal Accountant Fees and Services	56
Item 16D.	Exemptions from the Listing Standards for Audit Committees	56
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	56
Part III		57
Item 17.	Financial Statements	57
Item 18.	Financial Statements	57
Item 19.	Exhibits	58

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PART I

Item 1. Identity of Directors, Senior Management and Advisers

Not applicable

Item 2. Offer Statistics and Expected Timetable

Not applicable

Item 3. Key Information

SELECTED FINANCIAL DATA

The following selected consolidated financial data for the 53 weeks ended November 30, 2002 and the 52 weeks ended November 29, 2003 and November 27, 2004, and at November 29, 2003 and November 27, 2004, are derived from the Company’s audited financial statements included elsewhere in this Form 20-F. The selected consolidated financial data for the 52 weeks ended November 27, 1999 and November 25, 2000 and at November 27, 1999, November 25, 2000 and November 24, 2001, are derived from audited financial statements not included herein. These financial statements have been audited by Ernst & Young LLP, the Company’s independent registered public accounting firm.

The Company’s Financial Statements are prepared in accordance with UK GAAP which differs in certain respects from US GAAP. See Note 29 of Notes to the Financial Statements.

The selected financial data set forth overleaf should be read in conjunction with the Company’s Financial Statements and Item 5. “Operating and Financial Review and Prospects” included elsewhere in this Form 20-F.

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	52 weeks ended				53 weeks ended		52 weeks ended
	November 25, 2000		November 24, 2001		November 30, 2002		November 29, 2003		November 27, 2004
	(£ thousands)
Income Statement Data
Amounts in accordance with UK GAAP
Sales
Retailing - ongoing	672,197		661,050		664,461		635,453		619,849
- acquired	—		—		—		—		21,670
Discontinued operations	199,221		42,792		—		—		—
Total sales	871,418		703,842		664,461		635,453		641,519
Cost of sales	(639,878	)	(524,220	)	(502,974	)	(472,952	)	(476,192	)
Selling and distribution costs	(168,201	)	(136,368	)	(125,157	)	(127,968	)	(131,420	)
Administrative expenses	(24,372	)	(19,740	)	(18,063	)	(15,882	)	(16,974	)
Business re-structuring	—		—		(759	)	—		(1,236	)
Operating profit	38,967		23,514		17,508		18,651		15,697
Profit from discontinued operations	—		—		—		—		1,573
Profit on fixed asset disposals Profit on fixed asset disposals	1,509		3,137		3,907		3,908		4,154
Profit before interest, taxation and sale of businesses	40,476		26,651		21,415		22,559		21,424
Retailing - ongoing	29,015		27,541		25,480		25,912		23,426
- acquired	—		—		—		—		324
Central costs	(2,686	)	(2,993	)	(3,306	)	(3,353	)	(2,663	)
Total continuing operations	26,329		24,548		22,174		22,559		21,087
Discontinued operations	14,147		2,103		—		—		1,573
Business re-structuring	—		—		(759	)	—		(1,236	)
Total profit before interest, taxation and sale of businesses	40,476		26,651		21,415		22,559		21,424
Profit on sale of businesses	—		51,507		—		—		—
Profit before interest and taxation	40,476		78,158		21,415		22,559		21,424
Net interest expense	(36,135	)	(21,274	)	(20,532	)	(12,094	)	(8,426	)
Profit before taxation	4,341		56,884		883		10,465		12,998
Taxation	(504	)	(605	)	(139	)	(2,021	)	(4,758	)
Profit for the period	3,837		56,279		744		8,444		8,240
Amounts in accordance with US GAAP
Net (loss)/income for the period (i)
Continuing operations	(14,948	)	169		(5,163	)	1,872		(811	)
Discontinued operations	12,507		63,273		—		—		1,573
Total	(2,441	)	63,442		(5,163	)	1,872		762

⁽ⁱ⁾ In calculating net (loss)/income in accordance with US GAAP, certain Company charges (such as interest expense) have not been allocated to the discontinued operations and instead have been wholly allocated to continuing operations, as management has not considered such allocation to be meaningful.

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	November 25, 2000		November 24, 2001		November 30, 2002		November 29, 2003		November 27, 2004
	(£ thousands)
Balance Sheet Data
Amounts in accordance with UK GAAP
Intangible assets – goodwill	5,751		4,816		6,718		7,533		15,777
Tangible assets	74,650		53,880		50,826		47,728		45,747
Inventories	49,553		34,790		34,378		34,115		38,880
Total current assets	118,872		175,780		80,957		87,761		85,985
Total assets	199,273		234,476		138,501		143,022		147,509
Long-term debt	233,349		205,089		144,470		136,240		128,949
Total debt	235,144		205,379		144,470		136,240		128,949
Capital stock	212		212		212		212		212
Shareholder’s deficit	(166,215	)	(68,229	)	(89,635	)	(81,191	)	(72,859	)
Amounts in accordance with US GAAP
Intangible assets	109,966		75,067		72,736		73,858		80,846
Tangible assets	74,650		53,880		50,826		47,728		45,747
Other non-current assets	24,497		21,351		2,479		2,023		1,567
Inventories	49,553		34,790		34,378		34,115		38,880
Total current assets	118,872		178,394		87,301		95,005		93,809
Total assets	327,985		328,692		213,342		218,614		221,969
Long-term debt	238,790		209,113		146,949		138,263		130,516
Total debt	240,585		209,403		146,949		138,263		130,516
Capital stock	212		212		212		212		212
Shareholder’s (deficit)/equity	(47,861	)	15,911		(38,650	)	(34,865	)	(31,133	)
Number of equity shares (000s)	21,235		21,235		21,235		21,235		21,235

Exchange Rates

The following table sets out, for the periods and dates indicated, certain information regarding the Noon Buying Rate for pounds sterling, expressed in US dollars per £1.00.

Fiscal Year	At Period End	Average(1)	High	Low
2000	1.3997	1.5224	1.6520	1.3997
2001	1.4095	1.4416	1.5045	1.3730
2002	1.5515	1.4892	1.5915	1.4874
2003	1.7101	1.6304	1.7219	1.5500
2004	1.8817	1.8118	1.9073	1.7200

	High	Low
September 2004	1.8105	1.7733
October 2004	1.8404	1.7790
November 2004	1.9073	1.8323
December 2004	1.9482	1.9125
January 2005	1.9058	1.8647
February 2005	1.9249	1.8570
March 2005 (through March 22, 2005)	1.9292	1.8997

⁽¹⁾ The average of the Noon Buying Rates on the last trading day of each full month during the fiscal year.

The Noon Buying Rate is the City of New York rate for cable transfers in pounds sterling as announced by the Federal Reserve Bank of New York. On March 22, 2005, the latest practicable date prior to filing this report, the rate was $1.8997 = £1.00. The US dollar liability under the Senior Notes has been translated at $1.8817 = £1.00 being the representative US dollar/UK sterling exchange rate on November 27, 2004 (November 29, 2003 $1.7101 - £1.00, November 30, 2002 $1.5515 = £1.00).

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RISK FACTORS

Substantial Leverage and Debt Service Requirements

As of November 27, 2004, the Company’s consolidated long-term indebtedness, calculated in accordance with UK GAAP, was £128.9 million. In addition, the Company and its subsidiaries may incur additional indebtedness in the future, subject to limitations imposed by the Indentures and the instruments governing the Company’s other indebtedness.

While the Company’s profit before interest and taxation for its continuing business has been reasonably stable in each of the last three years, its ability to improve its operating performance and financial results will depend upon economic, financial, competitive and other factors beyond its control, including fluctuations in interest rates and general economic conditions in the United Kingdom. There can be no assurance that the Company will generate sufficient cash flow from operations in the future to service the debt of the Company. If the Company is unable to generate sufficient operating cash flow in the future to service its debt, it may be required to sell assets or to obtain additional financing. There can be no assurance that any such sales of assets or additional financing could be achieved.

The level of debt of the Company will have several important effects on its future operations, including the following: (a) the Company will have significant cash requirements to service debt, reducing funds available for operations and future business opportunities, including strategic acquisitions, and increasing the vulnerability of the Company to adverse general economic and industry conditions; (b) the Company may be restricted in the future from obtaining additional financing, whether for acquisitions, C-store conversions, tobacco pre-purchases or other competitive activity and working capital or other purposes; and (c) the Company will be required to comply with restrictions contained in the Indentures and the instruments governing the Company’s working capital facilities.

In December 2004, the Company renewed its agreement with HBOS (formerly the Bank of Scotland) for the granting of working capital facilities of £20 million, as permitted by covenants in the Notes. This agreement grants HBOS a charge over certain assets of the Company as security. HBOS permit this facility to be renewed annually although the Company has recently chosen to extend this facility for shorter periods in order to maximise its flexibility. The most recent renewal was for a period of six months.

Holding Company Structure, Subordination and Other Considerations

The Holding Company has no operations of its own. As a result, it is wholly dependent on dividends and inter-company payments (either advances or repayments) from its subsidiaries, the payment of which is limited by law. In addition, the ability of the Company’s subsidiaries to pay dividends and make inter-company advances to the Company depends on their earnings. The Company’s subsidiaries have no obligation, contingent or otherwise, to pay any amounts due under the Notes or to make funds available to the Company to enable it to pay any amounts due under the Notes. Generally, claims of creditors of a subsidiary, including trade creditors, secured creditors and creditors holding indebtedness and guarantees issued by the subsidiary, and claims of preference shareholders (if any) of the subsidiary, will have priority with respect to the assets and earnings of the subsidiary over the claims of the creditors of its parent company. The Notes therefore are effectively subordinated to creditors (including trade creditors) and preference shareholders (if any) of its direct and indirect subsidiaries. As of November 27, 2004, the Company had approximately £87.4 million of such liabilities, including £57.7 million due to trade creditors.

The Senior Subordinated Notes are also contractually subordinated in right of payment to the Senior Notes. In the event of a winding up of the Company, the payment of the principal of, premium, if any, and interest on, the Senior Subordinated Notes is subordinated in right of payment, as set forth in the Senior Subordinated Note Indenture, to the prior payment in full in cash or cash equivalents of all amounts due in respect of the Senior Notes. Accordingly, if any distribution is made in the winding up of the Company to the Senior Subordinated Note Trustee or to holders of Senior Subordinated Notes at a time when not all amounts due in respect of the Senior Notes have been paid in full in cash or cash equivalents, the Senior

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Subordinated Note Trustee or the holders of the Senior Subordinated Notes, as the case may be, are required to hold such distribution in trust for the holders of the Senior Notes and to pay it over to the Senior Note Trustee on behalf of the holders of the Senior Notes as their interests may appear.

The ability of the direct and indirect subsidiaries of the Company to pay dividends and make other payments to the Company may be restricted by, among other things, applicable corporate and other laws and regulations and by the terms of agreements to which such companies become subject.

Rights of Secured Creditors under Insolvency Laws

The procedural and substantive provisions of UK insolvency and administrative laws generally are more favourable to secured creditors than comparable provisions of US law and afford debtors and unsecured creditors only limited protection from the rights of secured creditors. As a result, the ability of the holders of the Notes to protect their interests in the Company may be more limited than under US laws. Under UK insolvency law, the liabilities of the Company in respect of the Notes would be paid in the event of a liquidation or similar proceeding after payment of all secured indebtedness of the Company and certain other creditors which are entitled to priority under UK law. The latter include creditors in respect of (i) amounts owed to the UK Inland Revenue, (ii) amounts owed to UK Customs and Excise in respect of value added tax and certain other taxes and duties, (iii) amounts owed in respect of UK social security contributions, (iv) amounts owed in respect of occupational pension schemes and (v) certain amounts owed to employees.

Reduced Demand for Tobacco Products - Relaxation on Personal Imports

The Company is a significant retailer of tobacco products in the United Kingdom, with tobacco accounting for approximately 29 per cent of its revenues from continuing operations in Fiscal 2004. The tobacco industry, both in the United Kingdom and abroad, has faced, and continues to face, a number of issues that may adversely affect demand for tobacco products, the volume of sales, operating revenues, cash flows, operating profit and financial position of the Company. In the United Kingdom, these issues include: actual and proposed regulatory controls at both the EU and UK level, excise tax increases, proposed governmental and voluntary private bans and restrictions on smoking (including in places and in buildings permitting public access), recent actual restrictions on tobacco marketing, advertising and sales, increased assertions of adverse health effects associated with both smoking and exposure to environmental tobacco smoke (“ETS”), legislation or other governmental action seeking to ascribe to tobacco manufacturers responsibility for any adverse health effects associated with both smoking and exposure to ETS, the diminishing social acceptance of smoking, increased pressure from anti-smoking groups, unfavourable press reports, governmental investigations, and increased smoking and ill-health litigation, including private plaintiff class action litigation. See “—Effect of UK Government Tobacco Regulation and UK Litigation” and “Item 4. Information on the Company—Regulation and Litigation”.

Cigarettes and other tobacco products are subject to substantial duties in the United Kingdom and in general, these duties and other cigarette-regulated taxes levied by the government have been increasing. Currently, these duties and taxes represent up to 80 per cent of the recommended retail price for such products sold in the United Kingdom. In the Company’s experience, past increases in duties and similar taxes have had an adverse effect on sales of cigarettes. In October 2002, the UK Government relaxed its guideline restrictions on the personal imports of tobacco products. Any future increases in duties and taxes or further relaxation of import restrictions, the extent of which cannot be predicted, could result in sales volume declines for the cigarette industry, and might cause the Company’s sales of tobacco products to shift from the premium segment to the discount segment on which the retailers earn a lower margin. See “Item 4. Information on the Company—The Tobacco Market”.

Although it is difficult to predict the precise nature of any future legislation or litigation in the United Kingdom, or regulation at EU level, the Company believes that the various existing restrictions and regulations, in particular the significant increase in regulatory activity in the last few years, together with substantial increases in excise duties on smoking tobacco products, have had, and are likely to continue to

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have, a detrimental effect on the sales of tobacco products. Given the fact that tobacco related products account for such a high proportion of the Company’s total revenues, any substantial decrease in sales of tobacco products may have a material adverse effect on the turnover, profit and financial condition of the Company. Future profitability will depend on how the Company manages any decreases in revenues due to reduced sales of tobacco products and how it continues to maintain its operating margins, despite any such decrease in sales. See “Item 4. Information on the Company—Regulation and Litigation”.

Effect of UK Government Tobacco Regulation and UK Litigation

Reports with respect to the possible harmful physical effects of cigarette smoking have been publicised for many years, and the sale, promotion and use of cigarettes continues to be subject to increasing governmental regulation in the United Kingdom and the European Union. The UK Government has an aim to reduce smoking in the United Kingdom and, on December 10, 1998, the Government issued a position paper known as a “White Paper” (“Smoking Kills—A White Paper on Tobacco”) (“the White Paper”) that set out a concerted programme of action to achieve this aim. The Government has invested and continues to invest in a number of initiatives to implement its plan of action, such as media campaigns designed to shift attitudes and programmes to help smokers quit smoking.

The Government is continuing its comprehensive strategy on reducing smoking and improving public health. Most recently, at the beginning of March 2004, the Government began a new consultation process on improving public health, one of the central tenets of which is the reduction of levels of smoking. As a result of this, the UK Government published another White Paper on 16 November 2004. Although it does not propose an outright ban, the paper sets out a schedule for banning smoking in most public places and workplaces in order to protect the welfare of others. Exemptions are proposed for pubs that do not serve food and private clubs. Smoking “in the bar area” will be prohibited everywhere.

A number of substantial restrictions on the marketing, advertising, product design and consumption of cigarettes have been introduced by Government regulation. For example, the Tobacco Advertising and Promotion Act 2002 came into force on February 14, 2003. The Act makes it an offence to: publish tobacco advertisements in the United Kingdom; devise or distribute a tobacco advertisement in the United Kingdom, whether in electronic or other form; display tobacco products or their prices in a place or website where tobacco products are offered for sale if the display does not comply with such requirements as may be specified in regulations; distribute free to the public any product or coupon with the purpose of promoting a tobacco product; be a party to a sponsorship agreement if the purpose or effect of that agreement is to promote tobacco products in the United Kingdom. Supplementary regulations have been created to consolidate, develop and strengthen this legislation and it is anticipated that advertising and sponsorship will be largely prohibited by 2006.

Legislative restrictions on the marketing, advertising, product design and consumption of cigarettes have had an adverse impact on the Company’s results of operations in recent years and are expected to continue to adversely affect results of operations in the future.

Parties seeking damages for illnesses claimed to have resulted from tobacco consumption have sued tobacco manufacturers in the United Kingdom, including the Company’s suppliers. The Company is not a party to any smoking and related ill-health litigation in any jurisdiction. However, there can be no guarantee that such actions will not arise in the future. In addition, although the Company is currently only a retailer of tobacco products, previous sales of cigarettes under Forbuoys’ own brand name and, with the acquisition of Dillons Stores Limited in August 2004, current sales of cigarettes under own brand names, although all manufactured by another company, as well as the Company’s activities as a tobacco retailer, could potentially subject the Company to future litigation. See “Item 4. Information on the Company—Regulation and Litigation”.

It is difficult to determine the precise impact of regulatory initiatives or the outcome of any related litigation, or to predict precisely what further other EU or UK legislation, regulations, directives or initiatives

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will be implemented or adopted relating to the manufacturing, advertising, sale or use of cigarettes, or to the tobacco industry generally. However, recent legislation is likely to affect the Company and, in particular, if any or all of the current initiatives were to be implemented, the volume, operating revenues, cash flows and operating profit of the Company could be materially adversely affected, in amounts that cannot be determined.

Competition

The markets in which the Company operates in the United Kingdom are highly competitive. The Company competes with a broad array of stores, supermarkets, petrol retailers, high street shops and food and beverage service providers. The Company has from time to time experienced significant competitive pressures from competitors in the businesses in which it operates. As a result, the Company’s ability to increase prices is limited.

The Company’s competitors have varying abilities to withstand changes in market conditions. Some of its competitors are divisions of larger companies with greater financial and other resources than the Company. The Company’s ability to compete effectively will require continuous efforts by the Company in the development of its store portfolio, cost rationalisations and investment in technology. As described above (see “— Substantial Leverage and Debt Service Requirements”), the Company will be limited in its ability to incur additional indebtedness and there can be no assurance that the Company will have sufficient financial resources to respond to these competitive pressures or that it will be successful in otherwise realising or maintaining any of its competitive advantages.

Reliance on Distributors and Manufacturers

The Company’s arrangements with its distributors are evidenced by written agreements with general terms. TM Retail has secured long-term contracts with Palmer & Harvey McLane Limited, which provides many of the products sold in its stores, Imperial Tobacco Group PLC for tobacco gantries and Carlton Cards for its greeting cards. To date, the Company has not experienced the cancellation of any significant supply or distribution contract. However, there can be no assurance that distributors will not terminate their relationships with the Company or that the Company’s suppliers or distributors will continue to provide trade credit or to renew or continue their contracts on terms as favourable as those currently in effect.

Integration of Acquisitions

During Fiscal 2004 a subsidiary of the Company acquired the entire share capital of Dillons Stores Limited that operates 181 newsagent stores. The Company and its subsidiaries may make other acquisitions in the future as part of its business strategy. Such acquisitions are made on the basis of achieving certain benefits for the whole business within an anticipated time-frame. However, failure to adequately manage the integration processes and co-ordinate the strategies of the newly acquired entities may affect the Company’s operating profit.

Control of Company; Potential Conflict of Interests

The Institutional Investors (as defined herein) own all of the outstanding “B” ordinary shares and 97.7 per cent of the outstanding “C” ordinary shares of Thistledove (see Item 7 “Major Shareholders and Related Party Transactions”), constituting approximately 72 per cent of the current issued ordinary share capital of Thistledove. They have the ability to exercise control over the Board of Directors of the Company. In addition, the Institutional Investors have the right to appoint at least two Directors of Thistledove. In the event that circumstances arise in which the interests of the Institutional Investors or the shareholders of Thistledove as a whole conflict with the holders of the Notes, such as if Thistledove were to encounter financial difficulties or were unable to pay its debts as they mature, the holders of the Notes could be disadvantaged by the actions that the Institutional Investors may seek to pursue. In addition, the shareholders and management may cause the Company to pursue acquisitions, divestitures, financings or other transactions that could enhance the value of their equity investment, even though such transactions might involve risks to the holders of the Notes.

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Dependence on Certain Employees

Each of the Company’s executive officers has responsibility for an important segment of the Company’s operations. The loss of any such person’s services could be detrimental to the Company’s operations, although the Company believes that, subject to the need to review and improve internal controls and systems discussed immediately below, it has adequate depth at all levels of management. To ensure continuity of management, the Company has entered into a service agreement with Mr. Lancaster, and has obtained “Key Man” life insurance policies on Mr Lancaster.

Issues regarding Internal Controls

In January 2005, the Company’s independent registered public accounting firm, Ernst & Young LLP, reported to TM Group Holdings PLC’s audit committee and management that Ernst & Young LLP considered that there was insufficient knowledge and experience of US GAAP in the Company’s corporate accounting department and that Ernst & Young considered this matter to be a reportable condition (as defined under standards adopted by the Public Company Accounting Oversight Board) representing a material weakness in the Company’s internal controls over financial reporting. Ernst & Young LLP has provided an unqualified audit report on the Company’s financial statements for Fiscal 2002 and Fiscal 2003.

In order to address this weakness, management are currently reviewing their resources and considering the changes necessary to remediate this deficiency and to improve the US GAAP reporting process. Options being considered include establishing procedures for the necessary periodic updates by external accounting advisors.

During the period of remediation, there can be no assurance that additional reportable conditions in the Company’s internal controls will not be discovered. Any failure to remediate the material weakness identified in Item 15 of this Annual Report or implement required new or improved controls, or difficulties encountered in their implementation, could cause the Company to fail to meet its reporting obligations relating to reconciliation of its financial statements to US GAAP.

Uncertainty of United Kingdom Participation in European Monetary Union

Pursuant to the Treaty establishing the European Community (as amended by the Treaty on European Union) (the “Treaty”), European economic and monetary union (“EMU”) occurred in three stages, the third of which began on January 1, 1999, when the value of the European Currency Unit (the “ecu”) as against the currencies of the member states participating in the third stage was irrevocably fixed and the ecu became a currency in its own right. The European Council named this currency the “euro”.

If the United Kingdom joins EMU, outstanding Senior Subordinated Notes will be re-denominated and/or become payable in euros. Any re-denomination will be effected in accordance with applicable law. The United Kingdom is not currently participating in EMU and it is not clear whether or on what terms the United Kingdom would be permitted to participate at some later time. The current policy of the UK Government is that any decision to join EMU will only be taken after a national referendum. There can be no prediction as to whether the United Kingdom will participate in EMU or as to the rate of exchange at which pounds sterling would be converted into euros, if at all. In addition, there can be no determination as to the likely impact on the rate of exchange between pounds sterling and US dollars of a decision by the United Kingdom to decline participation in EMU.

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Foreign Exchange Risks

The Company will make payments in respect of the Senior Subordinated Notes in pounds sterling (or euros, should the United Kingdom join EMU). Fluctuations in the exchange rate between pounds sterling (or the euro, as the case may be) and US dollars may therefore adversely affect the US dollar equivalent of any pound sterling or euro denominated payments made in respect of the Senior Subordinated Notes.

Currency Translation Risks Relating to the Senior Notes

As a result of US dollar denominated borrowings of $145 million and interest payments thereon, the Company’s balance sheet and profit and loss account can be significantly affected by movements in the US dollar/sterling exchange rates. The Company has partially mitigated the effect of this currency exposure by purchasing options to buy US dollars. In managing its currency exposures, the Company’s objectives are to maintain a low cost of borrowing and to retain some potential for currency-related appreciation while hedging against currency depreciation.

Since May 1998, the Company acquired a series of options, exercisable on May 13, 2003, to purchase US dollars at a rate between $1.55 = £1.00 and $1.60 = £1.00. The level of US borrowings covered by the options was $150 million. These options were not exercised and therefore lapsed during the period ended November 29, 2003.

On May 14, 2003, the Company acquired an option, exercisable on November 13, 2003, to purchase US dollars at the rate of $1.55 = £1.00 which covered US borrowings of $125 million. At the expiration of this option, the Company acquired a replacement option, exercisable on March 15, 2004, to purchase US dollars at the rate of $1.59 = £1.00 which also covered US borrowings of $125 million.

Subsequent options to purchase $145 million were acquired as follows:

• In March 2004 expiring July 2004 at the rate of $1.7025 = £1

• In July 2004 expiring January 2005 at the rate of $1.6930 = £1

These options were not exercised and therefore lapsed at their expiry date above.

Subsequent to the year end, in January 2005, an option was acquired to purchase $145 million at the rate of $1.7380 = £1.00. This option will expire July 4, 2005.

The Company had also entered into forward foreign currency contracts for the purchase, at rates varying from $1.5891 = £1.00 to $1.6177 = £1.00, or US dollar amounts equal to the total of the first ten half-yearly interest payments on the senior notes, for settlement on each interest payment date between November 1998 and May 2003. These forward foreign currency contracts were accounted for as hedges in accordance with the Company’s accounting policy and expired in May 2003. In October and November 2003, further forwards currency contracts at rates of $1.6459 = £1.00 and $1.67 = £1.00 were taken out and used for the November 2003 interest payment on the senior notes. There were no outstanding contracts at the period end November 29, 2003 or November 27, 2004 and therefore no unrecognised gains or losses.

The Company could still be exposed to material currency translation fluctuation in relation to the uncovered US borrowings of $297,000, the half yearly interest payments on the senior notes and, in any event, upon the expiration of the remaining option on July 4, 2005. The Company will continue to review its hedging arrangements and may amend them if it can do so on commercially attractive terms.

Pension obligations

According to recent actuarial valuations, the projected liabilities of the Company’s pension schemes exceed the projected realisable value of their assets. This has already impacted on cash flows and is expected to do so in the future.

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National Minimum Wage

The introduction of the national minimum wage in 2000 by the UK Government has already had an adverse impact on the Company’s operating costs. Further imposed increases could have a material adverse effect on the Company’s financial position and earnings.

Sub-Post Offices

The UK Government is phasing in changes to the means by which it dispenses pensions and benefits, which could lead to reduced customer levels at Post Offices located in the Company’s stores. These Post Offices are perceived to have a beneficial effect on the Company’s financial position through the ‘footfall’ they create. Any scaling down of these activities could adversely affect the Company’s financial position and earnings.

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Item 4. Information on the Company

History and Development

TM Group Holdings PLC (the “Company”) is a public limited company organised under the laws of England and Wales. It operates a leading nation-wide chain of newsagents, variety and convenience stores and, until Fiscal 2001, was the largest specialist cigarette, beverage and snack vending company in the United Kingdom. Its registered office is located at TM House, Ashwells Road, Brentwood, Essex CM15 9ST, England; telephone 011 44 1277 372916. The Company’s agent in the United States is CT Corporation System, 111 Eighth Avenue, New York, NY 10011; telephone (212) 894 8570.

The Company was incorporated on November 7, 1997 and used in 1998 as a vehicle for re-financing a company originally formed in 1995 upon a management buy-out (the “MBO”) of the principal retailing and vending businesses of Gallaher Group PLC (“Gallaher”). Following the MBO, the Company streamlined its operations and focused on increasing profitability in its three businesses, TM Retail (newsagents, variety and convenience stores), Mayfair Services (cigarette vending) and Vendepac (beverage and snack vending). Significant acquisitions were made for each business.

Following the disposal of the tobacco and beverage vending businesses during Fiscal 2001 and the redemption of debt in both Fiscal 2001 and Fiscal 2002, the Company is now focused on opportunities in the retailing market.

The Management Buy-Out

On July 24, 1995, TM Group Limited acquired from Gallaher the entire issued share capital of Forbuoys, Marshell Group Limited and Vendepac Services Limited in an MBO backed by the Institutional Investors as defined herein (see Item 7. “Major Shareholders and Related Party Transactions”). The opportunity for the MBO arose from Gallaher’s decision to refocus its operations by divesting its vending and retail businesses, along with all other assets Gallaher considered non-core to its principal business of cigarette manufacture. Financing for the MBO was provided by a combination of secured debt financing by a syndicate of banks, unsecured loan notes sold to the Institutional Investors, and a loan convertible into preferred ordinary shares and redeemable cumulative preference shares. The remainder of the purchase price was raised through the sale of ordinary shares to management and preferred ordinary shares and redeemable preference shares to the Institutional Investors. The remaining amount of this indebtedness, as well as the capital structure of the Company, was replaced as a result of the May 1998 Recapitalisation (see Note 1 of Notes to the Financial Statements).

Acquisitions

The Company has made several strategic acquisitions since the MBO, its strategy depending on the availability of suitable acquisition candidates, financing on acceptable terms and the Company’s ability to comply with the restrictions, if any, contained in its debt agreements (including the Indentures). As part of its strategy the Company will evaluate potential acquisition candidates and expects to pursue strategic acquisitions in the future. During Fiscal 2004 a subsidiary of the Company acquired the entire share capital of Dillons Stores Limited, comprising 181 newsagent stores. (See “ - CTN, V-store and C-store Market”).

Disposals

Following a strategic review, the Company sold the cigarette vending operation of Mayfair Services and the beverage and snack vending operation of Vendepac during Fiscal 2001. The aggregate consideration for both totalled approximately £125 million.

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Capital Expenditure

There are currently no capital expenditure projects in progress other than those of a routine nature that are funded out of normal operating cash flow.

For Fiscal 2002, 2003 and 2004 the Company’s gross capital expenditure including small acquisitions was £11.2 million, £11.4 million and £12.6 million respectively. In addition, the acquisition of Dillons Stores Limited in Fiscal 2004 gave rise to £6.9 million of expenditure (net of cash acquired), with a further £6.3 million deferred. Expenditure connected with the refit, conversion or acquisition of stores excluding Dillons totalled respectively £7.3 million, £7.2 million and £7.4 million. The remainder was routine replacement of vehicles and equipment.

Business Overview

According to “Verdict on Neighbourhood Retailing”, published by Verdict Research Limited, TM Retail is the eighth largest neighbourhood retailer in the United Kingdom (based on share of sales). In Fiscal 2004, TM Retail generated profit before central costs, interest and tax of £24.1 million on sales of £641.5 million. It employed approximately 10,700 people and operated 1,327 stores as at November 27, 2004, comprising 307 Convenience stores (“C-stores”), 121 Variety stores (“V-stores”) and 899 Newsagents (“CTNs”).

TM Retail was formed on November 28, 1998, when Forbuoys acquired the shares of Tog Limited, the parent company of Martin Retail Group, for a total cash payment (including repayment of debt) of £75 million. The Company has retained the brand names of Forbuoys and Martin, based primarily in England and Wales, and R S McColl, the brand name under which Martin operated in Scotland.

TM Retail has continued to convert CTNs to C-stores to take advantage of the higher sales and margins from C-stores and the opportunities created by the recent changes in traditional retailing in the United Kingdom, adopting the McColls name (See “- CTN, V-store and C-store Market”).

On August 21, 2004, Forbuoys acquired Dillons Stores Limited (“Dillons”), from Tesco plc, comprising 181 newsagent stores.

Business Strategy

Management will continue to pursue the C-store conversion programme focusing on those of its 899 CTN locations that demonstrate the greatest potential for success as C-stores.

The Company continues to appraise the likely opportunities within its CTN estate. CTNs provide valuable cash generation where viable. Marginal performers can be sold or closed. The Company is currently running a programme of CTN disposals.

As a further development of the segmentation of its estate, management has classified 121 stores as V-stores. These are generally larger than average, generally high street-based and require a broader product range.

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Operations

Established in 1935, Forbuoys expanded principally by opening shops on new public housing developments and in residential areas, retailing primarily confectionery, tobacco products and newspapers. At the time of the MBO, Forbuoys had 701 stores.

Following the MBO, and prior to the Martin acquisition, a total of 64 net loss making branch closures had taken place. Store numbers increased by a further 781 in 1998 with the acquisition of Martin. There was a net reduction of 222 stores between the beginning of Fiscal 1999 and the end of Fiscal 2003. Reasons for reduction vary from overlaps (eg between a Forbuoys and a Martin store), or closures of stores operating at a loss, to the related sale and purchase of stores with other C-store operators. In Fiscal 2004, 181 stores were acquired with Dillons, and the store base increased by net 131 stores in the year.

The following table sets out the total number of stores for the relevant periods.

	TM Retail
	Fiscal 2000	Fiscal 2001	Fiscal 2002	Fiscal 2003	Fiscal 2004
Beginning of period	1,353	1,291	1,230	1,213	1,196
End of period	1,291	1,230	1,213	1,196	1,327
Weighted average for the fiscal year	1,318	1,247	1,224	1,204	1,222

TM Retail supplies everyday needs to a large customer base and records approximately six million transactions per week. It is one of the largest operators of National Lottery terminals, the largest independent Post Office operator and has the biggest home news delivery service in the United Kingdom.

TM Retail’s sales are affected by seasonal and special events, such as Christmas, Easter, Valentine’s Day and Halloween. Stores sell fireworks for “Guy Fawkes” night (November 5), the Company being one of the largest retailers of fireworks in the United Kingdom.

The principal product lines in TM Retail stores as an approximate percentage of sales were as follows:

	Fiscal 2002	Fiscal 2003	Fiscal 2004
	%	%	%
News	26	27	29
Tobacco	30	30	29
Confectionery/Soft Drinks	14	16	16
Grocery	7	8	9
Non-Food/Stationery (1)	19	14	12
Lottery “Instants”	3	4	4
Lottery on-line commissions	1	1	1
	100	100	100

⁽¹⁾ Includes, among other products, greeting cards, toys, fireworks, stationery and phonecards.

Most of TM Retail’s CTNs and V-stores operate between the hours of 6.00 a.m. to 6.00 p.m. for six days a week and 7.00 a.m. to noon on Sundays. Most of TM Retail’s C-stores operate between the hours of 6.00 a.m. to 10.00 p.m. for seven days a week. Opening hours are reviewed on a store-by-store basis, and may vary depending upon local factors. Government legislation in England and Wales limits stores with retail space of more than 3,000 sq. ft. to a Sunday opening time of not more than six hours (a restriction that only applies to 14 TM Retail stores).

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CTN, V-store and C-store Market

The traditional CTN is essentially a newsagent located in a residential area or local shopping centre, which sells newspapers and magazines, tobacco products and confectionery. A V-store is typically a larger store, located in a shopping centre, selling traditional CTN products as well as a broader range of goods such as greetings cards, toys, books and stationery.

Over recent years, convenience stores have increased in importance in the retail market in the United Kingdom. Competitive pressures have led to the closure of many small specialist retailers such as butchers, bakers and greengrocers. C-stores have developed to fulfil the community needs left by these closures. Smaller family units, less leisure time and social changes resulting in more informal eating habits have also contributed to the development of C-stores. TM Retail is capitalising on this trend by converting its CTN stores to convenience stores and thereby exploiting the existing locations and goodwill of its stores. C-stores differentiate themselves from the superstore chains by satisfying their customers’ requirements for impulse and “top-up” purchases (such as milk and bread) and by having extended opening hours.

The typical C-store is located close to its customer base (often within walking distance) and has longer opening hours than most CTNs and supermarkets. News, tobacco, confectionery, alcohol and groceries are among its core products, and it offers a broad range of other products and services which may include, for example, video rental, telephone cards, baked goods, fast food and photocopying facilities. However, the range of groceries stocked is smaller than that stocked by a superstore.

Typical C-store operators have grown by a combination of methods, including conversion of CTNs to C-stores, acquiring established stores from small independent operators and developing greenfield sites. Apart from typical C-store operators, the other major entrants into C-store retailing have been petrol (gasoline) retailers, who have expanded mainly through the conversion and extension of their existing petrol retail outlets and, more recently, the major supermarkets.

There are a number of retail sectors active in neighbourhood locations, including off-licences (stores which sell alcohol for consumption off the premises), grocers, chemists, garage forecourts, C-stores and CTNs.

According to “Verdict on Neighbourhood Retailing 2004”, published by Verdict Research Limited, considered to be the leading retail analysts and consultants in the United Kingdom and Europe, the Co-op Group is the largest neighbourhood retailer with a 5.7 per cent market share and TM Retail is the eighth largest with 1.9 per cent of the market, reflecting the high level of fragmentation. The rest of the market includes symbol grocers, multiple C-store operators, regional operators and independents. Between 1998 and 2003, the number of neighbourhood stores is estimated to have fallen by 10 per cent. The large regional chains of CTNs and C-stores have benefited from this trend as it has created a new opportunity to increase market share and store profitability.

C-store Conversion Programme

The Company believes that it has developed a strong position in the growing C-store market by converting its existing CTNs into C-stores, where appropriate. Management believes that conversion is significantly cheaper and lower-risk than acquiring or building new C-stores and allows it to benefit from the existing goodwill of its CTN stores. At the time a CTN is converted into a C-store, increased space is usually obtained by extending into the stockroom or office area, extending into adjacent premises, or relocating the existing business into larger, nearby premises, many by acquisition of a competitor business.

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Properties

The majority of TM Retail’s stores are away from the main shopping street (referred to in the United Kingdom as the “high street”) in the town or village in which they are located and a large proportion are in or near housing estates. Many of the Company’s customers live within walking distance of TM Retail stores. Approximately 87 per cent of TM Retail stores are located in residential areas or small towns. The type of location of TM Retail stores as at November 27, 2004 was as follows:

	CTNs		C-stores		V-stores
Type of Location	No. of Shops	% of Total	No. of Shops	% of Total	No. of Shops	% of Total
Residential area	528	59	149	49	11	9
Local shopping centre	274	30	74	24	69	57
Large shopping centre	54	6	17	6	27	22
Large town centre	33	4	33	11	14	12
Other	10	1	34	11	0	0
Total	899	100	307	100	121	100

The breakdown of stores by retail space as of November 27, 2004 was as follows:

Retail Space (Sq. ft)	CTNs	C-stores	V-stores	Total Stores	Percentage of total Retail Space
Less than 500	221	21	0	242	18
500-999	512	79	0	591	45
1,000-1,999	157	160	53	370	28
Over 2,000	9	47	68	124	9
Total	899	307	121	1,327	100

TM Retail’s property portfolio and the nature of its ownership interests as at November 27, 2004 were as follows:

	Freehold(1)	Long Leasehold(2)	Short Leasehold(3)	Total(4)
Shops	70	23	1,409	1,502
Offices	1	0	4	5
Accommodation(5)	12	6	50	68
Other	1	1	20	22
	84	30	1,483	1,597

⁽¹⁾ Owned by the Company.

⁽²⁾ All long leases have a remaining period of more than 50 years (as of November 27, 2004).

⁽³⁾ All short leases have a remaining period of less than 50 years (as of November 27, 2004).

⁽⁴⁾ The number of shop property interests is greater than the number of total stores due to sublet properties, vacant properties, failed assignees and multiple lease interests per branch.

⁽⁵⁾ Either vacant, sub-let or provided to store manager, typically over the shop.

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Major Distributors

The Company’s distributors or suppliers deliver directly to the individual TM Retail stores all of the products on offer. In July 1999, a long-term agreement was entered into with Palmer and Harvey McLane to outsource TM Retail’s distribution of tobacco, confectionery and snacks, canned and packet grocery and alcohol. Palmer and Harvey McLane were Forbuoys’ existing suppliers and subsequently acquired the central distribution operation formerly managed by Martin.

Perishable products, such as milk, bread and sandwiches, are supplied locally usually on a daily basis. There are three major distributors of newspapers in the United Kingdom: W H Smith, John Menzies and Surridge Dawson. Each is assigned a specific region by publishers, and TM Retail deals with the relevant distributor in its respective region.

Trademarks

The Company has registered its service marks of “Forbuoys” and “McColls”.

The Tobacco Market

The UK duty-paid cigarette market accounted for an estimated 56 billion cigarettes in 2000, which made it the fifth largest market in Western Europe. The UK Government estimates in addition that almost 1 in 3 cigarettes consumed are not UK duty-paid, bringing total estimated consumption to 82 billion cigarettes. The smoking population in the United Kingdom is estimated to have remained constant at around 23.7 per cent of the population in 2000. In 2000, the UK tobacco duty paid market had an estimated retail value, including excise duties and VAT, of over £11.6 billion, of which approximately £10.7 billion was cigarette sales. The volumes of UK duty-paid tobacco products sold in the United Kingdom have declined since the 1970s. Total UK duty-paid cigarette consumer sales volumes over the period 1997 to 2000 fell by an average of 10 per cent each year. See “Item 3. Key Information—Reduced Demand for Tobacco Products – Relaxation on Personal Imports”. This period has also seen increasing demand for cigarette brands with a lower tar content and greater competition between manufacturers based on pricing. There are over 300 brands of cigarette sold in the United Kingdom. However, the market is highly concentrated, with the eight leading brands accounting for more than half of all cigarette sales.

A significant factor affecting the Company’s operations is excise duties on tobacco products although the impact has diminished since the disposal of Mayfair Services. As at January 2004, approximately [80] per cent of the recommended retail price for premium brand cigarettes sold in the United Kingdom consists of excise duties and VAT. Rates of duty charged on tobacco products in the United Kingdom are typically higher than those charged in other western European countries. This encourages illegal cross-border trade from countries with lower levels of duty. In March 2001, the UK Government estimated that 33 per cent of all tobacco consumed in the United Kingdom was not UK duty-paid; including almost 1 in 3 cigarettes and 80 per cent of hand-rolled tobacco.

For several years, the UK Government increased duties on tobacco products by an average of at least five per cent per annum in excess of the rate of inflation. However, the last increase of this magnitude was in the March 2000 Budget and in the subsequent budgets, the increase was in line with inflation (which in the March 2005 Budget meant an increase of 2.6 per cent). These increases have represented an annual direct increase in costs for tobacco manufacturers, which, but for the offsetting effect of illegal cross-border trade, when passed on to customers, is believed to have the effect of reducing the consumption of tobacco products. The continuing impact of price increases in the UK cigarette market, principally due to substantial duty increases in recent years, has reduced annual UK duty- paid volumes, led to greater price competition and accelerated trading down by consumers to lower price cigarette brands. These changes have particularly affected the premium sector of the UK cigarette market.

An EC Council Directive (2002/10/EC) which came into force on July 1, 2002 amended Directive 92/79/EC and requires, subject to some derogations, that the minimum excise tax (excluding VAT) on the

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most popular price category of cigarette in each EU country must represent not less than 57 per cent of the recommended retail selling price (including VAT) and shall not be less than €60 per 1,000 cigarettes. As from July 1, 2006, this figure shall be increased to €64 per 1,000 cigarettes.

Regulation and Litigation

Tobacco Regulation in the United Kingdom

Advertising and Manufacturing Regulation

The advertising, sale and consumption of cigarettes and other tobacco products in the United Kingdom has traditionally been subject to pressure from the UK Government, health officials and anti-smoking groups. The current UK Government has emphasised its intention to ensure that the number of people smoking in the United Kingdom falls, and has been supported in this by pressure groups such as Action on Smoking and Health (ASH) and QUIT.

A number of substantial restrictions on the marketing, advertising, product design and consumption of cigarettes have been introduced by Government regulation (much of which implements EC legislation in this area). Recent examples include the Tobacco Advertising and Promotion Act 2002 the Tobacco Products (Manufacture, Presentation and Sale) (Safety) Regulations 2002 and the Tobacco Products Regulations 2001. The legislative restrictions on advertising and promotion restrict the types of media and forms of advertising used and require the placement of a health warning on every advertisement and on the packaging of tobacco products.

In particular, the Tobacco Advertising and Promotion Act 2002, which received Royal Assent on November 7, 2002, makes it an offence to: publish tobacco advertisements in the United Kingdom; print, devise or distribute a tobacco advertisement in the United Kingdom, (whether in electronic or other form); display tobacco products or their prices in a place or website where tobacco products are offered for sale if the display does not comply with such requirements as may be specified in regulations; distribute free to the public any product or coupon with the purpose of promoting a tobacco product; be a party to a sponsorship agreement if the purpose or effect of that agreement is to promote tobacco products in the United Kingdom. The Act also permits the Secretary of State to make ‘brand sharing’ regulations prohibiting or restricting the use of any name, emblem or other feature which is connected with a tobacco product, in connection with any other service or product. Such regulations were made in 2004 and are referred to below in more detail.

The Act supersedes voluntary agreements on advertising that had been in operation between the Government and the tobacco industry prior to it coming into force. Additionally, the ban on sponsorship under the Act now covers the promotion of tobacco products in the United Kingdom, which had previously been monitored by the Committee for Monetary Agreements on Tobacco Advertising and Sponsorship.

Under the Act, there are exemptions for certain advertisements in or outside the premises of “specialist tobacconists” (a shop selling tobacco products by retail more than half of whose sales derive from the sale of those tobacco products); to publications for which the UK is not the principle market (except in-flight magazines); and business or intra-trade related advertisements.

Pursuant to the first six commencement orders, the Act came into force in a staged timetable from February 14, 2003, except in the case of tobacco advertisements which are published, printed, devised or distributed solely for the purposes of a distribution that is restricted to those members of the public who before October 8, 1999 requested their inclusion in such distributions; or for the purposes of the promotion of a tobacco product in a place or on a website where tobacco products are offered for sale.

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The prohibition under the Act was extended on December 21, 2004 to include advertisements in places where tobacco product are offered for sale (Tobacco Advertising and Promotion Act 2002 (Commencement No 7) Order 2004 for England, Wales and Northern Ireland and Tobacco Advertising and Promotion Act 2002 (Commencement No 8) (Scotland) Order 2004 for Scotland). By virtue of this same order, it will be extended on July 31, 2005 to all advertisements, other than in the case of a tobacco advertisement which is published, devised or distributed solely for the purposes of the promotion of a tobacco product on a website where tobacco products are offered for sale.

The Act has given rise to the introduction of associated regulations aimed at targeting and clarifying certain specific areas of tobacco advertising. The Tobacco Advertising and Promotion (Point of Sale) Regulations 2004 came into force on December 21, 2004 despite a claim for judicial review by the tobacco industry (R (on the application of British American Tobacco and others) v Secretary of State for Health [2004] EWHC 2493 (Admin)). These regulations clarified that no offence would be committed under the Act by the publication of an advertisement on a gantry or display unit at a point of sale for tobacco products, provided that the advertisement is restricted to the name, emblem and price of the tobacco product (and no other words or images), covers a maximum area of 210mm x 147.5mm. and contains a health warning occupying 30% of its size. No offence is also committed by the publication of an advertisement on a vending machine from which only tobacco products are sold, provided that the advertisement consists only of a picture of the packet of a tobacco product which is for sale from that vending machine, is no larger than the surface area of the largest face of the packet of the tobacco product depicted and includes an appropriate health warning.

The Tobacco Advertising and Promotion (Specialist Tobacconists) Regulations 2004 also came into force on 21 December 2004, providing for stricter controls on the nature of any advertisements with regard to the exemption for specialist tobacconists.

In addition, the Tobacco Advertising and Promotion (Brandsharing) Regulations 2004 were passed on July 13, 2004, and are due to come into force on July 31, 2005. These regulations will prohibit the use by a person, in connection with any non-tobacco product, of any feature which is the same as, or is so similar as to be likely to be mistaken for, any feature which is connected with a tobacco product (or vice versa). They do not apply to point of sale brandsharing (subject to restrictions on size and warnings similar to those in the Tobacco Advertising and Promotion (Point of Sale) Regulations 2004).

All tobacco sponsorship (for example, in relation to Formula 1 and World Snooker) will end by July 31, 2005. The Tobacco Advertising and Promotion (Sponsorship) Transitional Regulations 2003 transposed the EU Directive 2003/33/EC in this regard (see European Regulation section below).

Other Existing Regulation

The Children and Young Persons Act 1933 makes it illegal to sell cigarettes to anyone under sixteen and the Children and Young Persons (Protection from Tobacco) Act 1991 makes it an offence to sell unpackaged cigarettes or to fail to display warning statements that the sale of tobacco products to anyone under sixteen is illegal. It is the statutory duty of every local authority to consider taking enforcement action in relation to these Acts at least once a year. On September 13, 2000, the Protocol on Underage Sales was launched. There is to be an annual survey carried out of enforcement by local trading standards authorities to monitor enforcement of the law on underage tobacco sales.

Under the Health and Safety at Work Act 1974 employers have to ensure, so far as is reasonably practicable, the health, safety and welfare at work of all their employees. The Health and Safety Executive (“HSE”) currently recommends that all employers should have a specific policy on smoking in the workplace and that this should give priority to the needs of non-smokers who do not wish to breathe tobacco smoke. One of the key messages in relation to their stance on passive smoking was that non-smoking should be regarded as the norm in enclosed workplaces. Special provision should be made for smoking, rather than the reverse. The Health and Safety Commission (“HSC”) has published a Consultative Document which contains a draft Approved Code of Practice (“AcoP”) which is now being revised.

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The Management of Health and Safety at Work Regulations 1999 require every employer to assess the risks to the health of his/her employer to which they are exposed whilst they are at work. The purpose of this assessment is to assist the employer in complying with the relevant statutory provisions of the Health and Safety at Work Act 1974.

The Workplace (Health, Safety and Welfare) Regulations 1992 contain provisions requiring employers to provide effective and suitable ventilation, and protection from discomfort caused by tobacco smoke.

In Scotland, (under the devolved powers) the Smoking, Health and Social Care Bill was introduced on 16 December 2004. The bill proposes to: ban smoking in enclosed public places; create an offence of permitting others to smoke in no-smoking areas; create an offence of smoking in no-smoking premises; create an offence of failing to display warning notices in no-smoking premises; and set out the powers of enforcement officers to enter no-smoking premises. The bill is due to come into force in the Spring of 2006. The bill is currently with the Health Committee and has passed the pre-legislative scrutiny stage. This followed a major consultation exercise on whether there should be further restrictions on smoking in public places. The consultation in Scotland prompted the UK Government to consider the possibility of a country-wide ban, embodied in the latest White Paper discussed below.

Review Committees, Charters and Reports

In recent years, there has been an increased amount of attention focused on environmental tobacco smoke or “passive smoking”. The Scientific Committee on Tobacco and Health was set up in 1994 to review evidence on tobacco and health, and to provide advice to the Chief Medical Officer and the UK Department of Health. In 1998, the Committee produced a report which focused particularly on the negative health effects of passive smoking. The report concluded that long-term exposure to environmental tobacco smoke caused lung cancer and posed a number of other health risks. On December 21, 1999, following an application by the Tobacco Manufacturers’ Association, the High Court ruled that the report was not susceptible to judicial review.

The Public Places Charter was published on September 14, 1999 and commits signatories to improving the facilities for customers who do not smoke in pubs, bars and restaurants. The Charter’s requirements include: a written policy on smoking; implementation through non-smoking areas, air cleaning and ventilation as appropriate; and communication to customers through external and internal signs. The Government is currently working with the hospitality industry to agree targets for an increase in smoke-free facilities and clean air.

HM Treasury commissioned the Wanless Report to consult on the long-term assessment of health policy, including questions for consideration on the negative impact of smoking. The Final Report was published in April 2002 and highlights investment in encouraging people to stop smoking as an effective way to improve the population’s health status and cut health spending in the longer term.

The Department of Health has also run a project entitled Tackling Tobacco in the Workplace, the aim of which is to encourage businesses to develop and implement tobacco policies to help smokers to give up and to lead to the creation of smoke-free work places.

White Papers and Bills (Proposed Legislation)

On December 10, 1998, the UK Government issued a White Paper (“Smoking Kills – A White Paper on Tobacco”) that set out a concerted programme of action, the aim of which was to reduce smoking in the United Kingdom. The White Paper announced that the Government was planning a £50 million publicity campaign to shift attitudes and change behaviour and would invest £60 million in a comprehensive National Health Service (the “NHS”) service to help smokers to quit, which would include specialist counselling and a limited supply of free nicotine replacement therapy. This has been put into practice, with a billboard campaign, television campaign and specialist NHS clinics for smokers. The paper also stated that it did not

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feel a universal ban on smoking in all public places was justified while it could make fast and substantial progress in partnership with industry.

The Tobacco (Public Places and Workplaces) Bill was proposed as a private members bill in the House of Lords on 10 March 2004. It had its second reading in the House of Lords on 23 April 2004. No date was scheduled for a review by a committee before the end of the parliamentary session. There was insufficient parliamentary time to complete the process of this bill and as such the bill fell away and would need to be reintroduced to continue.

At the beginning of March 2004, the UK Government began a new consultation process on improving public health, one of the central tenets of which was the reduction of levels of smoking. As a result of this, the UK Government published another White Paper on 16 November 2004. Although it does not propose an outright ban, the paper sets out a schedule for banning smoking in most public places and workplaces in order to protect the welfare of others. In addition, chapter 1, paragraph 23 states that: “While people want to make their own health decisions, they do expect the Government to help by creating the right environment. Therefore, supporting informed choice is the first principle on which this White Paper is built”.

The key provisions set out are as follows. Smoking is to be banned in most workplaces and places where food is served. Exemptions are proposed for pubs that do not serve food and private clubs. Smoking “in the bar area” will be prohibited everywhere. The UK Government estimates that 10%-30% of pubs fall into the category of not serving food. In terms of timetable, by the end of 2006, all government departments and NHS organisations will be smoke-free (supplemented by advice and support for those employees who want to stop smoking). By the end of 2007, all enclosed public places and workplaces, other than licensed premises (and those specifically exempted) will, subject to legislation, be smoke-free. By the end of 2008 arrangements for licensed premises will be in place.

The UK Government intends to use the intervening period to draw up the required legislation and consider the position relating to certain specific establishments where further issues need to be considered (for example, hospices, prisons). This will include consulting with schools and other institutions on how best to enforce the policy and what penalties will be appropriate. The Health Development Agency will shortly publish guidance for NHS organisations on the provision of smoke-free buildings.

Under the White Paper, the UK Government did not consider that there is a case for setting up a UK agency to regulate tobacco. They are, however, in discussion with the European Commission and working with partner agencies, including the Medicine and Healthcare Products Regulatory Agency (who regulate medicinal nicotine products), the Health Protection Agency, scientific advisory committees and the National Institute for Clinical Excellence to develop a strategy to take this work forward. They anticipate that a report will be produced by the European Commission in 2005, which will give a view of the cross-Europe priorities for work in this area. A commitment to public health research is confirmed, as is a hard line on tobacco smuggling.

In addition, the UK Government will continue with its campaign to provide comprehensive information about health risks of smoking, reasons not to smoke and access to NHS support, including Stop Smoking Services and nicotine replacement therapy. Amendments are proposed that would create new powers to ban retailers from selling tobacco products if they repeatedly flout the law relating to the sale of such products to minors. Some consideration in the White Paper was given to the regulation of scenes of smoking in films and on television though no additional legislation was proposed. The UK Government believes that picture warnings on tobacco products could play a powerful role in any campaign to reduce the number of smokers.

As a response to the White Paper, and particularly in relation to the proposed smoking ban, some leading pub companies have abandoned the Public Places Charter initiative and promoted their own scheme in the hope of staving off legislation. The British Medical Association’s Tobacco Control Resource Centre has

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endorsed the White Paper, as have the Health Development Agency, although they have urged some scope for allowing smoking in mental health hospitals.

Smoking in pubs, restaurants and other enclosed work places was banned in the Republic of Ireland from March 29, 2004. Other foreign jurisdictions have also implemented their own bans.

Excise Duties

Excise duties represent a significant percentage of the retail price of tobacco products and have been steadily increased in the United Kingdom. As at January 2004, cigarette excise duties and VAT comprise approximately 80 per cent of the recommended retail price of a pack of premium brand cigarettes in the United Kingdom. In 1997 the UK Government stated its intention to increase excise duties on tobacco products by an average of at least 5 per cent a year in excess of the rate of inflation, and such increases were made in 1997, 1998, 1999 and 2000. In his Pre-Budget Report in November 2000, the Chancellor stated the UK Government’s belief that there is a strong case for a year on year real terms increase in the price of cigarettes. However, the last increase in excess of inflation was in the March 2000 Budget. In the March 2001, April 2002, April 2003, March 2004 and March 2005 Budgets, tobacco duty increase was in line with inflation (which in the March 2005 Budget meant an increase of 2.6 per cent).

Tobacco Regulation in Europe

There continues to be increasing regulation of tobacco products, excise tax, advertising and other tobacco-related areas at the EU level. In particular, in recent years, the Products Directive and Advertising Directive have been adopted. The application of this legislation has increased with the accession of ten new Member States to the EU in May 2004.

Directives

The European Parliament and the European Council adopted a directive on the manufacture, presentation and sale of tobacco products in June 2001 (2001/37/EC) (the “Products Directive”). The Products Directive combines existing legislation on tar content and labelling and reduces the current maximum tar yield per cigarette, introducing for the first time maximum yields for nicotine and carbon monoxide (which apply from January 1, 2004). It also introduces new, larger warnings, provisions for photographic health warnings, bans on misleading descriptors such as “low tar” and “light”, and requires manufacturers to give information on the contents of their products. Manufacturers and importers are required to submit a list of all ingredients used in the manufacture of tobacco products by brand name and type and give details of any toxicological data available to the manufacturer or importer. Member States of the EU are required to make this information public.

Directive 2003/33/EC of May 26, 2003 on the advertising and sponsorship of tobacco products (the “Advertising Directive”) seeks to harmonise the regulatory rules governing the advertising of tobacco products other than on television, e.g. in the press, other printed publications, and on the radio. In addition, it seeks to regulate tobacco company sponsorship of radio programmes and of certain events or activities involving, or taking place in, several member states. As the Directive requires Member States to place broad restrictions on such advertising or sponsorship, it is likely to have an impact on the efficacy of tobacco marketing.

The main aim of the Advertising Directive is to “ensure the free movement of the media concerned and of related services and to eliminate the obstacles to the operation of the Internal Market”. However, insofar as the Directive requires Member States to place broad restrictions on such advertising or sponsorship, it is likely to have an impact on the efficacy of tobacco marketing. The Directive replaces the similar Directive 98/43/EC, which was annulled by the European Court of Justice in October 2000 on the basis that the

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blanket ban on tobacco advertising that it sought to create was not necessary to remove distortions in the internal market, which was the basis relied on by the legislature in enacting the legislation.

The main provisions of the Advertising Directive are as follows. Advertising in the press and other printed publications is to be limited to publications intended exclusively for professionals in the tobacco trade and to publications which are printed and published in third countries, where those publications are not principally intended for the Community market. All forms of radio advertising for tobacco products is to be prohibited, whilst radio programmes shall not be sponsored by undertakings whose principal activity is the manufacture or sale of tobacco products. In addition, Sponsorship of events or activities involving or taking place in several Member States (e.g. Formula 1 motor racing) or otherwise having crossborder effects is to be prohibited.

Member states are required to implement the Advertising Directive by July 31, 2005. This is particularly significant with the UK in relation to Formula 1. Under section 20 of the Tobacco Advertising and Promotion Act 2002, provision had been made for regulations to be passed delaying the prohibition of tobacco sponsorship until (at the latest) 1 October 2006. The Advertising Directive seeks to bring forward the prohibition on sponsorship by more than a year. The Tobacco Advertising and Promotion (Sponsorship) Transitional Regulations 2003 have enacted this provision in UK legislation.

The European Commission had stated that before 2005 it will propose a new directive concerning a common list of ingredients authorised for tobacco products and will seek advice on whether any additives used may make the taste of tobacco more palatable to young people. As yet, this has not been proposed.

In addition, Directive 92/79/EC (as amended by Council Directive 2002/10/EC) requires, subject to some derogations, that the minimum excise tax (excluding VAT) on the most popular price category of cigarette in each EU country must represent not less than 57 per cent of the recommended retail selling price (including VAT) and shall not be less than €60 per 1,000 cigarettes. As from July 1, 2006, this figure shall increase to €64 per 1,000 cigarettes. The requirements under this Directive have been implemented in the United Kingdom and the table of excise duties payable on tobacco is revised on an annual basis.

Commission Decisions

Commission Decision of November 2001 makes reference to the intended phasing out of tobacco subsidies, whilst guaranteeing adequate replacement schemes for the tobacco farmers. On March 25, 2002, the Council of the EU adopted Regulation 546/2002 whereby in order to promote human health, tobacco farmers’ subsidies are to be reduced and, at the same time, steps are to be taken to develop new sources of income and economic activity for them.

Commission Decision of February 25, 2004 adopted a 2004 work plan for the implementation of the programme of Community action in the field of public health (2003 to 2008). Tackling tobacco addiction and smoking prevention and cessation are identified as priorities.

Council Recommendations

Council Recommendation of December 2, 2002 on the prevention of smoking and initiatives to improve tobacco control recommends that Member States adopt various measures, including requiring vendors to establish that purchasers have reached the legal age for purchase, removing tobacco products from self-service displays in retail outlets and restricting access to tobacco vending machines. It also requires Member States to implement legislation that provides protection from exposure to environmental tobacco smoke in indoor workplaces, enclosed public places and public transport and to implement appropriate price measures on tobacco products so as to discourage tobacco consumption. The Commission is to monitor and assess the developments and measures undertaken by Member States and report on the implementation of the

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proposed measures. This Council Recommendation includes certain issues arising from the World Health Organisation (the “WHO”) Framework Convention negotiations.

Cases

The European Court of Justice (“ECJ”) has given a ruling on the compatibility of the Products Directive with higher provisions of EC law (proportionality and non-discrimination). This featured in case C-434/02 (Arnold André GmbH & Co. KG v Landrat des Krieses Herford) in which the ECJ ruled that the Products Directive was compatible.

Global Regulation

On February 19, 2002, the European Report on Tobacco Control Policy was published and the Warsaw Declaration for a Tobacco-free Europe was adopted, both in conjunction with the WHO European Ministerial Conference for a Tobacco-free Europe. The Report reviewed the implementation of the Third Action Plan for a Tobacco-free Europe, while the Warsaw Declaration committed states participating in the conference (including the United Kingdom) to: developing and adopting the European Strategy for Tobacco Control (Fourth Action Plan for a Tobacco-free Europe); declaring their strong support for preparing a comprehensive WHO Framework Convention on Tobacco Control; and urging Member States and intergovernmental organisations to strengthen European partnership and solidarity in tobacco control.

On May 21, 2003, the 192 member states of the WHO adopted the world’s first public health treaty, the WHO Framework Convention on Tobacco Control. The main provisions of the treaty include: an obligation on signatory states to adopt and implement large, clear, visible health warnings and messages on tobacco products and their outside packaging; an obligation on signatory states to promote effective measures for protection from exposure to tobacco smoke in indoor workplaces, public transport, indoor public places and, as appropriate, other public places; and an obligation on party states to undertake a comprehensive ban on tobacco advertising, promotion and sponsorship. The treaty text states that governments should “ …develop, implement, periodically update and review comprehensive multisectoral national tobacco control strategies, plans and programmes in accordance with this Convention and the protocols to which it is a Party.”

Council Decision of June 2, 2004 concerning the conclusion of the WHO Framework Convention on Tobacco Control approved the WHO framework on behalf of the EC.

For the treaty to come into force, it needed to be signed and ratified by 40 participating countries. It was ratified by the UK on December 16, 2004 following ratification by the requisite fortieth country (Peru) on December 1, 2004. This means that the treaty will now be binding, under international law, on all those who have ratified it. The Treaty is due to come into effect on 28 February 2005.

Tobacco Litigation

Tobacco manufacturers in the United Kingdom, including the Company’s suppliers, have been sued by parties seeking damages for illnesses claimed to have resulted from tobacco consumption. To the Company’s knowledge, no such action has been decided in favour of a claimant in the United Kingdom.

The first action brought against a tobacco manufacturer in the United Kingdom for alleged smoking-related health effects is believed to have been in 1988. In 1992, legal aid was granted to approximately 200 claimants in England to commence litigation against a number of tobacco manufacturers, including Gallaher and Imperial Tobacco, in respect of alleged injuries caused by smoking. Legal aid was withdrawn in July 1996. Subsequently, various writs were issued against the tobacco manufacturers by some 52 claimants, none of whom had legal aid.

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On February 9, 1999 the High Court ruled that the actions of 36 of the 52 claimants were time-barred. The judge stated that the claimants’ chances of establishing liability were “speculative” and that, even if primary liability were established, defences of consent or contributory negligence could reduce or eliminate any award of damages. In addition, none of the defendants had acted promptly or reasonably once they knew that the acts or omissions of the tobacco companies might be capable of giving rise to an action for damages.

There was no full hearing on the merits, as the claimants withdrew their claims following this decision. Imperial and Gallaher agreed not to pursue legal costs from the claimants who had withdrawn. In return, the claimants’ solicitors gave an undertaking not to take any further action against the tobacco industry for the next five years, or against Imperial and Gallaher specifically for the next ten.

On October 23, 2001 permission was granted by the Court of Session in Edinburgh for a widow to sue Imperial Tobacco for £500,000 in respect of her husband’s death from lung cancer. Although the hearing concluded on February 20, 2004, the judgment has not yet been delivered.

The Company is not a party to any smoking and related ill-health litigation in any jurisdiction. However, there can be no guarantee that such actions will not arise in the future. In addition, although the Company is currently only a retailer of tobacco products, previous sales of cigarettes sold under Forbuoys’ own brand name and, with the acquisition of Dillons Stores Limited in August 2004, current sales of cigarettes under own brand names, although manufactured by another company, as well as the Company’s activities as a tobacco retailer, could potentially subject the Company to future litigation.

Other Government Regulation

Various other aspects of the Company’s businesses are also subject to governmental regulation, including standards for storage, distribution, labelling and the sale of food products, the requirement of a license for any shop selling alcohol or fireworks, standards for post office branches and general health and safety standards. Although the Company believes it is operating in substantial compliance with these laws and regulations, such laws and regulations are subject to change.

There can be no assurance that additional or more stringent requirements will not be imposed on the Company’s operations in the future. Failure to comply with such current or future laws and regulations could result in fines against the Company, a temporary shutdown of the Company’s operations or the loss of certification or rights to sell its products. Even in the absence of governmental action, a reduction in the Company’s profit margins based on increases in licensing or inspection fees or other duties payable by the Company or other additional compliance costs could result from Government regulations.

The Company has received a notice from the Office of Fair Trading (“OFT”) stating that the OFT has reasonable grounds to suspect vertical price fixing among manufacturers and retailers of tobacco-related products in contravention of Section 2 of the Competition Act 1998 and has requested the Company to provide specific documentation and information. The Company intends to co-operate with the OFT with respect to its request. The Company is not thought to be the main target of this enquiry. Because the Company has no knowledge of the detailed nature of this enquiry, no assurance can be given that this will not have adverse consequences for the Company.

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Organisational Structure

The Company is a wholly-owned subsidiary of Thistledove Limited. The following information relates to those subsidiary undertakings, or former subsidiary undertakings, whose results or financial position principally affected the Company during Fiscal 2004:

Name of company	Country of registration (or incorporation) and operation	Holding	Proportion of voting rights and shares held	Nature of business
Bracklands Ltd*	England and Wales	Ordinary shares	100%	Property Co
Clark Retail Ltd*	Scotland	Ordinary shares	100%	Retailing
Dillons Stores Ltd*	England and Wales	Ordinary shares	100%	Retailing
Forbuoys Ltd	England and Wales	Ordinary shares	100%	Retailing
Martin Retail Group Ltd*	Scotland	Ordinary shares	100%	Retailing
TM Vending Ltd	England and Wales	Ordinary shares	100%	Corporate Activities
Tog Ltd*	England and Wales	Ordinary shares	100%	Intermediate Holding Co

* 100% held by a subsidiary undertaking

Property, Plants and Equipment

The Company had 1,603 property interests at November 27, 2004, all of which were held in the United Kingdom, and comprised the 1,597 properties managed by TM Retail (see table on page 18), plus 6 centrally managed properties which are no longer used by the Company. Of the Company’s property interests, 1,519 were leaseholds. The remaining properties were owned. The centrally managed properties were properties that remained after various businesses disposals, five of which were sub-let.

Of the property interests, 1,502 represent trading, sub-let or vacant shops.

The principal administrative offices of the Company and the main operation facilities for TM Retail are located in Brentwood, England and are owned by the Company.

The leased properties have a book value of £9.0 million on the Company’s balance sheet, of which £7.8 million is classified as ‘short’ leases, which are leases with a remaining life of less than 50 years. The Company’s total rent expense for Fiscal 2004 was £27.7 million.

The maintenance and upkeep of the property portfolio is the joint responsibility of the Company’s property and facilities departments together with the operational area management. Maintenance includes ensuring adherence to all current UK health and safety regulation, safety procedures and accident reporting procedures. Recent changes to the control of Asbestos at Work Act 2002, which came into force in 2004, require companies to identify the risks posed by asbestos to their employees and to put in place procedures to manage the risk. The Company has substantially completed a risk-assessment survey of all its premises, and undertaken remedial work where necessary. Plant and equipment at November 27, 2004 mainly comprised fittings and equipment in the shops and offices, with a book value of £31.2 million.

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Item 5. Operating and Financial Review and Prospects

The following should be read together with “Item 3. Key Information”, and with the Company’s Financial Statements and the Notes thereto included elsewhere in this Form 20-F.

Overview

The Company was formed in 1995 upon the MBO of the principal retailing and vending businesses of Gallaher. Following the MBO, the Company streamlined its operations and focused on increasing profitability in its three core businesses, which comprised a leading nation-wide chain of newsagents and convenience stores under the name of TM Retail, a cigarette vending business, Mayfair Services, and a beverage and snack vending business, Vendepac.

The Company made key acquisitions for each of its core businesses. On November 28, 1998, it acquired the shares of Tog Limited, the parent company of the Martin Retail Group, for a total cash payment (including repayment of debt) of £75 million. Martin operated 781 retail outlets throughout the United Kingdom, comprising 731 traditional CTNs and 50 convenience stores.

Of the vending acquisitions since the MBO, those of the cigarette vending business of Stretton by Mayfair in December 1996 and the beverage and snack vending business of Vendcare in 1998 were significant in terms of increasing size.

Following strategic reviews, Mayfair Services was sold on December 8, 2000 to Sinclair Collis Limited, a subsidiary of Imperial Tobacco Group Plc, for a total consideration of £39.6 million and Vendepac was sold on July 20, 2001 to Compass Group, UK and Ireland Limited for a total consideration of £85.0 million.

On August 21, 2004, a subsidiary of the Company purchased from a subsidiary of Tesco plc, the entire share capital of Dillons Stores Limited (Dillons) for a consideration of £8.3 million, excluding stock and on a debt and cash-free basis. Trade creditors were not assumed. Dillons comprised 181 newsagent locations similar in operation to those within the existing TM Retail estate.

Revenues are generated primarily in cash. Sales represent the amounts receivable for goods and services sold in the relevant period, stated net of value added tax, and include commissions from the sale of the National Lottery’s on-line game and the sale of electronic mobile phone top-ups, and the gross sales of the National Lottery’s “Instants” scratch card tickets and from mobile phone vouchers.

Some goods (e.g. newspapers and magazines) have the selling price printed on the copy by the publisher. C-stores tend to have higher selling prices on many more items than CTNs, reflecting higher labour costs, longer opening hours and a better shopping environment. Changes in prices by product represent changes in purchase price of the product, or reflect prevailing trading conditions.

Critical Accounting Policies

The Company’s consolidated financial statements are prepared in accordance with UK GAAP. The preparation of financial statements requires the use of estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditure of the period.

The Company believes the following critical accounting policies require significant judgement and/or the greatest use of estimates.

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Goodwill

Goodwill arising on acquisitions prior to November 28, 1998 was set off directly against reserves. Goodwill previously eliminated against reserves has not been reinstated on implementation of Financial Reporting Standard 10 “Goodwill and Intangible Assets” (“FRS10”). Positive goodwill arising on acquisitions since November 28, 1998 is capitalised, classified as an asset on the balance sheet and amortised on a straight-line basis over its useful economic life up to a presumed maximum of 20 years. It is reviewed for impairment at the end of the first full financial year following the acquisition and in other periods if events or changes in circumstances indicate that the carrying value may not be recoverable. If a subsidiary or business is subsequently sold or closed, any goodwill arising on acquisition that was written off directly to reserves or that has not been amortised through the profit and loss account is reviewed for impairment and if such goodwill is not considered to be attached to the continuing business it is taken into account in determining the profit or loss on sale or closure.

In accordance with SFAS No.142, Goodwill and Other Intangible Assets, the Company performs an annual impairment test of goodwill and non-amortisable intangible assets with indefinite useful lives. This test is performed once a year, or if events occur or circumstances change that would indicate the carrying value might be impaired. The net assets of the Company calculated for US GAAP are allocated or apportioned to the three reporting units (convenience stores, variety stores, newsagents) to give a carrying value for each, which is compared against a valuation of each reporting unit. Each valuation is calculated using standard techniques and assessed against other valuation criteria, such as acquisition data of similar businesses.

The use of different estimates, assumptions and judgements, in particular those involved in determining a value based on managements current expectations of future market conditions and operations, could result in materially different carrying values of assets and assessments of impairment.

Pensions

The determination of the Company’s obligations and expense for pension costs is dependent upon the selection of certain assumptions used by actuaries in calculating such amounts. These assumptions are set out in Note 24 of Notes to the Financial Statements and include the discount rates, the expected long-term rates of return on plan assets and rates of increase in salaries. Whilst management believes that the actuarial assumptions are appropriate, any significant changes to those used could materially affect both the Company’s pension obligations and future expense.

Tobacco Pre-purchases

The imposition of duty increases in the UK Government’s Budget statement and of manufacturer price increase has affected the annual pattern of the Company’s tobacco purchases and stock values. Most UK cigarette retailers, including the Company, seek to take advantage of these price rise opportunities and pre-purchase stock immediately ahead of announced or expected duty or manufacturer price increases. This is known as ‘tobacco pre-purchasing’. Prior to each tobacco pre-purchase, the level of any announced or anticipated duty or price rise and the benefits of acquiring additional stock are carefully assessed against the interest cost of funding additional stock levels.

In its Budget announcement of March 22, 2000, the Government announced its intention to limit pre-purchasing activity by restricting the volume of removal of cigarettes from all duty-suspended storage in the run up to each future Budget. In the past manufacturers typically made available between two and three months’ supply, but since 2001, supply has been restricted to several weeks only.

Manufacturers’ price increases in the UK have tended to occur at least once a year and are announced a few weeks in advance of implementation. With price rises typically lower than the duty increases, pre-purchases prior to a manufacturers’ price increase are normally economic at no more than several weeks’ purchase.

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Tobacco pre-purchases have resulted in large variations in working capital and periodic increases in short-term borrowings. The Company has in the past financed the pre-purchase through borrowings under uncommitted Stocking Facilities and committed Working Capital Facilities. The increased drawings on the Stocking Facility due to the pre-payment are typically paid down over the following months, matching the period over which the pre-purchase is sold by the Company.

Tobacco pre-purchases for the last three years including Fiscal 2004 have not been economic at more than several weeks’ purchase and as such have not been material to the Company’s operating performance over this period. Tobacco pre-purchases continue to have a short term impact on working capital levels but since the disposal in 2000 of the Company’s cigarette vending business, Mayfair Services, this impact has been much reduced, and absorbed within its committed Working Capital Facilities without recourse to special Stocking Facilities.

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Results of Operations

The following table sets out a summary of the Company’s results by business sector:

	Fiscal 2002		Fiscal 2003		Fiscal 2004
	(£ millions)
Sales:
Continuing operations
Ongoing retailing	664.5		635.5		619.8
Acquired retailing	—		—		21.7
	664.5		635.5		641.5
Cost of sales:
Continuing operations
Ongoing retailing	(503.0	)	(473.0	)	(459.6	)
Acquired retailing	—		—		(16.6	)
	(503.0	)	(473.0	)	(476.2	)
Selling, distribution and administrative costs:
Continuing operations
Ongoing retailing	(139.9	)	(140.5	)	(140.9	)
Acquired retailing	—		—		(4.8	)
	(139.9	)	(140.5	)	(145.7	)
Central(1)	(3.3	)	(3.4	)	(2.7	)
	(143.2	)	(143.9	)	(148.4	)
Exceptional costs	(0.8	)	—		(1.2	)
Total selling, distribution and administrative costs	(144.0	)	(143.9	)	(149.6	)
Non-operating items:
Profit on fixed asset disposals - ongoing	3.9		3.9		4.1
Profit from discontinued operations	—		—		1.6
Total non-operating items	3.9		3.9		5.7
Profit/(loss) before interest, taxation and sale of businesses:
Continuing operations
Ongoing retailing	25.5		25.9		23.4
Acquired retailing	—		—		0.3
	25.5		25.9		23.7
Central(1)	(3.3	)	(3.4	)	(2.7	)
	22.2		22.5		21.0
Discontinued operations	—		—		1.6
Restructuring costs	(0.8	)	—		(1.2	)
Total profit before interest, taxation and sale of businesses	21.4		22.5		21.4
Net interest expense	(20.5	)	(12.1	)	(8.4	)
Taxation	(0.2	)	(2.0	)	(4.8	)
Profit for the period	0.7		8.4		8.2

⁽¹⁾ “Central” includes central management costs, finance functions and administration.

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Fiscal 2003 compared to Fiscal 2004

Sales

The Company’s total sales increased 1.0 per cent to £641.5 million for Fiscal 2004 from £635.5 million in Fiscal 2003, principally due to the increase in store numbers.

Principally as a result of the Dillons acquisition, the total number of stores increased by 131 to 1,327 at the end of the financial period and the weighted average number of stores increased by 1.5 per cent during the year. “Same store” revenues excluding lottery revenues were approximately 0.5 per cent lower for the year as a whole with declines in “same store” tobacco, phone top-up and minerals/ice cream partly offset by improvements in grocery and news.

Cost of Sales

The Company’s total cost of sales increased 0.7 per cent to £476.2 million for Fiscal 2004 from £473.0 million in Fiscal 2003, primarily due to the increase in sales.

Selling, Distribution and Administration Costs

The Company’s total selling, distribution and administration costs increased 3.2 per cent to £148.4 million for Fiscal 2004 from £144.0 million in Fiscal 2003, principally due to the increases in TM Retail.

TM Retail’s selling, distribution and administration costs increased 3.7 per cent to £145.7 million for Fiscal 2004 from £140.5 million in Fiscal 2003, principally due to store operating costs which increased as a result of the increase in store numbers and wage rates. Wage rates increased principally as a result of the October 2003 National Minimum Wage increase and associated effects.

Central administration costs decreased by £0.7 million in Fiscal 2004 to £2.7 million.

Operating exceptional costs relate to redundancies that took place in both the retailing and central administration functions and the integration costs associated with the acquisition of Dillons Stores Limited, but are shown separately to aid year on year comparisons.

Profit before Interest, Taxation and Sale of Businesses

The Company’s total profit before interest, taxation and sale of businesses decreased 5.0 per cent to £21.4 million for Fiscal 2004 from £22.5 million in Fiscal 2003.

TM Retail’s profit before interest, taxation and restructuring costs decreased 8.5 per cent to £23.7 million for Fiscal 2004 from £25.9 million in Fiscal 2003 due to the increase in store operating costs partially offset by the increase in sales in excess of the increase in cost of sales.

Net Interest Expense

Net interest expense decreased 30.3 per cent to £8.4 million for Fiscal 2004 from £12.1 million in Fiscal 2003. This was due to exchange rate gains on both actual interest payments and the retranslation of the Senior Notes.

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Taxation

The taxation charge in Fiscal 2004 comprised UK current and deferred income taxes and included certain adjustments in respect of prior years. A reconciliation of the standard UK tax charge of 30 per cent to the actual tax is set out in Note 10 of Notes to the Financial Statements included elsewhere in this Form 20-F.

Profit for the Period

The total profit for the period for the Company decreased to £8.2 million for Fiscal 2004 from £8.4 million in Fiscal 2003, the principal factor being the reduced retail performance and increased taxation charges, offset by the reduced interest expense.

Fiscal 2003 compared to Fiscal 2002

Sales

The Company’s and TM Retail’s sales decreased 4.4 per cent to £635.5 million for Fiscal 2003 from £664.5 million in Fiscal 2002, principally due to the impact of the 53^rd week in Fiscal 2002 and the reduction of sales arising from the migration from vouchers to electronic phone top-up transactions, offset by improved same store revenues.

The total number of stores decreased by 17 to 1,196 at the end of the financial period. The weighted average number of stores decreased by 1.6 per cent during the year. “Same store” revenues excluding lottery revenues were approximately 1.7 per cent higher for the year as a whole with declines in “same store” tobacco, confectionery and greetings cards product revenues offset by improvements in news, convenience and other products. “Same store” revenues improved in the second half.

Cost of Sales

The Company’s and TM Retail’s cost of sales decreased 6.0 per cent to £473.0 million for Fiscal 2003 from £503.0 million in Fiscal 2002, primarily due to the reduction in sales.

Selling, Distribution and Administration Costs

The Company’s total selling, distribution and administration costs decreased to £143.9 million for Fiscal 2003 from £144.0 million in Fiscal 2002, principally due to restructuring costs incurred in Fiscal 2002 offset by increases in TM Retail.

TM Retail’s selling, distribution and administration costs increased 0.4 per cent to £140.5 million for Fiscal 2003 from £139.9 million in Fiscal 2002, principally due to increases in store operating costs in excess of decreases due to the extra week in Fiscal 2002.

Central administration costs increased by 2.1 per cent in Fiscal 2003 to £3.4 million from £3.3 million in Fiscal 2002.

Profit before Interest, Taxation and Sale of Businesses

The Company’s total profit before interest and taxation increased 5.3 per cent to £22.5 million in Fiscal 2003 from £21.4 million in Fiscal 2002.

TM Retail’s profit before interest and taxation increased 1.7 per cent to £25.9 million for Fiscal 2003 from £25.5 million in Fiscal 2002 due to the reduction in cost of sales in excess of the reduction in sales, partially offset by increased store operating costs.

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Net Interest Expense

Net interest expense decreased 41.1 per cent to £12.1 million for Fiscal 2003 from £20.5 million in Fiscal 2002. This was due to a combination of lower interest payable on a lower level of debt and a favourable movement on exchange rates, which gave rise to an exchange gain of £4.6 million, net of losses on currency hedges.

Taxation

The taxation charge of £2.0 million in Fiscal 2003 comprises UK current and deferred income taxes, including certain adjustments in respect of prior years. A reconciliation of the standard UK tax charge of 30 per cent to the actual tax is set out in Note 10 of Notes to the Financial Statements included elsewhere in this Form 20-F.

Profit for the period

The Company’s total profit for the period increased to £8.4 million for Fiscal 2003 from £0.7 million in Fiscal 2002, the principal factor being the reduced net interest expense.

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Liquidity and Capital Resources

Cash Flows

Cash flow from operating activities fell from £25.0 million in Fiscal 2003 to £17.0 million in Fiscal 2004. This reflected the decision not to participate in certain supplier extended payment arrangements at the year end, as had been the practice in previous years.

A total of £1.0 million was expended during the year on replacing currency hedges.

A summary of the Company’s cash flow is as follows:

	(£ millions)
	Fiscal 2002		Fiscal 2003		Fiscal 2004
Net cash inflow from operating activities	19.6		25.0		17.0
Returns on investments and servicing of finance	(22.8	)	(16.2	)	(14.7	)
Taxation (paid)/refunded	(1.7	)	0.3		(2.5	)
Net capital expenditure and financial investment	(3.0	)	(1.9	)	(1.8	)
Acquisitions and disposals	(0.1	)	(1.4	)	(7.4	)
Decrease/(increase) in short-term deposits	83.4		(1.3	)	8.0
Financing including equity dividends paid	(74.2	)	(1.5	)	(1.0	)
Increase/(decrease) in cash	1.2		3.0		(2.4	)

Capital Expenditures

Routine capital expenditure is funded through the Company’s operating cash flow. See also “Item 4. Information on the Company—Capital Expenditure”.

Liquidity

The principal sources of funds for the Company in the future are anticipated to be cash flows from operating activities and any borrowings under future working capital facilities. The Company believes that these funds will provide the Company with sufficient liquidity and capital resources for the Company to meet its current and future financial obligations, including the payment of interest on the Notes and payment obligations arising under the Company’s other indebtedness, as well as to provide funds for the Company’s working capital, capital expenditure and other needs. However, no assurance can be given that this will be the case. The Company’s future operating performance and its ability to secure new facilities, or service or refinance the Notes and to repay, extend or refinance the bank facilities or continue to secure adequate levels of trade credit from suppliers or distributors will be subject to future economic conditions, financial, business and other factors, many of which are beyond the Company’s control.

The Company continues to review its exposure to currency translation fluctuations. During Fiscal 2004, the Company spent £1.0 million on further options. As of November 27, 2004, the Company had an option to purchase $145 million (and sell pounds sterling) at $1.6930 = £1.00. A further option on $145 million was purchased during January 2005 at $1.7380 = £1.00, which is exercisable on July 4, 2005.

Although the Company may seek to enter into a further set of hedging arrangements, there can be no assurance that it will be able to do so on commercially attractive terms. There are currently no hedging arrangements in place in respect of future interest payments.

As of November 27, 2004, the outstanding aggregate principal amount of the Senior Notes and Senior Subordinated Notes was $145.3 million and £53.3 million respectively.

Borrowings

Refer to Note 19 of Notes to the Financial Statements included elsewhere in this Form 20-F.

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Seasonality

The Company’s business exhibits seasonality in the results of its operations. In general, sales volumes increase significantly in the Christmas and Easter holiday seasons, primarily in confectionery and stationery products. The summer season is an important trading period for TM Retail and can be significantly influenced by the weather. Working capital requirements fluctuate significantly during the year and generally reach their highest levels as a result of these seasons and periodic tobacco pre-purchases. The Company’s quarterly results of operations have fluctuated depending on the timing and amount of tobacco pre-purchases and profits, although this effect is likely to be less marked in the future.

Outlook

The Company is aware of no recent trends, either in selling prices or the cost of goods sold, which are likely to have a material effect on the Company’s profitability and/or liquidity.

The UK Government has recently announced an increase in the national minimum wage for adults from £4.85 per hour to £5.05 per hour effective from October 1, 2005. A further increase will take place on October 1, 2006 to an anticipated £5.35 per hour. The young workers rate will increase from £4.10 per hour to £4.25 per hour from October 1, 2005, with a further anticipated increase at October 1, 2006 to £4.45. The new rate of £3.00 per hour for 16 and 17 year olds introduced on October 1, 2004, is not expected to increase in 2005, but will be subject to inflationary increases in subsequent years. The Company expects that labour costs will rise significantly as a direct result of these increases, and also as other wage costs rise to maintain differentials. There can be no assurances that these cost increases will be able to be offset by improvements in trading generally or by specific cost savings. The result may thus have a material impact on the earnings of the Company.

Changes being implemented by the Post Office to the manner in which it dispenses pensions and benefits could lead to reduced customer levels in the Company’s stores where Post Offices are located. Further, the Company expects that remuneration based on transaction levels paid to the Company by the Post Office may fall as a result of fewer transactions being processed in these Post Offices. Both of these may have a material impact on the earnings of the Company.

Contractual Obligations

Contractual cash obligations, excluding trade and other creditors, are as follows:

	Payments due by period (£ millions)
Contractual Obligations	Total	Less than 1 year	1 – 3 years	4 – 5 years	After 5 years
Total debt	130.5	—	—	130.5	—
Operating leases	191.8	25.0	43.5	34.9	88.4
Capital commitments	0.2	0.2	—	—	—
Total contractual cash obligations	322.5	25.2	43.5	165.4	88.4

The operating lease liabilities are not shown on the Company’s balance sheet, the relevant annual payments being expensed in the Company’s profit and loss account. No allowance has been made for rents receivable on sub-let properties, so the amounts shown represent the full liability as at the end of Fiscal 2004. The Company has no other material contingent liabilities.

The Company’s financial liabilities are shown in more detail in Notes 18 to 22 of Notes to the Financial Statements included elsewhere in this Form 20-F.

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Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements as defined by the SEC in Item 5E of Form 20-F that have, or are reasonably likely to have, a current or future effect on the Company’s financial condition, change in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

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Item 6. Directors, Senior Management and Employees

The following table shows information regarding the Directors and Senior Executive Officers of the Company:

Name	Age	Title
James Lancaster	57	Chairman, Chief Executive Officer and Director
Jonathan Miller	41	Chief Financial Officer
David Symondson	49	Director (Non-executive)
Mark Dunfoy	39	Director (Non-executive)
Stephen Wilkinson	49	Managing Director
Steve Davies	51	Human Resources Director

Russell Cox (resigned October 15, 2004) and David Saunders (resigned December 31, 2004) also served as directors during Fiscal 2004.

Kevin Hart, Paul Baxter and Nigel Waters left the company during Fiscal 2004, having served as Senior Executive Officers.

Directors

James Lancaster FCA is Chairman and Chief Executive Officer of the Company. Mr Lancaster established Mayfair in 1973 as a division of Gallaher. In 1984 he was appointed Chief Executive of TM Group Limited. At this time Gallaher combined cigarette and drinks vending with the acquisition by Gallaher of Vendepac. He was appointed Chairman and Chief Executive of the Gallaher Retail Division in 1993 and Chief Executive of TM Group Limited upon completion of the MBO in 1995. He is a director of the following non-group companies – Accantia Limited, Auto-Sleepers Limited and Upper Childown Limited.

Jonathan Miller ACA is Chief Financial Officer of the Company and was appointed to this position in November 2004. He had previously served as finance director of TM Retail (since 1999), finance director of Mayfair, which he joined in 1991, and as financial controller of the Company.

David Symondson has been a non-executive Director of the Company since 1995 and is a nominee of one of the principal shareholders. He is a director of Electra Administration Limited, Electra Partners Europe Limited, Printcrew Limited and Venetia Limited and is a non-executive director of Quantil Farms Limited, Quantil Limited, Capital Safety Group Limited and Allflex Holdings Inc.

Mark Dunfoy has been a non-executive Director of the Company since 2000 and is a nominee of one of the principal shareholders. He is a director of Montagu Private Equity Limited, a non-executive director of Clinphone Group Limited and Xtrac Transmissions Limited and a member of the advisory board of TMD Friction Holding GmbH.

Stephen Wilkinson is managing director of the Company and was appointed to this position in November 2004. He was previously appointed managing director (news and variety) of TM Retail in 2002, prior to which he was retail director of TM Retail and until 1997, operations director of Mayfair, where he had worked for nine years.

Senior Executive Officers

Steve Davies is director of human resources and joined the Company in 1990.

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Compensation

The aggregate compensation paid to the above Directors and Senior Executive Officers of the Company, including pension amounts set aside by the Company of £215,000 was £1,403,000 for the year ended November 27, 2004. Profit related bonuses are payable only on the achievement of pre-determined Company performance targets. There is no entitlement to deferred or contingent compensation, or to share options.

Board Practices

The Executive Directors of the Company have entered into service agreements or employment contracts, whereby the employment of the relevant Executive Directors is terminable by the Company after the giving of twelve months’ notice. Mr Lancaster is required to give twelve months’ notice to terminate his service agreement and Messrs Miller and Wilkinson are required to give six months’ notice to terminate their employment contracts. There is otherwise no automatic expiration of term of office nor are there any special contracted benefits upon termination of employment. In addition, the Company maintains a “Key Man” life insurance policy in the amount of £500,000 for Mr Lancaster.

Remuneration Committee

The remuneration committee is a function of Thistledove Limited and comprises James Lancaster and the non-executive directors. It is responsible for making recommendations to the board on the Company’s framework of executive remuneration and its cost. The committee determines the contract terms, remuneration and other benefits for each of the Executive Directors, including performance related bonus schemes, pension rights and compensation payments. As nominees of principal shareholders, the non-executive directors receive no compensation directly from the Company. The board itself determines the remuneration of the senior executive officers.

Audit Committee

The audit committee is also a function of Thistledove Limited. It comprises the non-executive directors of the Company’s parent and meets not less than once annually. The committee provides a forum for reporting by the Company’s external auditors. Meetings are also attended, by invitation, by the Chief Executive Officer and the Chief Financial Officer.

The audit committee is responsible for considering a wide range of matters and monitoring the controls which are in force to ensure the integrity of the information published. The audit committee advises the board on the appointment of external auditors and on their remuneration both for audit and non-audit work, and discusses the nature, scope and results of the audit with external auditors. The audit committee keeps under review the cost effectiveness and the independence and objectivity of the external auditors.

Employees

The average numbers of company employees excluding executive directors of the Company during each of the last three years were as follows:

	Fiscal 2002	Fiscal 2003	Fiscal 2004
	(number)
Continuing operations
Retailing	10,530	10,395	10,562
Central	6	6	6
	10,536	10,401	10,568

The Company does not employ a significant number of temporary employees.

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There is no recognised trade union representation. However, information on matters of concern to employees is given through information bulletins, meetings and reports. The same information, reinforced by profit sharing and bonus schemes, is used to help employees achieve a common awareness of the financial and economic factors affecting the performance of the Company.

Share Ownership of Directors and Senior Executive Officers

Ownership of the parent company’s ‘A’ ordinary shares by the Directors and Senior Executive Officers is as follows (see also Item 7 “Major Shareholders and Related Party Transactions”):

Name	No of “A” Shares	Percentage of “A” Shares
James Lancaster	47,526	26.6
Jonathan Miller	2,780	1.6
Stephen Wilkinson	2,780	1.6
Steve Davies	*	*

* Denotes shareholding of less than 1 per cent.

In addition James Lancaster owns 1,104 ‘C’ ordinary shares, which represent less than 1% of the total ‘C’ ordinary shares.

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Item 7. Major Shareholders and Related Party Transactions

Major Shareholders

TM Group Holdings PLC is a wholly-owned subsidiary of Thistledove Limited (“Thistledove”). The principal shareholders of the ordinary share capital of Thistledove Limited are as follows:

Name	Number of “A” Ordinary Shares	Number of “B” Ordinary Shares	Number of “C” Ordinary Shares	% of Total
Montagu Private Equity Limited and Discretionary clients of HSBC Private Equity Europe Limited(1)	—	145,914	71,793	32.9
Electra Fleming Limited and funds under its management(2)	—	145,914	71,793	32.9
Funds managed by Legal & General Ventures Limited	—	29,475	14,502	6.6
James Lancaster	47,526	—	1,104	7.3
Russell Cox	23,826	—	551	3.7
Philip Mitchell	23,826	—	551	3.7
David Keen	23,826	—	551	3.7
David Curzon	9,927	—	368	1.6
Nigel Waters	9,927	—	—	1.5
Employee Benefit Trust	19,656	—	552	3.1
Others	20,183	—	—	3.0
				100.0

⁽¹⁾ Montagu Private Equity Limited (formerly HSBC Private Equity Limited) owns approximately 13.01 per cent of the ordinary share capital of Thistledove Limited. No discretionary client of HSBC Private Equity Europe Limited holds more than 9.0 per cent of Thistledove Limited’s ordinary share capital.

⁽²⁾ Kingsway Nominees Ltd., Account DESEFPEP own approximately 24.81 per cent of the ordinary share capital of Thistledove Limited. No fund managed by Electra Fleming Limited holds more than 6.0 per cent of Thistledove Limited’s share capital.

Management and employees hold “A” and “C” ordinary shares. Certain institutional investors (the “Institutional Investors”) hold “B” and “C” ordinary shares. The “A”, “B” and “C” ordinary shares rank pari passu in all respects except that the “C” ordinary shares have the additional right to a fixed cumulative preferential dividend at the annual rate of 7 per cent of the nominal amount of and any premium paid on each “C” ordinary share. The articles of association of Thistledove contain restrictions on the transfer of ordinary shares. As long as Electra Fleming Limited manages funds holding 10 per cent or more of the “B” ordinary shares, it shall be entitled to appoint a director of Thistledove (“a “B” Director”). As long as Montagu Private Equity Limited and its discretionary clients hold 10 per cent or more of the “B” ordinary shares, it shall also be entitled to appoint a “B” Director. If either of such shareholdings is not held, the relevant appointment right vests in the holders of 75 per cent or more of the “B” and “C” ordinary shares, provided that the “B” and “C” ordinary shares represent at the time at least 10 per cent of the total issued share capital of Thistledove. The Electra Fleming funds and one of Montagu Private Equity Limited’s discretionary clients may each appoint an additional director in certain circumstances.

A shareholder’s agreement between Thistledove and its shareholders contains provisions relating to the governance of Thistledove. The agreement provides that certain matters require the prior consent of the holders of at least 75 per cent of the “B” and “C” ordinary shares. These include variations to the authorised or issued share capital, alterations to the articles of association and the appointment of directors (other than those directors appointed by the Institutional Investors). Certain matters also require the prior consent of the “B” Directors. These include the appointment of employees earning a basic salary of more than £100,000 per year, and the appointment of directors of subsidiaries. Certain matters also require the prior consent of the holders of at least 50 per cent of the “A” ordinary shares.

Thistledove has issued warrants with anti-dilution rights to subscribe for newly issued “B” ordinary shares representing 10 per cent of the issued ordinary share capital of Thistledove at an exercise price equal to the nominal value of such “B” ordinary shares.

There were no significant changes in the percentage ownership held by any major shareholders during the past three years.

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Related Party Transactions

During Fiscal 2002, the holding company, Thistledove Limited, redeemed the whole of the Unsecured 7% Loan Notes 2008. J Lancaster and A R Cox, directors of TM Group Holdings Plc received £148,896 and £74,449 respectively in respect of this transaction. There were no related party transactions during Fiscal 2003 or Fiscal 2004.

Item 8. Financial Information

See “Item 18. Financial Statements” for details of the financial statements filed as part of this Annual Report.

Legal Proceedings

The Company is not currently party to, nor the subject of, any legal proceedings that may have a material effect on its financial position or profitability.

Dividend Policy

As a wholly owned subsidiary of Thistledove Limited, the Company is required to remit dividends from time to time to enable Thistledove to service any debt and to pay dividends to its C shareholders. Its debt at November 24, 2001 which was repaid during Fiscal 2002 arose through its participation in the acquisition of Tog Limited. Certain restrictions apply to the payment of dividends. These are fully described in the registration statement of TM Group Holdings PLC submitted on Form F-4 on April 30, 1999 (File No. 333-9268).

Significant Changes

No significant change has occurred since November 27, 2004, the date of the financial statements.

Item 9. The Offer and Listing

Nature of Trading Market

On June 19, 1998, the Company made its initial submission of the Registration Statement with the Securities and Exchange Commission with respect to the exchange for the new Senior Notes of all old Senior Notes and for new Senior Subordinated Notes of all old Senior Subordinated Notes. The Registration Statement was declared effective on May 4, 1999. The new Senior Notes and the new Senior Subordinated Notes were issued on June 4, 1999. Although a substantial majority of the old Senior Notes and old Senior Subordinated Notes were exchanged for new Senior Notes and new Senior Subordinated Notes, respectively, some old Senior Notes and old Senior Subordinated Notes remain outstanding. The aggregate principal amount of the new Senior Notes and old Senior Notes is $145.3 million; the aggregate principal amount of the new Senior Subordinated Notes and old Senior Subordinated Notes is £53.3 million.

The Notes are listed on the Luxembourg Stock Exchange, and have been accepted for clearance, directly or indirectly, through DTC, Euroclear and Clearstream, Luxembourg. Management does not have any reliable information as to the position of the Notes held in the US or the number of record holders of the Notes in the US.

Item 10. Additional Information

There are no material contacts, other than those entered into in the ordinary course of business, to which the Company has been a party from March 2003 to the present.

There are no foreign exchange controls currently in force that restrict the import or export of capital or that affect the remittance of interest or other payments to holders of Notes who are non-residents of the United Kingdom.

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There are no limitations relating to non-residents of the United Kingdom on the right to be a holder of, or to vote in respect of, the Notes under English law currently in force or in the Company’s Memorandum and Articles of Association.

Taxation

The summaries, set out below, describe certain material US federal income tax consequences of the ownership and disposition of the Notes by a “United States Holder”, as defined below, and certain material UK tax consequences of the ownership and disposition of the Notes. The statements regarding US and UK tax laws and practices set forth below, including the statements regarding the US/UK double taxation convention relating to income and capital gains (the “Tax Treaty”), assume that the Notes were issued, and transfers thereof and payments thereon were made, in accordance with the applicable Indenture and the applicable Note Depositary Agreement.

For purposes of the Tax Treaty and the US Internal Revenue Code of 1986, as amended to the date hereof (the “Code”), United States Holders of Book-Entry Interests will be treated as owners of the Notes underlying such Book-Entry Interests and, except as noted below, the tax consequences of owning Book-Entry Interests will be the same as those applicable to ownership of Notes.

As used herein, the term “United States Holder” means a beneficial owner that is (i) a citizen or resident of the United States for US federal income tax purposes, (ii) a corporation, or other entity treated as an alien corporation (for US federal income tax purposes), created or organized in or under the laws of the United States or of any political subdivision thereof, (iii) an estate the income of which is subject to US federal income tax without regard to its source or (iv) a trust if a court within the US is able to exercise primary supervision over the administration of the trust and one or more US persons (as defined in the Code) have the authority to control all substantial decisions of the trust, or a trust that has made a valid election under US Treasury regulations to be treated as a domestic trust. If a partnership holds Notes, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. If a United States Holder is a partner in a partnership holding Notes, it should consult its own tax advisor.

UNITED STATES HOLDERS OF NOTES ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE US, UK OR OTHER TAX CONSEQUENCES OF THE OWNERSHIP AND DISPOSITION OF NOTES, INCLUDING THE EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.

United States Taxation

The following summary of the principal US federal income tax consequences of the ownership and disposition of Notes deals only with Notes held as capital assets by United States Holders. This summary does not address all of the US federal income tax consequences hat may be relevant to a particular United States Holder in light of such United States Holder’s particular circumstances or to United States Holders subject to special rules such as but not limited to dealers in securities or currencies, traders in securities that elect mark-to-market tax accounting, banks, tax-exempt organisations, regulated investment companies, life insurance companies, persons subject to the alternative minimum tax, certain US expatriates, persons that hold Notes that are a hedge or that are hedged against currency or interest rate risks or that are part of a straddle or conversion transaction, persons that are not “United States Holders”, as defined above, or persons whose functional currency is not the US dollar. Investors who purchase the Notes at a price other than their respective offering price should consult their tax advisor as to the possible applicability to them of the amortisable bond premium or market discount rules. The summary is based on the Code, its legislative history, existing and proposed US Treasury regulations promulgated thereunder, published rulings and court decisions, all as currently in effect and all subject to change at any time, perhaps with retroactive effect.

United States Holders of Notes should consult their own tax advisors concerning the consequences, in their particular circumstances, under the Code and the laws of any other taxing jurisdiction, of the ownership and disposition of the Notes.

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Payments of Interest

Interest on Notes (including any UK tax withheld therefrom) will be taxable to a United States Holder as ordinary income at the time it is received or accrued, depending on the holder’s method of accounting for tax purposes.

A cash basis United States Holder that receives interest in sterling will, upon a payment of interest, recognize the US dollar value of the interest payment, based on the exchange rate in effect on the date of receipt, regardless of whether the payment is in fact converted into US dollars.

An accrual basis United States Holder who receives interest in sterling may determine the amount of income recognized in accordance with either of two methods. Under the first method, the amount of income accrued will be based on the average exchange rate in effect during the interest accrual period (or, with respect to an accrual period that spans two taxable years, the part of the period within the taxable year).

Under the second method, the United States Holder may elect to determine the amount of income accrued on the basis of the exchange rate in effect on the last day of the accrual period or, in the case of an accrual period that spans two taxable years, the exchange rate in effect on the last day of the part of the period within the taxable year. Additionally, if a payment of interest is actually received within five business days of the last day of the accrual period or taxable year, an electing accrual basis Untied States Holder may instead translate such accrued interest into US dollars at the exchange rate in effect on the day of actual receipt. Any such election will apply to all debt instruments held by the United States Holder at the beginning of the first taxable year to which the election applies or thereafter acquired by the United States Holder, and will be irrevocable without the consent of the Internal Revenue Service (the “IRS”).

An accrual basis United States Holder recognises, as ordinary gain or loss, foreign currency exchange gain or loss with respect to accrued interest income on the date such income is actually received. The amount of gain or loss recognised equals the difference between the US dollar value of the foreign currency payment in respect of such accrual period determined based on the exchange rate on the date such payment is received and the US dollar value of interest income that has accrued during such accrual period as determined above.

For foreign tax credit limitation purposes, interest on the Notes will constitute foreign source income and will generally constitute “passive income” or, in the case of certain United States Holders, “financial services income”. United States Holders of Notes should consult their own tax advisors concerning foreign tax credit limitations.

Sale and Retirement of the Notes

A United States Holder will generally recognise gain or loss on the sale or retirement of a Note equal to the difference between the amount realised on the sale or retirement (other than amounts attributable to accrued interest, which will be taxable as such) and the tax basis of the Note (generally, the US dollar value of the purchase price for the Notes on the date of purchase). The amount realised on a sale or retirement for an amount in foreign currency will be the US dollar value of such amount on (i) the date payment is received in the case of a cash basis United States Holder, (ii) the date of disposition in the case of an accrual basis United States Holder or (iii) in the case of Notes traded on an established securities market, as defined in the applicable US Treasury regulations, sold by a cash basis United States Holder (or an accrual basis United States Holder that so elects), on the settlement date for the sale. Gain or loss recognised on the sale or retirement of a Note will be capital gain or loss except that the portion of such gain or loss attributable to changes in exchange rates will be treated as ordinary income or loss. A United States Holder will recognise US source exchange rate gain or loss (taxable as ordinary income or loss) on the sale or retirement of a Note equal to the difference, if any, between the US dollar values of the United States Holder’s purchase price for the Note (less any amount previously amortized) (i) on the date of sale and retirement or (ii) the date on which the United States Holder acquired the Note. Any such exchange rate gain or loss will be realised only to the extent of total gain or loss realised on the sale or retirement. Long-term capital gain of a non-

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corporate United States Holder is generally subject to a maximum tax rate of 15% (5% for tax payers in the 10% and 15% tax brackets) in respect of property held for more than one year. Limitations apply to the deductibility of capital losses by corporate and non-corporate United States Holders. Gain or loss realised by a United States Holder on the sale or a retirement of a Note generally will be US source gain or loss.

Amortizable Bond Premium

If a United States Holder purchased a Note for an amount greater than the principal amount of the Note, such United States Holder will be considered to have purchased such Note with “amortizable bond premium” equal in amount to such excess, as calculated in Sterling. The purchase amount will not include any amount paid with respect to accrued but unpaid interest on the Note at the time of acquisition. Generally, a United States Holder may elect to amortize such premium as an offset to interest income, using a constant yield method, over the remaining term of the Note. On each date the United States Holder offset interest income with amortizable bond premium, a United States Holder may recognise US source exchange gain or loss (taxable as ordinary income or loss) measured by the different between the spot rate in effect on that date and on the date the United States Holder acquired the Note multiplied by the amount of interest offset. A United States Holder that elects to amortize bond premium must reduce its tax basis in the Note by the amount of the premium used to offset interest income. An election to amortize bond premium applies to all taxable debt obligations held during or after the taxable year for which the election is made and may only be revoked with the consent of the IRS. A United States Holder that does not elect to amortize such premium as an offset to interest income will recognise a market loss upon the maturity of the Note.

Market Discount

A Note generally will be treated as purchased at a market discount if the Note’s principal amount exceeds the amount for which the United States Holder purchased the Note by at least 0.25 per cent of the Note’s principal amount multiplied by the number of complete years from the date acquired by the United States Holder to the Note’s maturity date. Any gain recognised on the maturity or disposition of a Note purchased at market discount will be treated as ordinary income to the extent that the gain does not exceed the accrued market discount on the Note. Alternatively, a United States Holder that purchases a Note with market discount may elect to include market discount in income over the life of the Note. This election will apply to all debt instruments acquired by the United States Holder on or after the first day of the first taxable year for which the election is made. This election may not be revoked without the consent of the IRS. A United States Holder that does not elect to include market discount in income currently generally will be required to defer deductions for interest on borrowing incurred to purchase or carry a Note purchased with market discount that is in excess of the interest on the Note includible in the United States Holder’s income, to the extent that the excess interest expense does not exceed the portion of the market discount allocable to the days on which the United States Holder held the Note.

Under current law, market discount will accrue on a straight-line basis unless the United States Holder elects to accrue the market discount on a constant yield method. This election applies only to the Note to which it is made and is irrevocable.

Market discount that is accrued by a United States Holder will be accrued in Sterling. If a United States Holder elects to include market discount in income currently, the accrued market discount will be translated into US dollars at the average exchange rate for the accrual period (or portion thereof within the United States Holder’s taxable year). Upon receipt of an amount attributable to accrued market discount, the United States Holder may recognise US source exchange gain or loss (taxable as ordinary income or loss) determined in the same manner as for accrued interest. A United States Holder that does not elect to include market discount in income currently will recognise, upon the disposition or maturity of a Note, the US dollar value of the amount accrued, calculated at the spot rate on that date, and no part of this accrued market discount will be treated as exchange gain or loss.

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Exchange of Sterling

A United States Holder will have a tax basis in sterling received as interest on or upon the sale or retirement of a Note equal to the US dollar value of such sterling, determined at the time the interest is received or at the time of the sale or retirement. Any gain or loss realized by a United States Holder on a sale or disposition of sterling generally will be treated as US source ordinary income or loss.

US Treasury regulations intended to address so-called tax shelters and other potentially tax-motivated transactions require reporting of foreign currency transactions. United States Holders of Notes should consult their own tax advisors concerning any possible disclosure obligation with respect to their investment in the Notes and should be aware that the Company and other participants in the transaction intend to comply with the disclosure and list- maintenance requirements under US Treasury regulations as they determine apply to them with respect to such transaction.

Backup Withholding and Information Reporting

In general, information reporting requirements will apply to payments of principal and interest on a Note within the United States (including payments made by wire transfer from outside the United States to an account maintained by the holder with a fiscal or paying agent in the United States) to non-corporate holders, and “backup withholding” will apply to such payments if the holder fails to provide an accurate taxpayer identification number or is notified by the IRS that it has failed to report all interest and dividends required to be shown on its US federal income tax returns. Holders that are not United States Holders are generally exempt from backup withholding and information reporting requirements with respect to payments of principal and interest (assuming the income is otherwise exempt from US federal income tax), provided that they comply with certain certification and identification procedures in order to prove their exemption.

Payment of the proceeds from the sale of a Note to or through the US office of a broker may be subject to information reporting and backup withholding. A Holder that is not a US person will not be subject to information reporting and backup withholding if the holder or beneficial owner certifies as to its non-US status or otherwise establishes an exemption from information reporting and backup withholding.

Payment of interest or the proceeds from the sale of a Note made to or through a foreign office of a broker generally will not be subject to information reporting or backup withholding. If, however, the broker (i) is a US person, (ii) is a controlled foreign corporation for US federal income tax purposes, (iii) is a foreign person 50% or more of whose gross income is effectively connected with a US trade or business for a specified three-year period, or (iv) is a foreign partnership that has 50% or more of its income or capital interests held by US persons or is engaged in the conduct of a trade or business in the United States, information reporting (but generally not backup withholding) may apply to such payments.

UK Taxation

The discussion set out below describes the material UK tax consequences of the acquisition, ownership and disposition of the Notes. The statements regarding UK tax laws and practices set forth below, including the statements regarding the US/UK double taxation convention relating to income and capital gains (the “Tax Treaty”) assume that the Notes were issued, and transfers thereof and payments thereon will be made, in accordance with the applicable Indenture and the applicable Note Depositary Agreement.

Except where noted, this summary of the material UK tax consequences of the ownership of the Notes relates only to the position of persons who are the absolute beneficial owners of their Notes and may not apply to special situations, such as those of dealers in securities. Furthermore, the discussion below is generally based upon the provisions of the UK tax laws and UK Inland Revenue practice as of the date hereof, and such provisions may be repealed, revoked or modified (possibly with retrospective effect) so as to result in UK income tax consequences different from those discussed below.

As used herein, the term “United Kingdom Holder” means an absolute beneficial owner of the Notes that

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owns those Notes as an investment and that is resident or, in the case of an individual, ordinarily resident in the United Kingdom for UK tax purposes, and “Holder” means any absolute beneficial owner of the Notes that owns those Notes as an investment.

Holders who are individuals should note that where any interest on Notes is paid to them (or to any person acting on their behalf) by the Company or by any person in the United Kingdom acting on behalf of the Company (a “paying agent”), or is received by any person in the United Kingdom acting on behalf of the relevant Holder (other than solely by clearing or arranging the clearing of a cheque) (a “collecting agent”), then the Company, the paying agent or the collecting agent (as the case may be) may, in certain cases, be required to supply to the UK Inland Revenue details of the payment and certain details relating to the Holder (including the Holder’s name and address). These provisions will apply whether or not the interest has been paid subject to withholding or deduction for or on account of UK income tax and whether or not the Holder is resident in the United Kingdom for UK taxation purposes. Where the Holder is not so resident, the details provided to the UK Inland Revenue may, in certain cases, be passed by the UK Inland Revenue to the tax authorities of the jurisdiction in which the Holder is resident for taxation purposes.

The provisions referred to above also apply, in certain circumstances, to payments made on redemption of any Notes where the amount payable on redemption is greater than the issue price of the Notes.

EU Savings Directive

On June 3, 2003 the EU Council of Economic and Finance Ministers adopted a new directive regarding the taxation of savings income. The directive is scheduled to be applied by Member States from July 1, 2005, provided that certain non-EU countries adopt similar measures from the same date. Under the directive, each Member State will be required to provide to the tax authorities of another Member State details of payments of interest or other similar income paid by a person within its jurisdiction to, or collected by such a person for an individual resident in that other Member State. However, Austria, Belgium and Luxembourg may instead apply a withholding system for a transitional period in relation to such payments, deducting tax at rates rising over time to 35 per cent. The transitional period is to commence on the date from which the directive is applied by Member States and will terminate at the end of the first full fiscal year following agreement by certain non-EU countries to the exchange of information relating to such payments.

Interest on the Global Notes

The Notes will constitute “quoted Eurobonds” provided that they are “listed on a recognised stock exchange”. Under a UK Inland Revenue interpretation of November 28, 2001, securities which are listed on a stock exchange in a country which is a member state of the European Union or which is part of the European Economic Area will be “listed on a recognised stock exchange” if they are listed by a competent authority in that country and are admitted to trading on a recognised stock exchange in that country; securities which are to be listed on a stock exchange in any other country will satisfy this requirement if they are admitted to trading on a recognised stock exchange in that country. The Notes are listed on the Luxembourg Stock Exchange which is a recognised stock exchange for the purposes of the UK Inland Revenue’s interpretation, and therefore the Notes are “quoted Eurobonds”. On the basis that the Notes are quoted Eurobonds, payments of accrued interest on the Notes, to the extent such payments are payments of interest for UK income tax purposes, may be made without withholding or deduction for or on account of UK income tax.

Interest on the Notes constitutes UK-source income for UK tax purposes and, as such, may be subject to income tax by direct assessment even where paid without withholding. However, interest with a UK source received without deduction or withholding on account of UK tax will not be chargeable to UK tax in the hands of a Holder who is not resident for tax purposes in the United Kingdom unless that Holder carries on a trade, profession or vocation in the United Kingdom through a UK branch or agency in connection with which the interest is received or to which the Notes are attributable. There are exemptions for interest received by certain categories of agent (such as some brokers and investment managers).

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Ownership and Disposal (including Redemption) by UK Corporation Tax Payers

In general Noteholders which are within the charge to UK corporation tax will be charged to tax on all returns on and fluctuations in value of the Notes (whether attributable to currency fluctuations or otherwise) broadly in accordance with their statutory accounting treatment. Such Noteholders will generally be charged to tax in each accounting period by reference to interest accrued in that period and any profit or loss which, in accordance with such Noteholders’ authorised accounting method, is applicable to that period.

Ownership and Disposal (including Redemption) by Other UK Tax Payers

Taxation of Chargeable Gains

The Senior Subordinated Notes constitute “qualifying corporate bonds” within the meaning of section 117 of the Taxation of Chargeable Gains Act 1992. Accordingly, a disposal by a Holder of a holding of Senior Subordinated Notes will not give rise to a chargeable gain or an allowable loss for the purposes of the UK taxation of chargeable gains.

The Senior Notes do not constitute “qualifying corporate bonds” within the meaning of section 117 of the Taxation of Chargeable Gains Act 1992. Therefore a disposal by a Holder of a holding of Senior Notes may give rise to a chargeable gain or allowable loss for the purpose of the UK taxation of chargeable gains.

Accrued Income Scheme

On a disposal of the Notes by a Holder, any interest which has accrued since the last interest payment date (or where no interest payment date has occurred, the issue of the Notes) may be chargeable to tax as income if that Holder is resident or ordinarily resident in the United Kingdom or carries on a trade in the United Kingdom through a branch or agency to which the Notes are attributable.

Stamp Duty and Stamp Duty Reserve Tax

No UK stamp duty or UK stamp duty reserve tax is payable on the issue or the transfer by delivery of the Notes.

Memorandum and Articles of Association

The following description summarises certain provisions of the memorandum and articles of association of TM Group Holdings PLC (the “Company”) and relevant applicable English law. It is a summary only and is qualified in its entirety by reference to the Companies Act 1985, as amended (the “Act”) and by the memorandum of TM Group Holdings PLC (the “Memorandum”) and articles of association adopted by special resolution of the Company on 22 January 1999 (the “Articles”) which have been filed as an exhibit to the registration statement of TM Group Holdings PLC submitted on Form F-4 on April 30, 1999 (File No 333-09268) (the “Registration Statement”). The Articles of the Company incorporate Table A from the Companies (Tables A to F) Regulations 1985 (each regulation of which will be referred to as the “Regulation(s)”), modified and/or disapplied in each relevant case.

Company Details

TM Group Holdings PLC, (the “Company”) is a public limited company incorporated in England under registered number 03462566.

Objects and purposes

The Company is established with a wide objects clause which entitles it to carry on business as a general commercial company including to act as a general investment company. The articles authorise the company to do all things that are in the opinion of the directors incidental or conducive to the carrying on of all or any of the Company’s objects, and to exercise all or any of its powers.

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Directors’ Interests

Subject to the provisions of the Act, and provided that he has disclosed to the directors the nature and extent of any material interest of his, under Regulation 85 a director notwithstanding his office:

(a) may be a party to, or otherwise interested in, any transaction or arrangement with the company or in which the company or in which the company is otherwise interested;

(b) may be a director or other officer of, or employed by, or a party to any transaction or arrangement with, or otherwise interested in, any body corporate promoted by the company or in which the Company is otherwise interested; and

(c) shall not, by reason of his office, be accountable to the company for any benefit which he derives from any such office or employment or from any such transaction or arrangement or from any interest in any such body corporate and no such transaction or arrangement shall be liable to be avoided on the ground of any such interest or benefit.

Compensation of Directors

The Memorandum and Articles of the Company do not contain any specific provisions other than Regulation 85 as described above.

Borrowing Powers

Under Regulation 70, the directors of the Company may exercise all the powers of the company. As such, in accordance with section 4 of the Memorandum, they may exercise all powers of the Company to borrow money and subject to provisions of the Act, to issue debt securities.

Age Limit Requirements

Under Article 17, no person is incapable of being appointed a director by reasons of his having reached the age of 70 or another age. Special notice is not required in connection with the appointment or the approval of the appointment of such person. No director is required to vacate his office because he has reached the age of 70 or another age and the Articles provide that section 293 of the Act (establishing age limits for directors) does not apply to the Company.

Shareholding for Director Qualification

No shareholding qualification for directors is required.

Shares in the Company

The issued share capital of the Company at the date hereof comprises ordinary shares only. All shares are currently owned by the Company’s immediate and ultimate parent undertaking and controlling party, Thistledove Limited, which is incorporated in England.

Dividends

The rights of shareholders relating to dividends are governed by Regulations 102 to 108. Under Regulation 102, subject to the provisions of the Act, the Company may by ordinary resolution declare dividends but no dividend shall exceed the amount recommended by the directors. The directors may also pay interim dividends. No dividends may be paid out other than out of profits available for distribution. Any dividend which has remained unclaimed for twelve years from the date when it became due for payment shall, if the directors so resolve, be forfeited and cease to remain owing by the company.

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Under Article 23, the directors may deduct from a dividend or other amounts payable to a person in respect of a share any amounts due from him to the Company on account of a call or otherwise in relation to a share.

Voting Rights

Under Regulations 54 to 59 (as amended by the Articles) every member of the Company who (being an individual) is present in person or (being a corporation) is present by a duly authorised representative, not being himself a member entitled to vote, has on a show of hands one vote and on a poll every member has one vote for every share of which he is the holder. Voting at any meeting of the shareholders is by show of hands unless a poll is demanded (in accordance with the provisions of Regulation 46).

Subject to the provisions of the Act, a poll may be demanded:

(a) by the chairman; or

(b) by at least two members having the right to vote at the meeting; or

(c) by a member or members representing not less than one-tenth of the total voting rights of all the members having the right to vote at the meeting; or

(d) by a member or members holding shares conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right;

and a demand by a person as proxy for a member shall be the same as a demand by the member.

Holders of the Company’s ordinary shares do not have cumulative voting rights.

Under Article 14, the directors are not subject to retirement by rotation (i.e. directors do not stand for re-election at staggered intervals).

Under Article 15, the Company may by ordinary resolution appoint a person who is willing to act to be a director either to fill a vacancy or as an additional director. Under Article 16, a person so appointed by the directors is not required to retire from office at the annual general meeting next following his appointment. Pursuant to Article 16, the provisions of Regulation 79 to the effect that a person so appointed by directors must hold office only until the next following general meeting and cannot be taken into account in determining the directors who are to retire by rotation at the meeting, are disapplied. Pursuant to Article 16, the last sentence of Regulation 79 to the effect that if not reappointed at the next following annual general meeting following his appointment, a director must vacate office at the conclusion thereof, is disapplied.

Proceedings at General Meetings

Under the Regulation 40, two persons entitled to vote upon the business to be transacted, each being a member or a proxy for a member or a duly authorised representative of a corporation, shall be a quorum.

No member shall, unless the directors otherwise determine, vote at any general meeting or at any separate meeting of the holders of any class of shares in the company, either in person or by proxy, in respect of any share held by him unless all moneys presently payable by him in respect of that share have been paid (Regulation 57 as modified by Article 7).

On a poll votes may be given either personally or by proxy. A member may appoint more than one proxy to attend on the same occasion. Deposit of an instrument of proxy (which must be in writing in any usual form or in any other form which the directors may approve, and which must be executed by or on behalf of the appointor) does not preclude a member from attending and voting at the meeting or at any adjournment of it (Regulation 59 as modified by Articles 8 to 10).

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Under English law, shareholders of a public company such as the Company are not permitted to pass resolutions by written consent.

Liquidation Rights

In the event of the liquidation of the Company, after payment of all liabilities, the remaining assets would be shared equally by the holders of the ordinary shares. However, under Regulation 117, the liquidator may, with the sanction of an extraordinary resolution of the company and any other sanction required by the Act, divide among the members in specie the whole or any part of the assets of the company and may, for that purpose, value any assets and determine how the division shall be carried out as between the members or different classes of members. The liquidator may, with the like sanction, vest the whole or any part of the assets in trustees upon such trusts for the benefit of the members as he with the like sanction determines, but no member shall be compelled to accept any assets upon which there is a liability.

Under Regulation 34, subject to the provisions of the Act, the company may by special resolution reduce its share capital, any capital redemption reserve and any share premium account in any way. There are no sinking fund provisions in the Articles.

Calls on Shares

Under Regulation 12, subject to the terms of allotment, the directors may make calls upon the members in respect of any moneys unpaid on their shares (whether in respect of nominal value or premium) and each member shall (subject to receiving at least fourteen clear days’ notice specifying when and where payment is to be made) pay to the company as required by the notice the amount called on his shares. A call may be required to be paid by instalments.

Under Regulation 15, if a call remains unpaid after it has become due and payable the person from whom it is due and payable shall pay interest on the amount unpaid from the day it became due and payable until it is paid at the rate fixed by the terms of allotment of the share or in the notice of the call or, if no rate is fixed, at the appropriate rate (as defined by the Act) but the directors may waive payment of the interest wholly or in part.

Under Regulation 18, if a call remains unpaid after it has become due and payable the directors may give to the person from whom it is due not less than fourteen clear days’ notice requiring payment of the amount unpaid together with any interest which may have accrued. If the notice is not complied with any share in respect of which it was given may, before the payment required by the notice has been made, be forfeited by a resolution of the directors and the forfeiture shall include all dividends or other moneys payable in respect of the forfeited shares and not paid before the forfeiture.

Shareholders owning a substantial number of shares

There are no provisions discriminating against any existing or prospective holder of such securities as a result of such shareholder owning a substantial amount of shares.

Pre-emption Rights

Under Section 80 of the Act, directors are, with certain exceptions, unable to allot relevant securities without the authority of the shareholders in a general meeting. Relevant securities, as defined in the Act, include the Company’s ordinary shares or securities convertible into TM Group Holding PLC’s ordinary shares. In addition, Section 89 of the Act imposes further restrictions on the issue of equity securities (as defined in the Act, which include TM Group Holding PLC’s ordinary shares and securities convertible into ordinary shares) which are, or are to be, paid up wholly in cash and not first offered to existing shareholders, except insofar as such statutory pre-emption rights have been disapplied in accordance with Section 95 of the Act.

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Modifications to Rights of Holders

Under section 125 of the Act, the rights attached to a class of shares may be varied whether or not the Company is being wound up, with the consent in writing of the holders of at least three-fourths of the nominal value of the issued ordinary shares or upon the adoption of an extraordinary resolution passed at a meeting of the ordinary holders of the issued ordinary shares validly held in accordance with the articles, but not otherwise.

The rights attached to a class of shares are not, unless otherwise expressly provided in the rights attaching to those shares, deemed to be varied by the creation, allotment or issue of further shares ranking pari passu with or subsequent to them or by the purchase or redemption by the Company of its own shares.

Meetings

Under Regulation 37 as amended by Article 5, the directors may call annual or extraordinary general meetings and, on the requisition of members pursuant to the provisions of the Act, shall forthwith proceed to convene an extraordinary general meeting for a date not later than 28 days after receipt of the requisition. If there are not within the United Kingdom sufficient directors to call a general meeting, any director or any member of the company may call a general meeting.

Under the Act, the Company shall hold a general meeting as its annual general meeting every year and not more than 15 months may elapse between annual general meetings.

Under Regulation 38, an annual general meeting and an extraordinary general meeting called for the passing of a special resolution shall be called by not less than 21 clear days’ notice. All other extraordinary general meetings shall be called by not less than 14 clear days’ notice.

The notice shall specify the time and place of the meeting and the general nature of the business to be transacted and, in the case of an annual general meeting, shall specify the meeting as such.

Subject to the provisions of the articles and to any restrictions imposed on any shares, the notice shall be given to all the members, to all persons entitled to a share in consequence of the death or bankruptcy of a member and to the directors and auditors.

Under Regulation 40, no business may be transacted at a general meeting unless a quorum is present. No business shall be transacted at any meeting unless a quorum is present. Two persons entitled to vote upon the business to be transacted, each being a member or a proxy for a member or a duly authorised representative of a corporation, shall be a quorum.

Under Regulation 41, if such a quorum is not present within half an hour from the time appointed for the meeting, or if during a meeting such a quorum ceases to be present, the meeting shall stand adjourned to the same day in the next week at the same time and place or such time and place as the directors may determine.

There are no other conditions of admission to the meeting.

Limitations on Rights

There are no limitations on the rights to own securities, including the rights of non-resident or foreign shareholders to hold or exercise voting rights.

Change of Control

Under Article 4, the directors may, at their discretion, refuse to register the transfer of shares. Apart from this provision, there are no provisions of the Articles, charter or bylaws that would have an effect of delaying, deferring or preventing a change in control of the Company.

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Disclosure of Share Ownership Interests

There are no provisions of the Articles, charter or bylaws governing the ownership threshold above which shareholder ownership must be disclosed.

Material Contracts

Provided as an exhibit at Item 19 are copies of the following contracts:

Agreement for the sale and purchase of Dillons Stores Limited from a subsidiary of Tesco plc.

On August 21, 2004, a subsidiary of the Company paid to a subsidiary of Tesco plc the sum of £1,925,180, net of cash acquired with the business, for the entire share capital of Dillons Stores Limited. A further sum of £4,569,000 was paid during October 2004 for the stock acquired as part of this transaction. Further consideration of £1,952,950 has since been paid 6 months after the completion date, with a further £1,952,950 and £2,441,150 payable respectively 12 and 18 months after the completion date. Tesco plc has given certain warranties and indemnities to the Company in relation to the company purchased.

Agreement with HBOS for the renewal of the £20 million working capital facility

The Halifax Bank of Scotland (HBOS) facility is renewable on an annual basis. The Company has recently chosen to extend this facility for shorter periods in order to maximise its flexibility. The most recent renewal, signed on December 21, 2004, is for a period of 6 months.

Documents on Display

It is possible to read and copy documents referred to in this annual report on Form 20-F that have been filed with the SEC at the SEC’s public reference room located at 450 Fifth Street, NW, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms and their copy charges.

Item 11. Quantitative and Qualitative Disclosures about Market Risk

Refer to Note 20 of Notes to the Financial Statements.

Item 12. Description of Securities other than Equity Securities

Not applicable

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PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies

None

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

None

Item 15. Controls and Procedures

As of the end of the period covered by this Annual Report, management, including the Company’s Chief Executive Officer and Finance Director, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based upon, and as of the date of that evaluation, the Chief Executive Officer and Finance Director concluded that the disclosure controls and procedures were effective, in all material respects, to ensure that information required to be disclosed in the reports the Company files and submits under the Exchange Act is recorded, processed, summarised and reported as and when required, subject to the following:

In January 2005, the Company’s independent registered public accounting firm, Ernst & Young LLP, reported to TM Group Holdings PLC’s audit committee and management that Ernst & Young LLP considered that there was insufficient knowledge and experience of US GAAP in the Company’s corporate accounting department and that Ernst & Young considered this matter to be a reportable condition (as defined under standards adopted by the Public Company Accounting Oversight Board) representing a material weakness in the Company’s internal controls over financial reporting. Ernst & Young LLP has provided an unqualified audit report on the Company’s financial statements for Fiscal 2002 and Fiscal 2003.

In order to address this weakness, management are currently reviewing their resources and considering the changes necessary to remediate this deficiency and to improve the US GAAP reporting process. Options being considered include establishing procedures for the necessary periodic updates by external accounting advisors.

Subject to the foregoing, since November 27, 2004 there have been no significant changes in the Company’s internal financial controls or in other factors that could significantly affect internal financial controls.

Item 16A. Audit Committee Financial Expert

The Audit Committee comprises non-executive directors David Symondson and Mark Dunfoy. The Company considers both to be “audit committee financial experts” as that term is defined in the SEC rules implementing Section 407 of the Sarbanes-Oxley Act.

Item 16B. Code of Ethics

The Company has not adopted a “Code of Ethics” as defined under the Sarbanes-Oxley Act because its shares are not listed on a stock exchange. The Company is not required to have a Code of Ethics under the laws governing public limited companies in England and Wales.

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Item 16C. Principal Accountant Fees and Services

In accordance with Section 10A (i) of the Securities Exchange Act of 1934, before the accountant is engaged by the Company or its subsidiaries to render audit or non-audit services, the engagement is approved by the Company’s Audit Committee.

The aggregate fees billed to, or accrued by, the Company in respect of Ernst & Young LLP are analysed as follows:

	Fiscal 2003	Fiscal 2004
	(£ thousands)
Charged to operating income:
Audit fees	240	295
Tax fees:
Compliance	177	124
Advice	33	—
Other fees:
Special projects	214	125
Pension advice	8	—
	432	249
Total charged to operating income	672	544
Charged to other income:
VAT reclaim	—	123
Amount capitalised on acquisition	—	102
	672	769

Item 16D. Exemptions from the Listing Standards for Audit Committees

Not applicable

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Not applicable

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PART III

Item 17. Financial Statements

Not applicable

Item 18. Financial Statements

The following consolidated financial statements and related schedule, together with the report thereon of Ernst & Young LLP, are filed as part of this annual report:

	Page
Report of Independent Registered Public Accounting Firm	F-1
Consolidated Financial Statements Consolidated Profit and Loss Accounts for the 53 weeks ended November 30, 2002 and the 52 weeks ended November 29, 2003 and November 27, 2004	F-2
Consolidated Balance Sheets at November 29, 2003 and November 27, 2004	F-3
Consolidated Statements of Changes in Shareholder’s Funds for the 53 weeks ended November 30, 2002 and the 52 weeks ended November 29, 2003 and November 27, 2004	F-4
Consolidated Cash Flow Statements for the 53 weeks ended November 30, 2002 and the 52 weeks ended November 29, 2003 and November 27, 2004	F-5
Notes to the Financial Statements	F-6
Schedule for the 53 weeks ended November 30, 2002 and the 52 weeks ended November 29, 2003 and November 27, 2004 Valuation and Qualifying Accounts	S-1

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Item 19. Exhibits

1.1	Articles of Association of TM Group Holdings PLC (incorporated by reference to Exhibit 3.1 of Amendment No.3 to the registration statement of TM Group Holdings PLC submitted on Form F-4 on February 24, 1999 (File No. 333-9268)).
2.1	Indenture, dated as of May 14, 1998, between TM Group Holdings PLC and Bankers Trust Company, London Branch, as Trustee, in respect of TM Group Holdings PLC’s 11% Senior Notes due May 15, 2008 (incorporated by reference to Exhibit 4.1 of Amendment to the registration statement of TM Group Holdings PLC submitted on Form F-4 on June 19, 1999 (File No. 333-9268)).
2.2	Indenture, dated as of May 14, 1998, between TM Group Holdings PLC and Bankers Trust Company, London Branch, as Trustee, in respect of TM Group Holdings PLC’s 12¼% Senior Subordinated Notes due May 15, 2008 (incorporated by reference to Exhibit 4.2 of the registration statement of TM Group Holdings PLC submitted on Form F-4 on April 30, 1999 (File No. 333-9268)).
4.1	Agreement for the sale and purchase of TM Group Limited and its subsidiaries, dated as of July 20, 2001, between TM Group Holdings PLC, Compass Group, UK and Ireland Limited, James Lancaster and Russell Cox (incorporated by reference to Exhibit 4.2 of Annual Report of TM Group Holdings PLC submitted on Form 20-F on March 20, 2001 (File No. 333-9268))
4.2	Agreement for the sale and purchase of Dillons Stores Limited dated as of August 21, 2004 between Forbuoys Limited, Tesco plc and Statusfloat Limited.
4.3	Agreement for the provision of a £20 million working capital facility between Halifax Bank of Scotland and various subsidiaries of the Company as most recently renewed December 21, 2004.
8.	List of principal subsidiaries
12.1	Section 302 Certification of Chief Executive Officer furnished as required by Rule 13a – 14(a) or Rule 15d – 14(a)
12.2	Section 302 Certification of Chief Financial Officer furnished as required by Rule 13a – 14(a) or Rule 15d – 14(a)
13.1	Section 906 Certification of Chief Executive Officer furnished as required by Rule 13a – 14(b) or Rule 15d – 14(b)
13.2	Section 906 Certification of Chief Financial Officer furnished as required by Rule 13a – 14(b) or Rule 15d – 14(b).

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SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorised the undersigned to sign this annual report on its behalf.

TM GROUP HOLDINGS PLC (REGISTRANT)
By:	/s/    JONATHAN MILLER
	Name:	Jonathan Miller
	Title:	Chief Financial Officer

MARCH 23, 2005

TM GROUP HOLDINGS PLC

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To The Board of Directors

TM Group Holdings PLC

We have audited the accompanying consolidated balance sheets of TM Group Holdings PLC at November 29, 2003 and November 27, 2004, and the related consolidated profit and loss accounts and consolidated statements of total recognised gains and losses, changes in shareholder’s funds and cash flows for the 53 weeks ended November 30, 2002 and the 52 weeks ended November 29, 2003 and November 27, 2004. Our audits also included the financial statement schedule listed in the Index at Item 18. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with United Kingdom auditing standards and United States generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of TM Group Holdings PLC at November 29, 2003 and November 27, 2004, and the consolidated results of its operations and its consolidated cash flows for the 53 weeks ended November 30, 2002 and the 52 weeks ended November 29, 2003 and November 27, 2004, in conformity with accounting principles generally accepted in the United Kingdom which differ in certain respects from those generally accepted in the United States (see Note 29 of Notes to the Financial Statements). Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

ERNST & YOUNG LLP

London, England

March 23, 2005

F -1-

TM GROUP HOLDINGS PLC

CONSOLIDATED PROFIT AND LOSS ACCOUNTS

	Notes	53 weeks ended November 30, 2002		52 weeks ended
				November 29, 2003		November 27, 2004
		(£ thousands)
Sales	3
Ongoing operations		664,461		635,453		619,849
Acquired operations		—		—		21,670
		664,461		635,453		641,519
Cost of sales
Ongoing operations		(502,974	)	(472,952	)	(459,660	)
Acquired operations		—		—		(16,532	)
		(502,974	)	(472,952	)	(476,192	)
Gross profit		161,487		162,501		165,327
Selling and distribution costs		(125,157	)	(127,968	)	(131,420	)
Administrative expenses
Before exceptional items		(18,063	)	(15,882	)	(16,974	)
Exceptional items – ongoing operations	4	(759	)	—		(1,236	)
		(143,979	)	(143,850	)	(149,630	)
Operating profit:
Ongoing operations	5	17,508		18,651		15,373
Acquired operations		—		—		324
		17,508		18,651		15,697
Profit on sale of fixed assets – ongoing operations		3,907		3,908		4,154
Profit from discontinued operations	6	—		—		1,573
Profit before interest and taxation		21,415		22,559		21,424
Net interest payable and similar charges	9	(20,532	)	(12,094	)	(8,426	)
Profit before taxation		883		10,465		12,998
Taxation	10	(139	)	(2,021	)	(4,758	)
Profit for the period(i)		744		8,444		8,240
Equity dividends	11	(22,450	)	—		—
(Loss)/profit retained for the period(ii)		(21,706	)	8,444		8,240

⁽ⁱ⁾ A summary of the significant adjustments to profit for the period that would be required if US generally accepted accounting principles were to be applied instead of those generally accepted in the United Kingdom is set out in Note 29 of Notes to the Financial Statements.

⁽ⁱⁱ⁾ The Company has no recognised gains or losses other than the profit shown in the profit and loss account, and therefore no separate statement of total recognised gains and losses has been presented.

THE NOTES TO THE FINANCIAL STATEMENTS FORM AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

F -2-

TM GROUP HOLDINGS PLC

CONSOLIDATED BALANCE SHEETS

	Notes	November 29, 2003		November 27, 2004
		(£ thousands)
Fixed assets
Goodwill	12	7,533		15,777
Tangible assets	13	47,728		45,747
		55,261		61,524
Current assets
Inventories	15	34,115		38,880
Debtors	16	27,844		31,868
Other current assets	17	177		—
Cash at bank and in hand		25,625		15,237
		87,761		85,985
Creditors: amounts falling due within one year
Trade creditors		(68,091	)	(57,746	)
Other liabilities	18	(17,026	)	(26,521	)
		(85,117	)	(84,267	)
Net current assets		2,644		1,718
Total assets less current liabilities		57,905		63,242
Creditors: amounts falling due after more than one year
Loans	19	(136,240	)	(128,949	)
Other liabilities		(697	)	(3,100	)
		(136,937	)	(132,049	)
Provisions for liabilities and charges	21	(2,159	)	(4,052	)
Net liabilities		(81,191	)	(72,859	)
Capital and reserves(i) Called up share capital		212		212
Share premium account		20,527		20,527
Other reserves		(59,892	)	(59,892	)
Profit and loss account		(42,038	)	(33,706	)
Equity shareholder’s funds (deficit)		(81,191	)	(72,859	)

⁽ⁱ⁾ A summary of the significant adjustments to shareholder’s deficit that would be required if US generally accepted accounting principles were to be applied instead of those generally accepted in the United Kingdom is set out in Note 29 of Notes to the Financial Statements.

THE NOTES TO THE FINANCIAL STATEMENTS FORM AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

F -3-

TM GROUP HOLDINGS PLC

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER’S FUNDS

Share Capital

	Equity Shares
	Ordinary Shares of 1p each
	(Number)	(£)
	(in thousands)
Authorised
Balance at November 25, 2001, November 30, 2002, November 29, 2003 and November 27, 2004	26,235	262
Issued
Balance at November 25, 2001, November 30, 2002, November 29, 2003 and November 27, 2004	21,235	212

Shareholder’s Funds

	Share capital	Share premium account (i)	Other reserves (i)		Profit and loss account (ii)		Total Shareholder’s funds
	(£ thousands)
Balance at November 25, 2001	212	20,527	(59,892	)	(29,076	)	(68,229	)
Profit for the period	—	—	—		744		744
Goodwill previously written off in respect of disposals	—	—	—		300		300
Dividends paid and proposed	—	—	—		(22,450	)	(22,450	)
Balance at November 30, 2002	212	20,527	(59,892	)	(50,482	)	(89,635	)
Profit for the period	—	—	—		8,444		8,444
Balance at November 29, 2003	212	20,527	(59,892	)	(42,038	)	(81,191	)
Goodwill previously written off in respect of disposals	—	—	—		92		92
Profit for the period	—	—	—		8,240		8,240
Balance at November 27, 2004	212	20,527	(59,892	)	(33,706	)	(72,859	)

⁽ⁱ⁾ Share premium account and other reserves are not distributable. A capital redemption reserve of £50,000 is included with other reserves.

⁽ⁱⁱ⁾ Profit and loss account includes £92,460,000 (2003: £92,552,000, 2002: £92,552,000) goodwill written off.

THE NOTES TO THE FINANCIAL STATEMENTS FORM AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

F -4-

TM GROUP HOLDINGS PLC

CONSOLIDATED CASH FLOW STATEMENTS

	Notes	53 weeks ended November 30, 2002		52 weeks ended
				November 29, 2003		November 27, 2004
		(£ thousands)
Net cash inflow from operating activities	23	19,617		24,970		16,982
Returns on investments and servicing of finance
Interest received		2,352		219		819
Interest paid		(23,209	)	(16,460	)	(15,439	)
Premia on redemption of loans and Senior and Senior Subordinated Notes		(1,950	)	—		—
		(22,807	)	(16,241	)	(14,620	)
Taxation
Corporation tax (paid)/refunded		(1,691	)	311		(2,492	)
Capital expenditure and financial investment
Payments to acquire tangible fixed assets		(8,686	)	(8,764	)	(9,218	)
Receipts from sale of tangible fixed assets		5,692		6,817		7,387
		(2,994	)	(1,947	)	(1,831	)
Acquisitions and disposals
Receipts from sale of businesses	14	2,458		1,250		1,250
Purchase of businesses	14	(2,520	)	(2,676	)	(21,048	)
Cash acquired with businesses	14	—		—		10,798
VAT refund in respect of discontinued business	6	—		—		1,573
		(62	)	(1,426	)	(7,427	)
Management of liquid resources
Decrease/(increase) in short-term deposits		83,394		(1,262	)	8,008
Equity dividends paid		(22,450	)	—		—
Net cash inflow before financing		53,007		4,405		(1,380	)
Financing
Redemption of Senior and Senior Subordinated Notes	23	(21,486	)	—		—
Repayment of loans	23	(30,287	)	—		—
Purchase of hedging instruments		—		(1,452	)	(1,000	)
Repayment of capital element of finance lease rentals	23	(3	)	—		—
		(51,776	)	(1,452	)	(1,000	)
Increase/(decrease) in cash (excluding short-term deposits)	23	1,231		2,953		(2,380	)

The significant differences between the cash flow statements presented above and those required under US generally accepted accounting principles are set out in Note 29 of Notes to the Financial Statements.

THE NOTES TO THE FINANCIAL STATEMENTS FORM AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

F -5-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS

1. The Company

On May 14, 1998, TM Group Holdings PLC (“the Company”) acquired the whole of the issued share capital of TM Group Holdings Limited (which was then renamed TM Group Limited) (“Limited”) in return for the issue of new shares in itself and the payment of cash to the shareholders of Limited (the “May Recapitalisation”). On that date the Company sold $175 million of 11% Senior Notes Due 2008 and £55 million of Senior Subordinated Notes Due 2008, a proportion of the net proceeds of which were used to fund the cash payments to the shareholders of Limited. The acquisition of Limited by the Company has been accounted for as a group reorganisation using merger accounting principles and, accordingly, the historical amounts reflected in the consolidated financial statements of Limited have been carried over into the consolidated financial statements of the Company.

On November 28, 1998, a subsidiary of the Company acquired the entire issued share capital of Tog Limited. As part of the financing of that acquisition, the entire issued share capital of the Company was acquired by Thistledove Limited which subscribed 20,734,550 “B” ordinary shares in Holdings at £1 each (the “November Recapitalisation”).

2. Accounting Policies

Accounting convention

The financial statements are prepared under the historical cost convention and in accordance with applicable United Kingdom accounting standards.

Revenue recognition

Sales are recognised as they are made. Revenue from the sale of instant lottery tickets and mobile phone vouchers is recognised gross as part of sales. Commission from the sale of on-line lottery tickets and electronic phone top-ups is recognised within sales.

Basis of Consolidation

The consolidated financial statements consolidate the accounts of TM Group Holdings PLC and all its subsidiary undertakings (together, the “Group”) drawn up on November 30, 2002, November 29, 2003 and November 27, 2004.

The consolidated financial statements have been prepared using merger accounting principles, reflecting the fact that the ownership and control of the Group remained with the same shareholders after the May 1998 and November 1998 Recapitalisations. Schedule 4A to the Companies Act 1985 and Financial Reporting Standard 6, “Acquisitions and Mergers”, require business combinations which include a substantial cash element to be accounted for using acquisition accounting principles. The use of acquisition accounting would give rise to goodwill on consolidation. As there was no arm’s length acquisition price in the recapitalisation, the resulting goodwill would not be a meaningful amount. In addition, as there was no external acquiring party, such goodwill would in effect be self-generated goodwill. In the opinion of the directors, the acquisition method of accounting would not result in a true and fair view of either the results of operations or financial position of the Group. No quantification of this departure is given as to do so would be misleading.

All subsidiaries acquired since May 1998 have been included in the consolidated financial statements using the acquisition method of accounting.

Goodwill

Goodwill arising on acquisitions prior to November 28, 1998 was set off directly against reserves. Goodwill previously eliminated against reserves has not been reinstated on implementation of Financial Reporting Standard 10 “Goodwill and Intangible Assets” (“FRS10”).

F -6-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS

2. Accounting Policies (continued)

Positive goodwill arising on acquisitions since November 28, 1998 is capitalised, classified as an asset on the balance sheet and amortised on a straight-line basis over its useful economic life up to a presumed maximum of 20 years. It is reviewed for impairment at the end of the first full financial year following the acquisition and in other periods if events or changes in circumstances indicate that the carrying value may not be recoverable.

If a subsidiary or business is subsequently sold or closed, any goodwill arising on acquisition that was written off directly to reserves or that has not been amortised through the profit and loss account is reviewed for impairment and if such goodwill is not considered to be attached to the continuing business it is taken into account in determining the profit or loss on sale or closure.

Depreciation

Depreciation is calculated so as to write off the cost of tangible fixed assets less their estimated residual values on a straight-line basis over the expected useful economic lives of the assets concerned. Principal rates used for this purpose are:

Land and buildings
Freehold (including land where it is not separately identifiable)	–	50 years
Long leaseholds improvements	–	50 years
Short leaseholds improvements –shops	–	10 years
–other	–	the term of the lease
Leasehold premiums	–	the unexpired portion of the lease
Plant and machinery
Motor vehicles	–	4 years
Computer equipment	–	between 3 and 6 yrs
Furniture and fittings	–	between 5 and 10 yrs

The carrying value of tangible fixed assets is reviewed for impairment if events or changes in circumstances indicate the carrying value may not be recoverable.

Stocks

Stocks are valued at the lower of cost and net realisable value. Cost of goods for resale is calculated for each category of stock by reducing the net selling price by the attributable average gross margin. Net realisable value is the price at which the stocks can be realised in the normal course of the business.

Volume rebates

Volume discounts receivable from manufacturers are recognised as a credit to cost of sales in the period in which the stock to which the volume discounts apply is sold.

Taxation

Current tax is provided at amounts expected to be paid using the tax rates and laws that have been enacted, or substantively enacted, at the balance sheet date.

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events have occurred at that date that will result in an obligation to pay more or a right to pay less or to receive more tax.

Deferred tax assets are recognised only to the extent that the Directors consider that it is more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted.

F -7-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS

2. Accounting Policies (continued)

Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date.

Foreign currencies

Transactions in foreign currencies are recorded at the rates of exchange ruling at the date of the transaction. Monetary assets and liabilities, including the Senior Notes, denominated in foreign currencies are translated at the rates of exchange ruling at the balance sheet date or if appropriate at the forward contract rate. All differences on translation are taken to the profit and loss account.

The Group manages its exposure to foreign currency fluctuation by the use of options and forward foreign currency contracts. Premiums paid on entering into options are marked to market at the end of each period and the resulting gain or loss is expensed in the profit and loss account.

Capital instruments

Shares are included in shareholder’s funds. Other instruments are classified as liabilities if they contain an obligation to transfer economic benefits and if not they are included in shareholder’s funds. The finance cost recognised in the profit and loss account in respect of capital instruments other than equity shares is allocated to periods over the term of the instrument at a constant rate on the carrying amount.

Derivative instruments

The Group considers its derivative instruments qualify for hedge accounting when certain criteria are met.

Forward foreign currency contracts

The criteria for forward foreign currency contracts are:

• the instrument must be related to a foreign currency asset or liability that is likely to crystallise and whose characteristics have been identified,

• it must involve the same currency as the hedged item, and

• it must reduce the risk of foreign currency exchange movements on the Group’s operations.

Leases

Costs in respect of operating leases are charged on a straight-line basis over the lease term. Lease agreements which transfer to the Group substantially all the risks and rewards of ownership of an asset, are treated as if they had been purchased outright. The assets are included in fixed assets and the capital element of the leasing commitments is shown as obligations under finance leases. The lease rentals are treated as consisting of capital and interest elements. The capital element is applied to reduce the outstanding obligations and the interest element is charged against profit so as to give a constant periodic rate of charge on the remaining balance outstanding at each accounting period. Assets held under finance leases are depreciated over the shorter of the lease terms and the useful lives of equivalent owned assets.

Pensions

The Group operates two defined benefit pension schemes, in addition to several defined contribution schemes, which require contributions to be made to separately administered funds. The cost of contributions to the defined benefit schemes is charged in the profit and loss account so as to spread the cost of pensions over the employees’ working lives within the Group. The regular cost is attributed to individual years using the projected unit credit method. Variations in pension cost, which are identified as a result of actuarial valuations, are amortised over the average expected remaining working lives of employees in proportion to their expected payroll costs. Differences between the amounts funded and the amounts charged in the profit and loss account are treated as either accruals or prepayments in the balance sheet. Actuarial valuations are undertaken periodically. Additional disclosures have been made in accordance with the transitional requirements of FRS 17 - Retirement Benefits.

F -8-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS

2. Accounting Policies (continued)

Advertising

Advertising costs are expensed as incurred.

Use of estimates

The preparation of financial statements requires management to make estimates and assumptions that affect reported sales, expenses, assets and liabilities. Actual amounts could differ from such estimates.

F -9-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

3. Segmental Analysis

	Restated 53 weeks ended November 30, 2002		52 weeks ended
			November 29, 2003		November 27, 2004
	(£ thousands)
Sales
Ongoing operations	664,461		635,453		619,849
Acquired operations	—		—		21,670
	664,461		635,453		641,519
Cost of sales
Ongoing operations	(502,974	)	(472,952	)	(459,660	)
Acquired operations	—		—		(16,532	)
	(502,974	)	(472,952	)	(476,192	)
Selling, distribution and advertising costs
Ongoing operations	(125,157	)	(127,968	)	(127,156	)
Acquired operations	—		—		(4,264	)
	(125,157	)	(127,968	)	(131,420	)
Administrative expenses
Ongoing operations
Retailing	(14,775	)	(12,526	)	(13,761	)
Central	(3,288	)	(3,356	)	(2,663	)
Acquired operations	—		—		(550	)
	(18,063	)	(15,882	)	(16,974	)
Profit/(loss) before interest and taxation
Ongoing operations
Retailing	21,555		22,007		19,272
Central costs	(3,288	)	(3,356	)	(2,663	)
	18,267		18,651		16,609
Acquired operations	—		—		324
	18,267		18,651		16,933
Profit on sale of fixed assets – ongoing operations	3,907		3,908		4,154
Profit from discontinued businesses	—		—		1,573
Business restructuring	(759	)	—		(1,236	)
	21,415		22,559		21,424
Capital expenditure
Ongoing operations
Retailing	8,686		8,757		9,141
Central	—		7		77
	8,686		8,764		9,218
Depreciation and amortisation
Ongoing operations
Retailing	10,669		10,471		10,820
Central	61		63		48
	10,730		10,534		10,868

F -10-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

Net Assets

	November 29, 2003		November 27, 2004
	(£ thousands)
Allocated net assets
Retailing	25,542		38,166
Unallocated net liabilities	(106,733	)	(111,025	)
	(81,191	)	(72,859	)
Unallocated net liabilities comprise
Fixed assets	92		87
Pension asset	5,612		8,393
Other debtors	2,695		1,325
Other current assets	177		—
Cash at bank and in hand	25,625		15,237
Corporation tax	(2,789	)	(3,353	)
Deferred taxation	60		(1,998	)
Other creditors and accruals	(1,965	)	(1,767	)
Bank and other loans	(136,240	)	(128,949	)
	(106,733	)	(111,025	)

Total Assets

	November 29, 2003	November 27, 2004
	(£ thousands)
Continuing operations
Retailing	108,761	122,467
Central	34,261	25,042
	143,022	147,509

4. Operating Exceptional Items

	53 weeks ended November 30, 2002	52 weeks ended
		November 29, 2003	November 27, 2004
	(£ thousands)
Dillons integration costs	—	—	258
Redundancies	759	—	978
	759	—	1,236

Redundancy costs arose in the restructuring of both the TM Retail business and central administration function. £1,149,000 of these exceptional items in Fiscal 2004 was settled in cash during the period ended November 27, 2004.

5. Operating Profit

Operating profit is stated after charging/(crediting):

	53 weeks ended November 30, 2002		52 weeks ended
			November 29, 2003		November 27, 2004
	(£ thousands)
Advertising	47		32		75
Auditors’ remuneration
— audit services	215		240		295
— non-audit services	258		432		249
Amortisation of goodwill	257		398		553
Depreciation of owned assets	10,454		10,136		10,315
Depreciation of assets held under finance leases	19		—		—
Operating lease payments
— land and buildings	25,580		26,387		27,656
— plant and machinery	15		8		116
Operating lease income
— land and buildings	(3,421	)	(3,655	)	(4,066	)

F -11-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

6. Profit from Discontinued Operations

	53 weeks ended November 30, 2002	52 weeks ended
		November 29, 2003	November 27, 2004
	(£ thousands)
VAT refund arising from a European Court of Justice ruling on vending machine site rentals	—	—	1,696
Related professional fees	—	—	(123	)
	—	—	1,573

7. Directors’ Remuneration

	53 weeks ended November 30, 2002	52 weeks ended
		November 29, 2003	November 27, 2004
	(£ thousands)
Emoluments	945	1,620	1,593
Company contribution to money purchase pension scheme	—	101	114
Amounts paid to third parties for services of directors	41	42	40
	986	1,763	1,747

The emoluments for Fiscal 2004 include compensation of £518,866 paid to one director on leaving the Company. This cost is part of the operating exceptional items shown in Note 4 to these accounts.

Three directors were members of the Group’s defined benefit pension scheme (2003: two; 2002: three).

The remuneration, excluding pension contributions, of the highest paid director for the 52 weeks ended November 27, 2004 was £386,250 (2003: £509,683, 2002: £399,000). Contributions to that director’s personal pension arrangement totalled £113,884 (2003: £100,713, 2002: nil). The remuneration, excluding pension contributions, of the highest paid director for the 52 weeks ended November 29, 2003 was £854,000 and his accrued pension benefit was £46,475. The remuneration, excluding pension contributions, of the highest paid director for the 53 weeks ended November 30, 2002 was £399,000 and his accrued pension benefit was £272,565.

Company contributions for one director were made to a money purchase scheme (2003: one; 2002: none).

8. Staff Costs

	53 weeks ended November 30, 2002	52 weeks ended
		November 29, 2003	November 30, 2004
	(£ thousands)
Wages and salaries	79,820	79,110	81,856
Social security costs	4,417	4,784	5,023
Other pension costs	819	641	297
	85,056	84,535	87,176

The above staff costs exclude directors emoluments

The average weekly number of employees during the period excluding directors was as follows:

	53 weeks ended November 30, 2002	52 weeks ended
		November 29, 2003	November 27, 2004
		(number)
Continuing businesses
Retailing	10,530	10,395	10,562
Central	6	6	6
	10,536	10,401	10,568

F -12-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

9. Net Interest Payable and Similar Charges

	53 weeks ended November 30, 2002		52 weeks ended
			November 29, 2003		November 27, 2004
	(£ thousands)
Interest receivable Third parties	(2,352	)	(219	)	(819	)
Interest payable Bank loans and overdrafts	92		94		31
Other loans	20,439		16,363		15,276
Premia on redemption of loans, Senior Notes and Senior Subordinated Notes	1,950		—		—
	22,481		16,457		15,307
Similar charges
Gain on retranslation of Senior Notes	(9,398	)	(8,686	)	(7,747	)
Gain on redemption of Senior Notes	(1,280	)	—		—
Revaluation and write off of currency options	9,507		4,055		1,177
Amortisation of finance charges	1,545		456		456
Unwinding of discount included in provisions	29		31		52
	403		(4,144	)	(6,062	)
Net interest payable and similar charges	20,532		12,094		8,426

10. Taxation

Analysis of tax charge/(credit) in the period:

	53 weeks ended November 30, 2002		52 weeks ended
			November 29, 2003		November 27, 2004
	(£ thousands)
Current tax:
Current tax on income for the period	608		1,774		2,816
Adjustments in respect of prior periods	(71	)	(669	)	14
	537		1,105		2,830
Deferred tax:
Origination and reversal of timing differences	(874	)	970		1,928
Adjustments in respect of prior periods	476		(54	)	—
	(398	)	916		1,928
Total tax on profit on ordinary activities	139		2,021		4,758

Factors affecting current tax charge:

The difference between the UK statutory rate and the actual current tax rate is reconciled as follows:

	53 weeks ended November 30, 2002		52 weeks ended
			November 29, 2003		November 27, 2004
	%		%		%
UK statutory rate	30.0		30.0		30.0
Disallowed expenses and non-taxable income	(60.1	)	(3.8	)	6.5
Adjustments in respect of previous periods	(8.1	)	(6.4	)	0.1
Deferred tax recognised	99.0		(9.2	)	(14.8	)
Total current tax charge	60.8		10.6		21.8

F -13-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

10. Taxation (continued)

A reconciliation of the UK statutory rate of corporation tax applicable for the Group to the total tax rate is as follows:

	53 weeks ended November 30, 2002		52 weeks ended
			November 29, 2003		November 27, 2004
	%		%		%
UK statutory rate	30.0		30.0		30.0
Non-tax deductible depreciation of fixed assets	74.4		6.8		6.3
Permanent differences	11.7		1.9		0.2
Non-taxable profit in respect of disposals	(146.1	)	(12.5	)	—
Prior year adjustments	45.8		(6.9	)	0.1
Effective tax rate	15.8		19.3		36.6

Factors that may affect future tax charges:

There are estimated capital losses of £10,000,000 that may be available against future gains. In the event that the Group makes profits on capital disposals, an unrecognised deferred tax asset of approximately £3,000,000 would be available to offset against such tax liabilities.

The tax on profit on sale of fixed assets is nil (2003: nil; 2002: nil).

The movements in the provision for deferred taxation during the period are as follows:

	November 29, 2003		November 27, 2004
	(£ thousands)
At the beginning of the period	(976	)	(60	)
Balance from acquired company	—		125
Charge for the period	916		1,928
At the end of the period	(60	)	1,993

The deferred tax (asset)/liability comprises:

	53 weeks ended November 30, 2002		52 weeks ended
			November 29, 2003		November 27, 2004
	(£ thousands)
(Decelerated)/accelerated capital allowances	(964	)	42		1,554
Other timing differences	(12	)	(102	)	439
Total (asset included in debtors)/creditor included in provisions	(976	)	(60	)	1,993

11. Dividends

	53 weeks ended November 30, 2002	52 weeks ended
		November 29, 2003	November 27, 2004
	(£ thousands)
Ordinary dividends to parent company - paid	22,450	—	—

F -14-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

12. Intangible Fixed Assets

Goodwill	(£ thousands)
Cost:
At December 1, 2002	7,325
Additions	1,245
Disposals	(37	)
At November 30, 2003	8,533
Additions	8,935
Disposals	(163	)
At November 27, 2004	17,305
Amortisation:
At December 1, 2002	607
Provided during the year	398
Disposals	(5	)
At November 30, 2003	1,000
Provided during the year	553
Disposals	(25	)
At November 27, 2004	1,528
Net book value:
At November 30, 2003	7,533
At November 27, 2004	15,777

Goodwill arising on acquisitions is being amortised evenly over the directors’ estimate of the useful economic life of 20 years.

13. Tangible Fixed Assets

	Land and Buildings		Plant and machinery		Total
	(£ thousands)
Cost
At December 1, 2002	21,977		60,330		82,307
Additions	2,101		6,663		8,764
Acquisitions	975		176		1,151
Disposals	(2,998	)	(1,866	)	(4,864	)
At November 30, 2003	22,055		65,303		87,358
Additions	2,500		6,718		9,218
Acquisitions	1,179		1,032		2,211
Disposals	(3,672	)	(2,877	)	(6,549	)
At November 27, 2004	22,062		70,176		92,238
Depreciation
At December 1, 2002	4,426		27,055		31,481
Charge for the period	2,368		7,768		10,136
Disposals	(689	)	(1,298	)	(1,987	)
At November 30, 2003	6,105		33,525		39,630
Charge for the period	2,566		7,749		10,315
Disposals	(1,120	)	(2,334	)	(3,454	)
At November 27, 2004	7,551		38,940		46,491
Net book value
At November 30, 2003	15,950		31,778		47,728
At November 27, 2004	14,511		31,236		45,747

F -15-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

13. Tangible Fixed Assets (continued)

The net book value of land and buildings comprises:

	Freehold	Long Leasehold	Short Leasehold	Total
	(£ thousands)
At November 30, 2003	6,518	1,096	8,336	15,950
At November 27, 2004	5,464	1,262	7,785	14,511

14. Acquisitions and Disposals

On August 21, 2004, a subsidiary of the Company acquired the entire share capital of Dillons Stores Limited from a subsidiary of Tesco PLC, comprising 181 newsagent stores. The Group also made a number of small acquisitions in Fiscal 2002, Fiscal 2003 and Fiscal 2004 that were not considered material to the Group. An analysis of these acquisitions is shown below:

	53 weeks ended November 30, 2002	52 weeks ended
		November 29, 2003	November 27, 2004
			Dillons		Other	Total
	(£ thousands)
Net assets at the date of acquisition Tangible fixed assets	194	1,151	868		1,343	2,211
Inventories	143	280	4,469		211	4,680
Debtors	—	—	1,820		—	1,820
Creditors	—	—	(1,049	)	—	(1,049	)
Cash	—	—	10,798		—	10,798
	337	1,431	16,906		1,554	18,460
Goodwill arising on acquisition	2,183	1,245	7,139		1,796	8,935
	2,520	2,676	24,045		3,350	27,395
Discharged by:
Cash paid	2,520	2,676	17,293		3,350	20,643
Cost of acquisition	—	—	405		—	405
Deferred consideration	—	—	6,347		—	6,347
	2,520	2,676	24,045		3,350	27,395

The difference between the fair value of assets acquired and book value is not considered to be significant.

The deferred consideration comprises £1,952,950, £1,952,950 and £2,441,150 due February 21, 2005, August 21, 2005 and February 21, 2006 respectively (6, 12 and 18 months after acquisition).

Dillons Stores Limited made a profit on ordinary activities after tax of £819,000 for the year ended February 28, 2004, and the summarised profit and loss account for the period from March 1, 2004 to the date of acquisition is as follows:

	Period ended August 21, 2004
	(£ thousands)
Turnover	31,248
Operating profit and profit before tax	1,047
Tax	(314	)
Profit after tax	733

There were no recognised gains and losses in the period ended August 21, 2004 other than the profit after tax of £733,000.

For the period August 22, 2004 to November 27, 2004, Dillons Stores limited contributed £316,000 to the Group’s operating cash flows.

The costs incurred in integrating Dillons Stores Limited amounted to £258,000 and have been shown as an Operating Exceptional Item.

F -16-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

14. Acquisitions and Disposals (continued)

During Fiscal 2004, the Group received £1,250,000 of the deferred consideration in respect of the disposal of the Mayfair business in Fiscal 2001. Additional deferred consideration of £1,250,000 in relation to the disposal of the Mayfair business is included in other debtors (note 16).

15. Inventories

	November 29, 2003	November 27, 2004
	(£ thousands)
Goods for resale	34,115	38,880

The directors consider that the replacement value of inventories does not materially differ from the book value shown above.

16. Debtors

	November 29, 2003	November 27, 2004
	(£ thousands)
Trade debtors	3,169	3,010
Other debtors	15,896	16,492
Pension asset	5,612	8,393
Deferred taxation	60	—
Pre-payments	3,107	3,973
	27,844	31,868
Due within one year	20,922	23,475
Other debtors due after more than one year	6,922	8,393
	27,844	31,868

Trade debtors at November 27, 2004 are shown net of provisions for bad and doubtful debts of £387,000 (2003: £175,000).

17. Other Current Assets

	November 29, 2003	November 27, 2004
	(£ thousands)
Currency options	177	—

18. Creditors: Amounts Falling Due Within One Year

	November 29, 2003	November 27, 2004
	(£ thousands)
Other liabilities:
Amount owed to parent undertaking	269	344
Group relief payable	33	9
Corporation tax	2,756	3,344
Taxation and social security	2,909	1,671
Other creditors	3,022	12,175
Accruals	8,037	8,978
	17,026	26,521

F -17-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

19. Loans

	November 29, 2003		November 27, 2004
	(£ thousands)
Bank and other loans repayable otherwise than by instalments
$145.3 million 11% Senior Notes due May 15, 2008	84,963		77,216
£53.3 million 12.25% Senior Subordinated Notes due May 15, 2008	53,300		53,300
	138,263		130,516
Less: unamortised issue costs	(2,023	)	(1,567	)
Total borrowings	136,240		128,949

The $145,297,000 Senior Notes due in May 2008 have been translated at November 27, 2004 at the rate of $1.8817 = £1 (2003: $1.7101). Interest on the Senior and Senior Subordinated Notes is payable half-yearly. These Notes are redeemable in whole or in part at the option of the Company. They are unsecured and rank pari passu with any existing and future senior unsecured indebtedness of the Company and senior to all existing and future subordinated debt of the Company but are subordinate to all liabilities in the subsidiaries of the Company.

Maturity of Debt

	November 29, 2003		November 27, 2004
	(£ thousands)
Amounts falling due:
In more than two years but not more than five years	138,263		130,516
Less: unamortised issue costs	(2,023	)	(1,567	)
Total borrowings	136,240		128,949

20. Financial Risk Management

Derivatives and other financial instruments

The Group’s principal financial instruments, other than derivatives, comprise loans, cash and short-term deposits. The main purpose of these financial instruments is to raise finance for the Group’s operations. The Group has various other financial instruments, such as trade debtors and trade creditors, that arise directly from its operations.

The Group also enters into derivative transactions (principally currency options and forward currency contracts). The purpose is to manage the currency risks arising from the Group’s operations and its sources of finance.

It is, and has been throughout the period under review, the Group’s policy that no trading in financial instruments shall be undertaken.

The main risks arising from the Group’s financial instruments are liquidity risk and foreign currency risk. The board reviews and agrees policies for managing each of these risks and they are summarised below.

The disclosures below include short-term debtors and creditors and exclude un-amortised finance costs.

Interest rate risk

All financial liabilities on which interest is paid are at fixed rates, with no interest rate swaps or caps during the period.

F -18-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

20. Financial Risk Management (continued)

Interest rate risk profile of financial liabilities

The interest rate profile of the financial liabilities of the Group was as follows:

	Fixed rate financial liabilities	Floating rate financial liabilities	Financial liabilities on which no interest is paid	Total
	(£ thousands)
As at November 29, 2003
Sterling	53,300	—	82,275	135,575
US dollar	84,963	—	—	84,963
	138,263	—	82,275	220,538
As at November 27, 2004
Sterling	53,300	—	84,402	137,702
US dollar	77,216	—	—	77,216
	130,516	—	84,402	214,918

	Fixed rate financial liabilities		Financial liabilities on which no interest is paid
	Weighted average interest rate %	Weighted average period for which rate is fixed (years)	Weighted average period until maturity (years)
As at November 29, 2003
Sterling	12.25	4.50	0.38
US dollar	11.00	4.50	—
	11.45	4.50	0.38
As at November 27, 2004
Sterling	12.25	3.50	0.24
US dollar	11.00	3.50	—
	11.45	3.50	0.24

Interest rate risk profile of financial assets

The interest rate profile of the financial assets of the Group was as follows:

	Fixed rate financial assets	Floating rate financial assets	Financial assets on which no interest is earned	Total
	(£ thousands)
As at November 29, 2003
Sterling	—	14,105	30,762	44,867
As at November 27, 2004
Sterling	—	6,097	28,642	34,739

Floating rate financial assets comprise cash deposits on money market deposit at call that earn interest at commercial rates. The weighted average period for financial assets on which no interest is earned is 0.2 years (2003: 0.3 years).

F -19-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

20. Financial Risk Management (continued)

Liquidity risk

The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of overdrafts, loans and finance leases.

Short-term flexibility has been achieved through borrowing facilities in the operating subsidiaries. Under this arrangement, the Company’s subsidiaries had an undrawn Revolving Credit Facility of £20,000,000 available at November 27, 2004 of which £5,000,000 was allocated as an overdraft facility. These facilities are renewable periodically.

Foreign currency risk

As a result of US dollar denominated borrowings of $145,297,000 and interest payments thereon, the Group’s balance sheet and profit and loss account can be significantly affected by movements in the US dollar/sterling exchange rates. The Group has partially mitigated the effect of this currency exposure by purchasing options to buy US dollars. In managing its currency exposures, the group’s objectives are to maintain a low cost of borrowing and to retain some potential for currency-related appreciation while hedging against currency depreciation.

From May 1998, the Group had acquired a series of options, exercisable on May 13, 2003, to purchase US dollars at a rate between $1.55 = £1.00 and $1.60 = £1.00. The level of US borrowings covered by the options was $150,000,000. These options were not exercised and therefore lapsed during the period.

On May 14, 2003, the Group acquired an option, exercisable on November 13, 2003, to purchase US dollars at the rate of $1.55 = £1.00 which covered US borrowings of $125,000,000. At the expiration of this option, the Group acquired a replacement option, exercisable on March 15, 2004, to purchase US dollars at the rate of $1.59 = £1.00 which also covered US borrowings of $125,000,000. Subsequent options to purchase $145,000,000 were acquired as follows:

• In March 2004 expiring July 2004 at the rate of $1.7025 = £1

• In July 2004 expiring January 2005 at the rate of $1.6930 = £1

These options were not exercised and therefore lapsed at their expiry dates.

Subsequent to the year end, in January 2005, an option was acquired to purchase $145 million at the rate of $1.7380 = £1.00. This option will expire July 4, 2005.

The Group had also entered into forward foreign currency contracts for the purchase, at rates varying from $1.5891 = £1.00 to $1.6177 = £1.00, of US dollar amounts equal to the total of the first ten half-yearly interest payments on the senior notes, for settlement on each interest payment date between November 1998 and May 2003. These forward foreign currency contracts were accounted for as hedges in accordance with the Group’s accounting policy and expired in May 2003. In October and November 2003 further forward currency contracts at rates of $1.6459 = £1.00 and $1.67 = £1.00 were taken out and used for the November 2003 interest payment on the senior notes. There were no outstanding contracts at the period end and therefore no unrecognised gains or losses.

The Group could still be exposed to material currency translation fluctuation in relation to the uncovered US borrowings of $297,000, the half yearly interest payments on the senior notes and, in any event, upon the expiration of the remaining option on July 4, 2005. The Group will continue to review its hedging arrangements and may amend them if it can do so on commercially attractive terms.

F -20-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

20. Financial Risk Management (continued)

Maturity of financial liabilities

The maturity profile of the Group’s financial liabilities was as follows:

	November 29, 2003	November 27, 2004
	(£ thousands)
In one year or less, or on demand	79,980	79,778
In more than one year but not more than two	1,086	3,471
In more than two years, but no more than three	101	96
In more than three years, but no more than four	101	130,612
In more than four years, but not more than five	138,363	96
In more than five years	907	865
	220,538	214,918

Borrowing facilities

The Group has certain borrowing facilities available to it for general working capital requirements, none of which were drawn at November 27, 2004 (2003 - nil). Expiration of these facilities is as follows:

	November 29, 2003	November 27, 2004
	(£ thousands)
In one year or less	20,000	20,000

Fair values of financial assets and financial liabilities

Set out below is a comparison by category of book values and fair values of all the Group’s financial assets and financial liabilities:

	At November 29, 2003				At November 27, 2004
	Book Value		Fair Value		Book value		Fair value
	(£ thousands)
Primary financial instruments
Financial liabilities
Short-term creditors	(79,419	)	(79,419	)	(79,243	)	(79,243	)
Long-term borrowings	(138,263	)	(141,863	)	(130,516	)	(136,830	)
Long-term creditors	(697	)	(697	)	(3,100	)	(3,100	)
Provisions	(2,159	)	(2,159	)	(2,059	)	(2,059	)
	(220,538	)	(224,138	)	(214,918	)	(221,232	)
Financial assets
Currency Options	177		177		—		—
Short-term debtors	17,815		17,815		19,502		19,502
Long-term debtors	1,250		1,250		—		—
Cash and short-term deposits	25,625		25,625		15,237		15,237
	44,867		44,867		34,739		34,739

Currency exposure

There were no derivative financial instruments held to hedge currency exposure (2003: none).

Market values have been used to determine the fair value of the forward foreign currency contracts, the $145,297,000 11% Senior Notes, the £53,300,000 12.25% Senior Subordinated Notes and the currency options. For all other instruments, any differences between fair value and book value are not considered to be material.

Hedges

There were no unrecognised gains or losses on financial instruments used for hedging as at November 27, 2004 (2003: nil, 2002: £199,000).

F -21-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

21. Provisions for Liabilities and Charges

	Deferred tax		Dilapidations		Onerous Contracts		Other		Total
	(£ thousands)
At November 24, 2001	—		1,033		2,127		4		3,164
Charged/(released) during the period	—		3		(16	)	—		(13	)
Unwinding of discount included in provisions	—		9		20		—		29
Utilised during the period	—		(248	)	(217	)	(4	)	(469	)
At November 30, 2002	—		797		1,914		—		2,711
Charged/(released) during the period	—		236		(214	)	—		22
Unwinding of discount included in provisions	—		6		25		—		31
Utilised during the period	—		(327	)	(278	)	—		(605	)
At November 29, 2003	—		712		1,447		—		2,159
Acquired during the period	125		—		—		—		125
Charged during the period	1,928		193		210		—		2,331
Unwinding of discount included in provisions	—		22		30		—		52
Utilised during the period	(60	)	(294	)	(261	)	—		(615	)
At November 27, 2004	1,993		633		1,426		—		4,052

Onerous contracts

A provision is recognised for the rent due less estimated rent receivable until the anticipated disposal of a vacant property. In addition, provision has been made for excess rent over market rent on leasehold properties as part of fair value assessments made on acquisition. It is expected that most of these costs will be incurred during the next five years.

Dilapidations

A provision is recognised for the expected cost of dilapidation that has occurred in respect of leasehold properties. It is expected that most of these costs will be incurred during the next five years.

22. Other Financial Commitments

	November 29, 2003	November 27, 2004
	(£ thousands)
Capital commitments
Contracted but not provided for	821	179
Annual commitments under non-cancellable operating leases
Land and buildings leases expiring:
Within one year	952	961
Between two and five years	7,481	9,005
After more than five years	14,768	14,925
	23,201	24,891
Other leases expiring:
Between two and five years	116	116
	23,317	25,007

The aggregate payments, for which there are commitments under operating leases fall due as follows:

	November 27, 2004
	Land and Buildings	Other
	(£ thousands)
Within one year	24,891	116
Between one and two years	22,771	58
Between two and three years	20,670	—
Between three and four years	18,724	—
Between four and five years	16,202	—
After five years	88,332	—
	191,590	174

F -22-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

23. Cash Flow Statements

	53 weeks ended November 30, 2002		52 weeks ended
			November 29, 2003		November 27, 2004
	(£ thousands)
Reconciliation of net cash flow to movement in net debt
Increase/(decrease) in cash in the period	1,231		2,953		(2,380	)
(Decrease)/increase in short-term deposits	(83,394	)	1,262		(8,008	)
Repayment of loans	51,773		—		—
Repayment of lease financing	3		—		—
Change in net debt resulting from cash flows	(30,387	)	4,215		(10,388	)
Change in net debt resulting from exchange movement	10,678		8,686		7,747
Movement in un-amortised finance costs	(1,545	)	(456	)	(456	)
Movement in net debt in the period	(21,254	)	12,445		(3,097	)
Net debt at the beginning of the period	(101,806	)	(123,060	)	(110,615	)
Net debt at the end of the period	(123,060	)	(110,615	)	(113,712	)
Comprising:
Cash at bank and in hand	21,410		25,625		15,237
Loans due after one year based on original book valuation	(137,111	)	(137,567	)	(138,023	)
Cumulative exchange differences arising on retranslation of Senior Notes	(7,359	)	1,327		9,074
	(123,060	)	(110,615	)	(113,712	)
	53 weeks ended November 30, 2002		52 weeks ended
			November 29, 2003		November 27, 2004
	(£ thousands)
Reconciliation of operating profit to net cash inflow from operating activities
Operating profit	17,508		18,651		15,697
Depreciation and amortisation charge	10,730		10,534		10,868
Decrease in provisions	(482	)	(583	)	(152	)
Decrease/(increase) in inventories	555		543		(85	)
Decrease/(increase) in debtors	1,149		(7,621	)	(3,514	)
(Decrease)/increase in creditors	(9,843	)	3,446		(5,832	)
Net cash inflow from operating activities	19,617		24,970		16,982
Analysis of changes in loan financing during the period
At the beginning of the period	205,376		144,470		136,240
Redemption of Senior and Senior Subordinated Notes	(21,486	)	—		—
Repayment of loans	(30,287	)	—		—
Movement in exchange differences	(10,678	)	(8,686	)	(7,747	)
Movement in un-amortised finance costs	1,545		456		456
At the end of the period	144,470		136,240		128,949
Analysis of changes in finance leases during the period
At the beginning of the period	3		—		—
Capital element of finance lease rental payments	(3	)	—		—
At the end of the period	—		—		—

24. Pension Commitments

The Group continues to account for pensions in accordance with SSAP 24.

The Group operates two defined benefit pension schemes in the United Kingdom, the TM Group Pension Scheme and the TM Pension Plan. Full actuarial valuations of the schemes are carried out in accordance with legislative requirements. The last full valuations of the schemes were carried out at March 31, 2002 (TM Group Pension Scheme) and April 30, 2002 (TM Pension Plan).

F -23-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

24. Pension Commitments (continued)

The contributions to the schemes during the year were determined with the advice of independent qualified actuaries on the basis of triennial valuations using the projected unit method. The principal assumptions made for the last full SSAP 24 valuations for the purpose of determining pension costs are:

	TM Group Pension Scheme	TM Pension Plan
Rate of return on investments
Before retirement	7.7%	7.7%
In retirement	7.7%	7.7%
Rate of salary increases	3.8%	3.7%
Rate of pension increases	2.7%	2.6%
Date of latest valuation	March 31, 2002	April 30, 2002
Market value of schemes’ assets at latest valuation	£54.9m	£24.0m

Using the above assumptions, the actuarial value of the schemes’ assets at the last full valuation date represented the following percentages of the benefits for each scheme that had accrued to the members based on service to that date allowing for assumed future salary increases:

	TM Group Pension Scheme	TM Pension Plan
	%	%
Percentage of benefits	108	95

Additional contributions will continue to be made in order to reduce the deficiency in the TM Pension Plan, following the last full valuation in April 2002.

Movements in the Group pension asset throughout the period may be summarised as follows:

	52 weeks ended
	November 29, 2003		November 27, 2004
	£000		£000
Balance at the beginning of the period	1,753		5,612
Funding	4,500		3,078
Charged during the period	(641	)	(297	)
Balance at the end of the period	5,612		8,393

The agreed contribution level for future years, following the latest actuarial valuation of the schemes, is £3,000,000 increasing annually by price inflation. At the next actuarial valuation, the contribution level will be reassessed.

Both schemes are closed to new entrants.

Under the transitional rules of FRS 17 – Retirement Benefits – certain additional disclosures are required in the financial statements which are set out below. The disclosures are based upon the last full valuations of the schemes which were carried out at March 31, 2002 (TM Group Pension Scheme) and April 30, 2002 (TM Pension Plan) and have been updated to November 27, 2004 by qualified independent actuaries, using revised assumptions that are consistent with the requirements of FRS 17.

F -24-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

24. Pension Commitments (continued)

Main financial assumptions:

	November 30, 2002		November 29, 2003		November 27, 2004
	TM Group Pension Scheme	TM Pension Plan	TM Group Pension Scheme	TM Pension Plan	TM Group Pension Scheme	TM Pension Plan
	%pa	%pa	%pa	%pa	%pa	%pa
Inflation	2.3	2.3	2.8	2.8	2.8	2.8
Rate of general long-term increase in salaries	3.3	3.3	3.8	3.8	3.8	3.8
Rate of increase to pensions in payment
Post April 5, 1997	2.3	2.3	2.8	2.7	2.7	2.7
Pre April 6, 1997	1.2	2.3	0.0	2.7	0.0	2.7
Discount rate of scheme liabilities	5.7	5.7	5.6	5.6	5.2	5.2

Expected return on assets:

	Long Term rate of return expected at		Value at November 29, 2003				Value at November 27, 2004
	November 29, 2003	November 27, 2004	TM Group Pension Scheme		TM Pension Plan		TM Group Pension Scheme		TM Pension Plan
	(% pa)		(£ millions)
Equities	8.0	7.5	40.6		16.4		43.8		18.1
Property	7.0	6.5	2.7		—		2.4		—
Government bonds	5.0	4.5	1.7		6.8		2.9		7.6
Corporate bonds	5.5	5.0	2.3		—		1.2		—
Other	4.5	4.0	0.5		—		1.5		—
Total market value of assets			47.8		23.2		51.8		25.7
Present value of scheme liabilities			(58.5	)	(31.5	)	(63.9	)	(34.4	)
Deficit in scheme			(10.7	)	(8.3	)	(12.1	)	(8.7	)
Related deferred tax asset			3.2		2.5		3.6		2.6
Net pension liability			(7.5	)	(5.8	)	(8.5	)	(6.1	)

The following amounts would have been charged/(credited) to operating profit as follows:

	53 weeks ended November 30, 2002		52 weeks ended
			November 29, 2003			November 27, 2004
	TM Group Pension Scheme	TM Pension Plan	TM Group Pension Scheme		TM Pension Plan	TM Group Pension Scheme	TM Pension Plan
	(£ millions)
Current service cost	1.0	0.5	0.8		0.4	0.8	0.4
Settlement profit	—	—	(1.8	)	—	—	—
Total operating charge/Income)	1.0	0.5	(1.0	)	0.4	0.8	0.4

The following amounts would have been credited/(charged) to other finance income as follows:

	53 weeks ended November 30, 2002				52 weeks ended
					November 29, 2003				November 27, 2004
	TM Group Pension Scheme		TM Pension Plan		TM Group Pension Scheme		TM Pension Plan		TM Group Pension Scheme		TM Pension Plan
	(£ millions)
Total return on pension scheme assets	4.3		1.6		3.6		1.4		3.6		1.6
Interest on pension scheme liabilities	(4.0	)	(1.6	)	(3.4	)	(1.6	)	(3.2	)	(1.7	)
Total other finance income/(charge)	0.3		—		0.2		(0.2	)	0.4		(0.1	)

F -25-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

24. Pension Commitments (continued)

The following amounts would have been recognised in the statement of total recognised gains and losses as follows:

	53 weeks ended November 30, 2002				52 weeks ended November 29, 2003				52 weeks ended November 27, 2004
	TM Group Pension Scheme		TM Pension Plan		TM Group Pension Scheme		TM Pension Plan		TM Group Pension Scheme		TM Pension Plan
	(£ millions)
Actual return less expected return on pension scheme assets	(12.0	)	(4.3	)	(0.1	)	0.6		1.4		1.0
Experience gains and losses arising on the present value of scheme liabilities	3.7		1.1		(0.4	)	0.3		(0.2	)	(0.2	)
Changes in assumptions underlying the present value of scheme liabilities	5.8		0.6		(2.8	)	(2.1	)	(3.8	)	(2.2	)
Actuarial loss recognised in the statement of total recognised gains and losses	(2.5	)	(2.6	)	(3.3	)	(1.2	)	(2.6	)	(1.4	)

Analysis of movement in deficit during the period:

	52 weeks ended November 29, 2003				52 weeks ended November 27, 2004
	TM Group Pension Scheme		TM Pension Plan		TM Group Pension Scheme		TM Pension Plan
	(£ millions)
Opening balance	(11.6	)	(8.0	)	(10.7	)	(8.3	)
Total operating income/(charge)	1.0		(0.4	)	(0.8	)	(0.4	)
Total other finance income/(charge)	0.2		(0.2	)	0.4		(0.1	)
Actuarial loss	(3.3	)	(1.2	)	(2.6	)	(1.4	)
Contributions	3.0		1.5		1.6		1.5
Closing balance	(10.7	)	(8.3	)	(12.1	)	(8.7	)

History of experience gains and losses:

	53 weeks ended November 30, 2002				52 weeks ended November 29, 2003				52 weeks ended November 27, 2004
	TM Group Pension Scheme		TM Pension Plan		TM Group Pension Scheme		TM Pension Plan		TM Group Pension Scheme		TM Pension Plan
Difference between expected and actual return on pension scheme assets
Amount (£ millions)	(12.0	)	(4.3	)	(0.1	)	0.6		1.4		1.0
Percentage of scheme assets	23.6	%	20.6	%	0.2	%	2.6	%	2.8	%	4.1	%
Experience gains and losses arising on the present value of scheme liabilities
Amount (£ millions)	3.7		1.1		(0.4	)	0.3		(0.2	)	(0.2	)
Percentage of the present value of scheme liabilities	5.9	%	3.8	%	0.7	%	1.0	%	0.2	%	0.4	%
Total actuarial loss recognised in statement of total recognised gains and losses
Amount (£ millions)	(2.5	)	(2.6	)	(3.3	)	(1.2	)	(2.6	)	(1.4	)
Percentage of the present value of scheme liabilities	4.0	%	9.0	%	5.7	%	3.8	%	4.1	%	4.0	%

F -26-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

24. Pension Commitments (continued)

Reconciliation of net liabilities and reserves under FRS 17:

	November 29, 2003		November 27, 2004
	(£ thousands)
Net liabilities as stated in balance sheet	(81,191	)	(72,859	)
SSAP 24 balance after deferred taxation	(3,928	)	(5,875	)
FRS 17 balance after deferred taxation	(13,300	)	(14,600	)
Net liabilities as adjusted for FRS 17	(98,419	)	(93,334	)
Profit and loss reserve as stated in balance sheet	(42,038	)	(33,706	)
SSAP 24 balance after deferred taxation	(3,928	)	(5,875	)
FRS 17 balance after deferred taxation	(13,300	)	(14,600	)
Profit and loss reserve as adjusted for FRS 17	(59,266	)	(54,181	)

25. Related Party Transactions

There were no related party transactions during Fiscal 2004 (Fiscal 2003: none). In Fiscal 2002 the holding company, Thistledove Limited, redeemed the whole of the Unsecured 7% Loan Notes 2008. J Lancaster and A R Cox, directors of TM Group Holding Plc, received £148,896 and £74,449 respectively during that period in respect of this transaction.

26. Contingent Liabilities

The Group did not have any material contingent liabilities at November 27, 2004. Certain subsidiaries of the Company have assigned UK property leases in the normal course of business. Should the assignees fail to fulfil any obligations in respect of these leases, members of the Group may be liable for those defaults. The number of such claims arising to date has been small, and the liability, which is charged to the profit and loss as it arises, has not been material.

27. Companies Act 1985

These financial statements do not comprise the Group’s “statutory accounts” within the meaning of section 240 of the Companies Act 1985 of Great Britain. Statutory accounts for the 53 weeks ended November 30, 2002, and 52 weeks ended November 29, 2003 have been, and statutory accounts for the 52 weeks ended November 27, 2004 will be, delivered to the Registrar of Companies for England and Wales. The auditors’ reports on such accounts were unqualified.

28. New Accounting Standards

FRS 17, ‘Retirement Benefits’, issued in November 2000, is fully effective for accounting periods starting on or after January 1, 2005. Certain of the disclosure requirements are, however, effective for periods prior to the January 2005 deadline and those required are given in Note 24 to the Financial Statements. The standard requires that financial statements reflect at fair values the assets and liabilities arising from an employer’s retirement benefit obligations and related funding. The operating costs of providing retirement benefits are recognised in the period in which they are earned together with any related finance costs and changes in the value of the related assets and liabilities. Had FRS 17 been implemented at November 27, 2004 the Group would have reported a pension liability net of deferred taxation of £14.6 million, which compares with the pension asset net of deferred taxation of £5.9 million recorded in the Financial Statements under the existing rules. The impact of FRS 17 on profit and loss reserves would have been to reduce those reserves by £20.5 million.

29. Differences between United Kingdom and United States Generally Accepted Accounting Principles

The Group’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United Kingdom (“UK GAAP”) which differ from US generally accepted accounting principles (“US GAAP”). The significant differences as they apply to the Group are described below.

F -27-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

29. Differences between United Kingdom and United States Generally Accepted Accounting Principles (continued)

Pension costs

Under UK GAAP, the Group provides for the cost of retirement benefits based upon consistent percentages of employees’ pensionable pay as recommended by independent qualified actuaries. US GAAP require that projected benefit obligation (pension liability) be matched against the fair value of the plan’s assets and be adjusted to reflect any unrecognised obligation or asset in determining the pension cost or credit for the year. In addition, under US GAAP where the value of plan assets is below the value of the liabilities valued on an accumulated benefit obligation basis, the deficit on this basis would be recognised immediately through other comprehensive income or as an intangible asset, to the extent of any unrecognised prior service cost.

Deferred debt issue costs

Under UK GAAP, costs of issuing debt finance are presented as a deduction from the carrying amount of debt finance to which they relate. Under US GAAP these deferred issue costs would be included in non-current assets.

Purchase accounting

Under US GAAP, the restructuring provisions, primarily consisting of redundancy and store closure costs, made at the time of the MBO would not have been permitted as they did not meet the criteria for recognition set forth in EITF 95-3. These amounts would have been expensed as incurred. The goodwill arising under US GAAP on the MBO would have been reduced accordingly.

In addition, under US GAAP the goodwill arising would have been reduced to the extent the asset arising with respect to pension costs at the date of acquisition under US GAAP was higher than that arising under UK GAAP.

Goodwill

Under UK GAAP, goodwill arising on acquisitions prior to November 28, 1998 was set off directly against reserves. Goodwill arising on acquisitions since November 28, 1998 is capitalised, classified as an asset on the balance sheet and amortised on a straight-line basis over its useful economic life up to a presumed maximum of 20 years. It is reviewed for impairment at the end of the first full financial year following the acquisition and in other periods if events or changes in circumstances indicate that the carrying value may not be recoverable. If a subsidiary or business is subsequently sold or closed, any goodwill arising on acquisition that was written off directly to reserves or that has not been amortised through the profit and loss account is reviewed for impairment and if such goodwill is not considered to be attached to the continuing business it is taken into account in determining the profit or loss on sale or closure.

Under US GAAP, goodwill purchased prior to 2002 would have been capitalised and amortised over its estimated useful life not exceeding 40 years. The Group has adopted Statement of Financial Accounting Standards 142 (“SFAS 142”) Goodwill and Other Intangible Assets, which requires that goodwill is not amortised, but is tested at least annually for impairment. No impairment has resulted from the test carried out in respect of the period ended November 27, 2004.

Under US GAAP, the benefit of acquired tax losses not previously recognised at the date of acquisition is credited as an adjustment to goodwill rather than taken to the profit and loss account as a reduction of the tax charge.

Provisions

Under UK GAAP, provisions are discounted where the effect of the time value of money is material. Under US GAAP a provision should only be discounted where the aggregate amount of the liability and the timing of future cash payments are fixed or reliably determinable. On this basis, the discounting of provisions relating to dilapidations is not permitted under US GAAP.

F -28-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

29. Differences between United Kingdom and United States Generally Accepted Accounting Principles (continued)

Accounting for derivative instruments and hedging activities

The Group adopted the provisions of Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities”, as amended from November 26, 2000. This Statement requires that all derivatives be recorded on the balance sheet as either an asset or liability measured at fair value. Gains or losses resulting from changes in the fair value of these derivatives would be accounted for based on the use of the derivative and whether the instrument qualified for hedge accounting, as defined under the Statement.

Changes in the fair value of derivatives accounted for as cash flow hedges, to the extent that they are effective as hedges, are recorded in other comprehensive income net of deferred taxes. Changes in the fair value of derivatives not qualifying as hedges are reported in net income, consistent with the treatment under UK GAAP.

The adoption of this Statement resulted in the Group recording, with effect from November 26, 2000, a cumulative net transition adjustment gain of £2,650,000, net of tax, in cumulative other comprehensive income and an increase in current assets to record the fair value of the forward foreign currency contracts and interest rate swaps of the same amount. The Company’s forward foreign currency contracts all expired in May 2003, so there were no current asset derivatives to record at the end of Fiscal 2003 and no changes to other comprehensive income for the period ended November 27, 2004. The currency options held by the Group are not considered to be effective hedges and do not qualify for hedge accounting. Changes in their market value have therefore been taken to the income statement consistent with the treatment under UK GAAP.

Profit on sale of businesses and fixed assets

Certain exceptional items are shown on the face of the profit and loss account after operating profit. These items are gains on the sale of businesses and fixed assets. Under US GAAP these items, to the extent recognised, are included within operating profit or other income. Under UK GAAP, gains arising from property sale and operating leaseback transactions are recognised in the period of the transaction. Under US GAAP, such gains are recognised in proportion to the gross rental charged over the lease term.

The following is a summary of the significant adjustments to profit for the year and shareholder’s funds which would be required if US GAAP were to be applied instead of UK GAAP.

Profit for the period

	53 weeks ended November 30, 2002		52 weeks ended
			November 29, 2003		November 27, 2004
	(£ thousands)
Profit for the period as reported in the consolidated profit and loss account under UK GAAP	744		8,444		8,240
Adjustments
Pension costs	(1,862	)	(6,403	)	(6,195	)
Amortisation of goodwill	(4,210	)	398		553
Goodwill in respect of disposals	66		—		(1,626	)
Profit on property sale and operating leaseback transactions	(481	)	(2,494	)	(2,084	)
Dilapidations provisions	31		8		22
Deferred taxation on adjustments	549		1,919		1,852
Net (loss)/income for the period as adjusted to accord with US GAAP	(5,163	)	1,872		762

F -29-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

29. Differences between United Kingdom and United States Generally Accepted Accounting Principles (continued)

Comprehensive income

Comprehensive income under US GAAP is as follows:

	53 weeks ended November 30, 2002		52 weeks ended
			November 29, 2003		November 27, 2004
	(£ thousands)
Net (loss)/income for the period as adjusted to accord with US GAAP	(5,163	)	1,872		762
Other comprehensive income:
Pension (costs)/credit net of tax at 30%	(25,257	)	2,052		2,970
Change in fair value of derivatives net of tax at 30%	(1,691	)	(139	)	—
	(26,948	)	1,913		2,970
Comprehensive (loss)/income	(32,111	)	3,785		3,732

Movements in other comprehensive income amounts (net of related tax) are as follows:

	53 weeks ended November 30, 2002		52 weeks ended
			November 29, 2003		November 27, 2004
Movement in Fair Value of Derivatives	(£ thousands)
At beginning of period	1,830		139		—
Losses during the period	(1,691	)	(139	)	—
At end of period	139		—		—
Minimum pension accrual
At beginning of period	—		(25,257	)	(23,205	)
Movement in the period	(25,257	)	2,052		2,970
At end of period	(25,257	)	(23,205	)	(20,235	)
Total
At beginning of period	1,830		(25,118	)	(23,205	)
Movement in the period	(26,948	)	1,913		2,970
At end of period	(25,118	)	(23,205	)	(20,235	)

F -30-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

29. Differences between United Kingdom and United States Generally Accepted Accounting Principles (continued)

Shareholder’s funds

	November 29, 2003		November 27, 2004
	(£ thousands)
Shareholder’s funds (deficit) as reported in the consolidated balance sheet under UK GAAP	(81,191	)	(72,859	)
Adjustments
Intangible fixed assets — goodwill
Cost	65,205		63,512
Accumulated amortisation	1,000		1,528
Net	66,205		65,040
Other intangible asset – pensions	120		29
Debtors due after more than one year:
Deferred issue costs	2,023		1,567
Pension accrual	(24,207	)	(26,069	)
Dilapidations provisions	(61	)	(39	)
Current liabilities:
Deferred gains on property sale and operating leaseback transactions	(202	)	(360	)
Deferred taxation
On adjustments	7,244		7,824
Creditors due after more than one year:
Deferred issue costs	(2,023	)	(1,567	)
Deferred gains on property sale and operating leaseback transactions	(2,773	)	(4,699	)
Shareholder’s equity (deficit) as adjusted to accord with US GAAP	(34,865	)	(31,133	)

Reconciliation of movement in shareholder’s funds under US GAAP

	November 27, 2004
	(£ thousands)
Shareholder’s equity (deficit) as adjusted to accord with US GAAP at beginning of the period	(34,865	)
Income for the period available for equity shareholders as adjusted to accord with US GAAP	762
Movement in other comprehensive income during period	2,970
Shareholders equity (deficit) as adjusted to accord with US GAAP at end of the period	(31,133	)

Consolidated statement of cash flows

The consolidated statements of cash flows prepared under UK GAAP present substantially the same information as those required under US GAAP but they differ, however, with regard to classification of items within the statements and as regards the definition of cash under UK GAAP and cash and cash equivalents under US GAAP.

Under US GAAP, cash and cash equivalents include short-term highly liquid investments but do not include bank overdrafts. Under UK GAAP, cash flows are presented separately for operating activities, returns on investments and servicing of finance, taxation and capital expenditure and financial investment, acquisitions, equity dividends and management of liquid resources and financing. US GAAP, however, require only three categories of cash flow activity to be reported: operating, investing and financing. Cash flows from taxation and returns on investments and servicing of finance shown under UK GAAP would, with the exception of dividends paid to minority shareholders, be included as operating activities under US GAAP. The payment of dividends would be included as a financing activity under US GAAP. Under US GAAP capital expenditure and financial investment and acquisitions are reported within investing activities.

F -31-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

29. Differences between United Kingdom and United States Generally Accepted Accounting Principles (continued)

The categories of cash flow activity under US GAAP can be summarised as follows:

	53 weeks ended November 30, 2002		52 weeks ended
			November 29, 2003		November 27, 2004
	(£ thousands)
Cash (outflow)/inflow from operating activities	(4,881	)	9,040		1,443
Cash outflow from investing activities	(3,056	)	(3,373	)	(10,831	)
Cash outflow from financing activities	(74,226	)	(1,452	)	(1,000	)
(Decrease)/increase in cash and cash equivalents	(82,163	)	4,215		(10,388	)
Cash and cash equivalents at:
beginning of the period	103,573		21,410		25,625
end of the period	21,410		25,625		15,237

Additional information required by US GAAP in respect of the Group’s pension plans

The pension cost for these plans computed in accordance with the requirements of US GAAP comprises:

	53 weeks ended November 30, 2002		52 weeks ended
			November 29, 2003		November 27, 2004
	(£ thousands)
Service cost	1,641		1,672		1,885
Interest cost	4,599		5,462		5,337
Actual return on plan assets	(5,539	)	(4,764	)	(4,646	)
Net amortisation and deferral	1,395		3,791		3,916
Effect of settlement	585		883		—
Net periodic pension cost	2,681		7,044		6,492

The major assumptions used in computing the pension cost were:

	November 30, 2002		November 29, 2003		November 27, 2004
Expected long-term rate of return on plan assets	6.70	%	6.60	%	6.20	%
Discount rate	5.70	%	5.60	%	5.20	%
Expected long-term rate of earnings increases	4.25	%	4.75	%	4.00	%

The funding of the Group’s plans is as follows:

	November 29, 2003		November 27, 2004
	(£ thousands)
Accumulated benefit obligation (all vested)	89,414		95,206
Fair value of plan assets	70,819		77,530
Projected benefit obligation	(97,475	)	(102,991	)
Plan assets in deficit of projected benefit obligation	(26,656	)	(25,461	)
Unrecognised prior service cost	120		29
Unrecognised net loss	41,696		37,154
Prepaid pension cost	15,160		11,722

The assets of these plans principally comprise United Kingdom and other listed equities, property investments, bank deposits and UK Government index-linked stocks.

F -32-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

29. Differences between United Kingdom and United States Generally Accepted Accounting Principles (continued)

Reconciliation of plans’ projected benefit obligations is as follows:

	52 weeks ended
	November 29, 2003		November 27, 2004
	(£ thousands)
Projected benefit obligation at beginning of period	98,029		97,475
Disposals	(6,891	)	—
Service cost	1,672		1,885
Interest cost	5,462		5,337
Plan participant contributions	350		476
Actuarial loss	7,029		2,383
Benefits paid	(8,176	)	(4,565	)
Projected benefit obligation at end of period	97,475		102,991

Reconciliation of change in fair value of plan assets:

	52 weeks ended
	November 29, 2003		November 27, 2004
	(£ thousands)
Fair value of plan assets at beginning of period	71,674		70,819
Disposals	(4,254	)	—
Actual return on plan assets	6,725		7,746
Group contributions	4,500		3,054
Plan participant contributions	350		476
Benefits paid	(8,176	)	(4,565	)
Fair value of plan assets at end of period	70,819		77,530

The expected contribution to the Group’s plans for the year ending November 2005 is £3,662,000.

The projected benefit payments under these plans are as follows:

		(£ thousands)
Year ending:	November 2005	4,024
	November 2006	4,144
	November 2007	4,269
	November 2008	4,397
	November 2009	4,528
Five years ending:	November 2014 (aggregate)	24,764

Additional information required by US GAAP in respect of deferred taxation

The analysis of the deferred taxation asset required by US GAAP is as follows:

	November 29, 2004		November 27, 2004
	(£ thousands)
Deferred taxation liabilities
Deficit of book value against taxation value of fixed assets	(40	)	(1,554	)
Deferred taxation assets
Pension accrual	6,699		7,282
Taxation effect of losses carried forward	1,979		1,979
Taxation effect of provisions	645		103
	9,323		7,810
Less: Valuation allowance	(1,979	)	(1,979	)
Net deferred tax asset	7,304		5,831
Of which:
Current	—		—
Non-current	7,304		5,831
	7,304		5,831

F -33-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

29. Differences between United Kingdom and United States Generally Accepted Accounting Principles (continued)

Concentrations of credit risk

Potential concentrations of credit risk to the Group consist principally of short-term cash investments and trade receivables.

At November 27, 2004 the Group did not consider there to be any significant concentration of credit risk.

New US accounting standards

FIN 46 – Consolidation of Variable Interest Entities was issued in January 2003 and subsequently revised in December 2003. It requires additional disclosures to be made in financial statements issued after January 2003 and became fully effective for accounting periods ending after March 15, 2004. FIN 46 requires certain third party entities to be consolidated by the Group if the equity investors in the entity do not have either a controlling financial interest or sufficient equity to finance its activities without additional financial support. Management have assessed the impact of this standard and concluded that no additional entities require consolidation into the Group.

F -34-

Schedule II

TM GROUP HOLDINGS PLC

VALUATION AND QUALIFYING ACCOUNTS

		Additions		Deductions
Description	Balance at beginning of period	Charged to costs and expenses	Other			Balance at end of period
	(£ thousands)
53 weeks ended November 30, 2002
Provisions for bad and doubtful debts	169	13	—	—		182
52 weeks ended November 29, 2003
Provisions for bad and doubtful debts	182	—	—	(7	)	175
52 weeks ended November 27, 2004
Provisions for bad and doubtful debts	175	152	60	—		387

S -1-