TM 20-F/A 2003 FY Annual report (foreign) (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F/A

AMENDMENT No. 1

(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 29, 2003

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 organisation)

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.

Yesx No¨

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

Item 17¨ Item 18x

TABLE OF CONTENTS

Name		Page
Table of Contents		2
Explanatory Note		3
Item 3.	Key Information	4
Item 15.	Controls and Procedures	13
Item 18	Financial Statements	14
Item 19.	Exhibits	14

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EXPLANATORY NOTE

Pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, TM Group Holdings Plc (the “Company”) hereby amends its Annual Report on Form 20-F for the fiscal year ended November 29, 2003 as filed with the U.S. Securities and Exchange Commission on March 26, 2004 (the “Original Filing”) by setting forth the following amendments to Item 18 of the Original Filing:

• The restatement of Note 29 of Notes to the Financial Statements to reflect an additional difference between UK GAAP and US GAAP, concerning gains arising from property sale and operating leaseback transactions;

• The inclusion of an updated report of the Company’s independent registered public accounting firm that refers to the amended Note 29.

This Form 20-F/A also amends the Selected Financial Data in Item 3. “Key Information”, Item 15. “Controls and Procedures” and the list of Item 19. “Exhibits” to reflect the filing of new certifications of the Chief Executive Officer and the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, and furnishing of new certifications of the Chief Executive Officer and the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

The restatement in Note 29 relates to the treatment under US GAAP of gains arising from property sale and operating leaseback transactions. Under US GAAP, such gains are recognised in proportion to the gross rental charged over the lease term. Under UK GAAP, gains arising from property sale and operating leaseback transactions are recognised in the period of the transaction. Previously, the Company accounted for gains arising from property sale and operating leaseback transactions under US GAAP using the same method as under UK GAAP. The effect of the restatement on the Company’s US GAAP financial statements is to decrease gains on property sale and operating leaseback transactions and thus increase net loss or decrease net income. The decrease in net income increases shareholder’s deficit. The restatement increases the net loss as reported under US GAAP in Fiscal 2002 by £0.5 million and reduces net income in Fiscal 2003 by £2.5 million. Shareholder’s deficit as reported under US GAAP is increased by £0.5 million in Fiscal 2002 and £3.0 million in Fiscal 2003.

There are no changes to the Company’s financial statements and related notes prepared in accordance with UK GAAP.

Other than as expressly set forth above, this Form 20-F/A does not, and does not purport to, amend, update or restate the information in any other item of the Original Filing or reflect any events that have occurred after the date on which such annual report was filed.

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Item 3. Key Information

SELECTED FINANCIAL DATA

The following selected consolidated financial data for the 52 weeks ended November 24, 2001, the 53 weeks ended November 30, 2002 and the 52 weeks ended November 29, 2003, and at November 30, 2002 and November 29, 2003, 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 auditors.

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 27, 1999		November 25, 2000		Restated (i) November 24, 2001		Restated (i)(ii) November 30, 2002		Restated (ii) November 29, 2003
	(£ thousands)
Income Statement Data
Amounts in accordance with UK GAAP
Sales
Retailing	691,181		672,197		661,050		664,461		635,453
Discontinued operations	206,262		199,221		42,792		—		—
Total sales	897,443		871,418		703,842		664,461		635,453
Cost of sales	(660,537	)	(639,878	)	(524,220	)	(502,974	)	(472,952	)
Selling and distribution costs	(174,987	)	(168,201	)	(136,368	)	(125,157	)	(127,968	)
Administrative expenses	(23,763	)	(24,372	)	(19,740	)	(18,063	)	(15,882	)
Business re-structuring	(1,783	)	—		—		(759	)	—
Operating profit	36,373		38,967		23,514		17,508		18,651
Profit on fixed asset disposals	305		1,509		3,137		3,907		3,908
Profit before interest, taxation And sale of businesses	36,678		40,476		26,651		21,415		22,559
Retailing	24,487		29,015		27,541		25,480		25,912
Central costs	(2,613	)	(2,686	)	(2,993	)	(3,306	)	(3,353	)
Total continuing operations	21,874		26,329		24,548		22,174		22,559
Discontinued operations	16,587		14,147		2,103		—		—
Business re-structuring	(1,783	)	—		—		(759	)	—
Total profit before interest, taxation and sale of businesses	36,678		40,476		26,651		21,415		22,559
Profit on sale of businesses	—		—		51,507		—		—
Profit before interest and taxation	36,678		40,476		78,158		21,415		22,559
Net interest expense	(31,860	)	(36,135	)	(21,274	)	(20,532	)	(12,094	)
Profit before taxation	4,818		4,341		56,884		883		10,465
Taxation	—		(504	)	(605	)	(139	)	(2,021	)
Profit for the period	4,818		3,837		56,279		744		8,444
Amounts in accordance with US GAAP
Net income/(loss) for the period(iii)
Continuing operations as previously reported	(13,819	)	(14,948	)	169		(4,682	)	4,366
Restatement relating to deferral of gains on property sale and operating leaseback transactions	—		—		—		(481	)	(2,494	)
Discontinued operations	12,766		12,507		63,273		—		—
Total as restated	(1,053	)	(2,441	)	63,442		(5,163	)	1,872

(i) The Company has revised the presentation of sales arising from the processing of electronic phone top-up transactions, to reflect only the commission earned on these transactions. This has no effect on operating profit.

(ii) The Company has restated its US GAAP net income/(loss) for the period in recognition of an additional difference between UK GAAP and US GAAP concerning gains arising from property sale and operating leaseback transactions. See Note 29 of Notes to the Financial Statements.

(iii) In calculating net income/(loss) 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 27, 1999		November 25, 2000		November 24, 2001		Restated (i) November 30, 2002		Restated (i) November 29, 2003
	(£ thousands)
Balance Sheet Data
Amounts in accordance with UK GAAP
Intangible assets – goodwill	2,502		5,751		4,816		6,718		7,533
Tangible assets	69,078		74,650		53,880		50,826		47,728
Inventories	54,505		49,553		34,790		34,378		34,115
Total current assets	115,431		118,872		175,780		80,957		87,761
Total assets	187,011		199,273		234,476		138,501		143,022
Long-term debt	218,264		233,349		205,089		144,470		136,240
Total debt	219,193		235,144		205,379		144,470		136,240
Capital stock	212		212		212		212		212
Shareholder’s deficit	(168,214	)	(166,215	)	(68,229	)	(89,635	)	(81,191	)
Amounts in accordance with US GAAP
Intangible assets	113,330		109,966		75,067		72,736		73,858
Tangible assets	69,078		74,650		53,880		50,826		47,728
Other non-current assets	24,940		24,497		21,351		2,479		2,023
Inventories	54,505		49,553		34,790		34,378		34,115
Total current assets	115,431		118,872		178,394		87,301		95,005
Total assets	322,779		327,985		328,692		213,342		218,614
Long-term debt	224,587		238,790		209,113		146,949		138,263
Total debt	225,516		240,585		209,403		146,949		138,263
Capital stock	212		212		212		212		212
Shareholder’s equity (deficit) as restated(i)	(43,425	)	(47,861	)	15,911		(38,650	)	(34,865	)
Number of equity shares (000s)	21,235		21,235		21,235		21,235		21,235

(i) The Company has restated its US GAAP Shareholder’s equity (deficit) in recognition of an additional difference between UK GAAP and US GAAP, concerning gains arising from property sale and operating leaseback transactions. See Note 29 of Notes to the Financial Statements.

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
1999	1.6062	1.6186	1.6885	1.5515
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

	High	Low
September 2003	1.6642	1.5732
October 2003	1.7025	1.6598
November 2003	1.7219	1.6693
December 2003	1.7842	1.7200
January 2004	1.8511	1.7902
February 2004	1.9045	1.8182
March 2004 (through March 24, 2004)	1.8680	1.7943

(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 24, 2004, the latest practicable date prior to filing this report, the rate was $1.8351 = £1.00. The US dollar liability under the Senior Notes has been translated at $1.7101 = £1.00 being the representative US dollar/UK sterling exchange rate on November 29, 2003 (November 30, 2002 $1.5515 = £1.00, November 24, 2001 $1.4100 = £1.00).

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RISK FACTORS

Substantial Leverage and Debt Service Requirements

As of November 29, 2003, the Company’s consolidated long-term indebtedness, calculated in accordance with UK GAAP, was £136.2 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 June 2003, 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 annually renewable agreement grants HBOS a charge over certain assets of the Company as security.

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 29, 2003, the Company had approximately £85.8 million of such liabilities, including £68.1 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 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.

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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 United States 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 United States 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 30 per cent of its revenues from continuing operations in Fiscal 2003. 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 have, a detrimental effect on the sales of tobacco products. Given the fact that tobacco related products

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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 on improving public health, one of the central tenets of which is the reduction of levels of smoking. Accordingly, the Government is consulting on a number of issues related to achieving its aim of reducing levels of smoking. Some of the measures it has considered, is considering or has implemented to control smoking include: continuing to make smoking more expensive through taxation, reducing exposure to environmental tobacco smoke by encouraging employers and others to provide a smoke-free environment for non-smokers and banning smoking in public service buildings and on public transport, ending advertising and promotion of cigarettes, enforcing the prohibition on sale of cigarettes to minors, raising the price of tobacco each year to discourage people from smoking and providing information on the health risks of smoking.

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. 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, Forbuoys’ previous sale of cigarettes under its own brand name, although 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 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

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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.

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 it has adequate depth at all levels of management. To ensure continuity of management, the Company has entered into service agreements with Mr. Lancaster, Mr. Cox and Mr. Saunders (the “Executive Directors”), and the Company has also obtained “Key Man” life insurance policies on the first two of these Executive Directors.

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.

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

At the start of Fiscal 2003, the Company had a series of options to purchase a total of $125 million (and sell pounds sterling) at the rate of $1.55 = £1.00 ($100 million) and $1.60 = £1.00 ($25 million). These options expired in May 2003.

As of November 29, 2003 the Company had a similar option on $125 million at the rate of $1.59 = £1.00 which expired during March 2004.

A further option on $145 million was purchased during March 2004 at the rate of $1.7025 = £1.00.

The Company could still be exposed to material currency translation fluctuations upon the expiration of its latest option on July 2, 2004. Although the Company may seek to enter into a further set of hedging arrangements, there can be no assurance that it will, or will be able to do so on commercially attractive terms. Not obtaining such hedging arrangements (or, in the alternative, not redeeming the Senior Notes on or before July 2, 2004) could result in foreign currency translation losses that would have a material adverse effect on the Company’s financial position and earnings.

The Company’s foreign exchange forward contract for the purchase of US dollar amounts equal to the total of the first ten interest payments on the Senior Notes also expired in May 2003. Management has not yet determined whether to enter into any hedging arrangements with respect to future interest payments. Failure by the Company to enter into any hedging arrangements with respect to these interest payments or,

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in the alternative, to redeem the Notes, would further expose the Company to potential exchange rate fluctuations relating to the Senior Notes, which also could have a material adverse effect on the Company’s financial position and earnings.

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.

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 15. Controls and Procedures

As of November 29, 2003, 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:

The Company’s auditors, Ernst & Young LLP, identified an error in respect of the Company’s accounting for property sale and operating leaseback transactions under US GAAP. Consequently, the Company has restated, under US GAAP, the gains arising from property sale and operating leaseback transactions that were previously recognised in the year of the transaction, as discussed more fully in Note 29 of Notes to the Financial Statements. This resulted in the Company restating its Fiscal 2002 and Fiscal 2003 US GAAP net income (loss) and shareholders’ deficit. There are no changes to the Company’s Fiscal 2002 and Fiscal 2003 financial statements and related notes prepared in accordance with UK GAAP.

In January 2005, the Company’s auditors, 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.

Subject to the foregoing, since November 29, 2003 there have been no significant changes in the Company’s internal financial controls or in other factors that could significantly affect internal financial controls.

- 13 -

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 52 weeks ended November 24, 2001, the 53 weeks ended November 30, 2002 and the 52 weeks ended November 29, 2003	F-2
Consolidated Balance Sheets at November, 30 2002 and November 29, 2003	F-3
Consolidated Statements of Changes in Shareholder’s Funds for the 52 weeks ended November 24, 2001, the 53 weeks ended November 30, 2002 and the 52 weeks ended November 29, 2003	F-4
Consolidated Cash Flow Statements for the 52 weeks ended November 24, 2001, the 53 weeks ended November 30, 2002 and the 52 weeks ended November 29, 2003	F-5
Notes to the Financial Statements	F-6
Schedule for the 52 weeks ended November 24, 2001, the 53 weeks ended November 30, 2002 and the 52 weeks ended November 29, 2003 Valuation and Qualifying Accounts	S-1

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))
8.	List of principal subsidiaries (Previously filed as exhibit 8 to the Original Filing)
12.1	Section 302 Certification of Chief Executive Officer as required by Rule 13a – 14(a) or Rule 15d – 14(a) (Filed herewith).
12.2	Section 302 Certification of Chief Financial Officer as required by Rule 13a – 14(a) or Rule 15d – 14(a) (Filed herewith).
13.1	Section 906 Certification of Chief Executive Officer as required by Rule 13a – 14(b) or Rule 15d – 14(b) (Furnished herewith).
13.2	Section 906 Certification of Chief Financial Officer as required by Rule 13a - 14(b) or Rule 15d - 14(b) (Furnished herewith).

- 14 -

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 amendment of its annual report on its behalf.

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

JANUARY 31, 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 30, 2002 and November 29, 2003, 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 52 weeks ended November 24, 2001, the 53 weeks ended November 30, 2002 and the 52 weeks ended November 29, 2003. 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 examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as 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 30, 2002 and November 29, 2003, and the consolidated results of its operations and its consolidated cash flows for the 52 weeks ended November 24, 2001, the 53 weeks ended November 30, 2002 and the 52 weeks ended November 29, 2003, 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.

/s/ Ernst & Young LLP

ERNST & YOUNG LLP

London, England

March 26, 2004, except for

Note 29, Differences between United Kingdom and

United States Generally Accepted Accounting Principles,

as to which the date is

January 31, 2005

F -1-

TM GROUP HOLDINGS PLC

CONSOLIDATED PROFIT AND LOSS ACCOUNTS

	Notes	52 weeks ended (Restated) (i) November 24, 2001		53 weeks ended (Restated) (i) November 30, 2002		52 weeks ended November 29, 2003
		(£ thousands)
Sales	3
Continuing operations		661,050		664,461		635,453
Discontinued operations		42,792		—		—
		703,842		664,461		635,453
Cost of sales		(524,220	)	(502,974	)	(472,952	)
Gross profit		179,622		161,487		162,501
Selling and distribution costs		(136,368	)	(125,157	)	(127,968	)
Administrative expenses before exceptional items		(19,740	)	(18,063	)	(15,882	)
exceptional items	4	—		(759	)	—
		(156,108	)	(143,979	)	(143,850	)
Operating profit:
Continuing operations	5	21,535		17,508		18,651
Discontinued operations		1,979		—		—
		23,514		17,508		18,651
Profit on sale of fixed assets:
Continuing operations		3,013		3,907		3,908
Discontinued operations		124		—		—
		3,137		3,907		3,908
Profit on sale of discontinued operations	6	51,507		—		—
Profit before interest and taxation:
Continuing operations		24,548		21,415		22,559
Discontinued operations		53,610		—		—
		78,158		21,415		22,559
Net interest payable and similar charges	9	(21,274	)	(20,532	)	(12,094	)
Profit before taxation		56,884		883		10,465
Taxation	10	(605	)	(139	)	(2,021	)
Profit for the period(ii)		56,279		744		8,444
Equity dividends	11	—		(22,450	)	—
Profit/(loss) retained for the period(iii)		56,279		(21,706	)	8,444

⁽ⁱ⁾ The Company has revised the presentation of sales arising from the processing of electronic phone top-up transactions, to reflect only the commission earned on these transactions. Further details are set out in note 2.

⁽ⁱⁱ⁾ 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.

⁽ⁱⁱⁱ⁾ 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 NOTESTOTHE FINANCIAL STATEMENTSFORMANINTEGRALPARTOFTHESE FINANCIAL STATEMENTS.

F -2-

TM GROUP HOLDINGS PLC

CONSOLIDATED BALANCE SHEETS

	Notes	November 30, 2002		November 29, 2003
		(£ thousands)
Fixed assets
Goodwill	12	6,718		7,533
Tangible assets	13	50,826		47,728
		57,544		55,261
Current assets
Inventories	15	34,378		34,115
Debtors	16	22,389		27,844
Other current assets	17	2,780		177
Cash at bank and in hand		21,410		25,625
		80,957		87,761
Creditors: amounts falling due within one year
Trade creditors		(67,216	)	(68,091	)
Other liabilities	18	(12,972	)	(17,026	)
		(80,188	)	(85,117	)
Net current assets		769		2,644
Total assets less current liabilities		58,313		57,905
Creditors: amounts falling due after more than one year
Loans	19	(144,470	)	(136,240	)
Other liabilities		(767	)	(697	)
		(145,237	)	(136,937	)
Provisions for liabilities and charges	21	(2,711	)	(2,159	)
Net liabilities		(89,635	)	(81,191	)
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		(50,482	)	(42,038	)
Equity shareholder’s funds (deficit)		(89,635	)	(81,191	)

⁽ⁱ⁾ A summary of the significant adjustments to capital and reserves 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 NOTESTOTHE FINANCIAL STATEMENTSFORMANINTEGRALPARTOFTHESE 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 26, 2000, November 24, 2001, November 30, 2002 and November 29, 2003	26,235	262
Issued
Balance at November 26, 2000, November 24, 2001, November 30, 2002 and November 29, 2003	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 26, 2000	212	20,527	(59,892	)	(127,062	)	(166,215	)
Profit for the period	—	—	—		56,279		56,279
Goodwill previously written off in respect of disposals	—	—	—		41,707		41,707
Balance at November 24, 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	)

⁽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 £92,552,000 (2002: £92,552,000, 2001: £92,852,000) goodwill written off.

THE NOTESTOTHE FINANCIAL STATEMENTSFORMANINTEGRALPARTOFTHESE FINANCIAL STATEMENTS.

F -4-

TM GROUP HOLDINGS PLC

CONSOLIDATED CASH FLOW STATEMENTS

	Notes	52 weeks ended November 24, 2001		53 weeks ended November 30, 2002		52 weeks ended November 29, 2003
	(£ thousands)
Net cash inflow from operating activities	23	28,159		19,617		24,970
Returns on investments and servicing of finance
Interest received		2,186		2,352		219
Interest paid		(23,744	)	(23,209	)	(16,460	)
Premia on redemption of loans and Senior and Senior Subordinated Notes		—		(1,950	)	—
Finance lease interest		(4	)	—		—
		(21,562	)	(22,807	)	(16,241	)
Taxation
Corporation tax refunded/(paid)		178		(1,691	)	311
Capital expenditure and financial investment
Payments to acquire tangible fixed assets		(13,537	)	(8,686	)	(8,764	)
Receipts from sale of tangible fixed assets		4,827		5,692		6,817
		(8,710	)	(2,994	)	(1,947	)
Acquisitions and disposals
Receipts from sale of businesses	14	109,549		2,458		1,250
Cash disposed of with businesses		(1,836	)	—		—
Purchase of businesses	14	(1,829	)	(2,520	)	(2,676	)
		105,884		(62	)	(1,426	)
Management of liquid resources
(Increase)/decrease in short-term deposits		(82,637	)	83,394		(1,262	)
Equity dividends paid		—		(22,450	)	—
Net cash inflow before financing		21,312		53,007		4,405
Financing
Redemption of Senior and Senior Subordinated Notes	23	—		(21,486	)	—
Repayment of loans	23	(30,192	)	(30,287	)	—
Purchase of hedging instruments		—		—		(1,452	)
Repayment of capital element of finance lease rentals	23	(103	)	(3	)	—
		(30,295	)	(51,776	)	(1,452	)
(Decrease)/increase in cash (excluding short-term deposits)	23	(8,983	)	1,231		2,953

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 NOTESTOTHE FINANCIAL STATEMENTSFORMANINTEGRALPARTOFTHESE 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.

The Company has revised the presentation of turnover arising from the processing of electronic phone top-up transactions, to reflect only the commission earned on these transactions. This change has no impact on profit or on the balance sheet. The comparative figures for turnover and cost of sales have been adjusted accordingly, resulting in a reduction in turnover and cost of sales of £27,313,000 for the period ended November 30, 2002 and £2,073,000 for the period ended November 24, 2001.

Revenue recognition

Retailing — 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.

Beverage and snack vending — Sales were recognised when product was sold from a vending machine or delivered to a customer in the case of wholesale deliveries. Machine sales were recognised on delivery. Maintenance revenue relating to vending machines was recognised over the period of the contracts in respect of long-term contracts and on completion of a technical repair in other cases.

Cigarette vending — Sales were recognised when the cash in vending machines was collected or product was delivered to the customer in the case of wholesale deliveries.

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 24, 2001, November 30, 2002 and November 29, 2003.

F -6-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS

2. Accounting Policies (continued)

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”).

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.

F -7-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

2. Accounting Policies (continued)

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.

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.

F -8-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

2. Accounting Policies (continued)

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 are 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.

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 52 weeks ended November 24, 2001		Restated 53 weeks ended November 30, 2002		52 weeks ended November 29, 2003
	(£ thousands)
Sales
Continuing operations
Retailing	661,050		664,461		635,453
Discontinued operations
Cigarette vending	5,812		—		—
Beverage and snack vending	36,980		—		—
	703,842		664,461		635,453
Cost of sales
Continuing operations
Retailing	(504,038	)	(502,974	)	(472,952	)
Discontinued operations
Cigarette vending	(4,591	)	—		—
Beverage and snack vending	(15,591	)	—		—
	(524,220	)	(502,974	)	(472,952	)
Selling, distribution and advertising costs
Continuing operations
Retailing	(118,178	)	(125,157	)	(127,968	)
Discontinued operations
Cigarette vending	(1,103	)	—		—
Beverage and snack vending	(17,087	)	—		—
	(136,368	)	(125,157	)	(127,968	)
Administrative expenses
Continuing operations
Retailing	(14,306	)	(14,775	)	(12,526	)
Central	(2,993	)	(3,288	)	(3,356	)
Discontinued operations
Cigarette vending	—		—		—
Beverage and snack vending	(2,441	)	—		—
	(19,740	)	(18,063	)	(15,882	)
Profit/(loss) before interest & taxation
Continuing operations
Retailing	24,528		21,555		22,007
Central costs	(2,993	)	(3,288	)	(3,356	)
	21,535		18,267		18,651
Discontinued operations
Cigarette vending	118		—		—
Beverage and snack vending	1,861		—		—
	23,514		18,267		18,651
Profit on sale of fixed assets	3,137		3,907		3,908
Profit on disposal of businesses	51,507		—		—
Business restructuring	—		(759	)	—
	78,158		21,415		22,559
Capital expenditure
Continuing operations
Retailing	10,832		8,686		8,757
Central	131		—		7
	10,963		8,686		8,764
Discontinued operations
Cigarette vending	—		—		—
Beverage and snack vending	2,574		—		—
	13,537		8,686		8,764
Depreciation and amortisation
Continuing operations
Retailing	9,874		10,669		10,471
Central	78		61		63
	9,952		10,730		10,534
Discontinued operations
Cigarette vending	102		—		—
Beverage and snack vending	2,265		—		—
	12,319		10,730		10,534

F -10-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

Net Assets

	November 30, 2002		November 29, 2003
	(£ thousands)
Allocated net assets
Retailing	26,573		25,542
Unallocated net liabilities	(116,208	)	(106,733	)
	(89,635	)	(81,191	)
Unallocated net liabilities comprise
Fixed assets	125		92
Pension (liability)/asset	1,753		5,612
Other debtors	4,088		2,695
Other current assets	2,780		177
Cash at bank and in hand	21,410		25,625
Corporation tax	(1,373	)	(2,789	)
Deferred taxation	976		60
Other creditors and accruals	(1,497	)	(1,965	)
Bank and other loans	(144,470	)	(136,240	)
	(116,208	)	(106,733	)
Total Assets
	November 30, 2002		November 29, 2003
	(£ thousands)
Continuing operations
Retailing	107,369		108,761
Central	31,132		34,261
	138,501		143,022

4. Operating Exceptional Item

	52 weeks ended November 24, 2001	53 weeks ended November 30, 2002	52 weeks ended November 29, 2003
	(£ thousands)
Redundancies	—	759	—

Redundancy costs arose in the restructuring of the TM Retail business.

5. Operating Profit

Operating profit is stated after charging/(crediting):

	52 weeks ended November 24, 2001		53 weeks ended November 30, 2002		52 weeks ended November 29, 2003
	(£ thousands)
Advertising	52		47		32
Auditors’ remuneration
— audit services	195		215		240
— non-audit services	257		258		432
Amortisation of goodwill	223		257		398
Depreciation of owned assets	11,960		10,454		10,136
Depreciation of assets held under finance leases	136		19		—
Operating lease payments
— land and buildings	24,897		25,580		26,387
— plant and machinery	455		15		8
Operating lease income
— land and buildings	(3,345	)	(3,421	)	(3,655	)

F -11-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

6. Profit on Sale of Discontinued Operations

	52 weeks ended November 24, 2001	53 weeks ended November 30, 2002	52 weeks ended November 29, 2003
	(£ thousands)
Profit on sale of Mayfair business of TM Vending Ltd (note 14)	14,576	—	—
Profit on sale of TM Group Ltd and subsidiaries (note 14)	36,931	—	—
	51,507	—	—

7. Directors’ Remuneration

	52 weeks ended November 24, 2001	53 weeks ended November 30, 2002	52 weeks ended November 29, 2003
	(£ thousands)
Emoluments	1,463	945	1,620
Company contribution to money purchase pension scheme	—	—	101
Amounts paid to third parties for services of directors	40	41	42
	1,503	986	1,763

Three directors were members of the Group’s defined benefit pension scheme until February 2003. For the remainder of the period, there were two (2002: three; 2001: three).

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. The remuneration, excluding pension contributions, of the highest paid director for the 52 weeks ended November 24, 2001 was £608,000 and his accrued pension benefit was £227,900.

Company contributions for one director were made to a money purchase scheme (2002: none; 2001: none).

8. Staff Costs

	52 weeks ended November 24, 2001	53 weeks ended November 30, 2002	52 weeks ended November 29, 2003
	(£ thousands)
Wages and salaries	85,264	79,820	79,110
Social security costs	4,921	4,417	4,784
Other pension costs	1,190	819	641
	91,375	85,056	84,535

The above staff costs exclude directors’ emoluments

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

	52 weeks ended November 24, 2001	53 weeks ended November 30, 2002	52 weeks ended November 29, 2003
	(number)
Continuing businesses
Retailing	10,962	10,530	10,397
Central	6	6	4
Discontinued businesses
Beverage and snack vending	626	—	—
Cigarette vending	14	—	—
	11,608	10,536	10,401

F -12-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

9. Net Interest Payable and Similar Charges

	52 weeks ended November 24, 2001		53 weeks ended November 30, 2002		52 weeks ended November 29, 2003
	(£ thousands)
Interest receivable Third parties	(2,186	)	(2,352	)	(219	)
Interest payable Bank loans and overdrafts	2,510		92		94
Other loans	23,408		21,984		16,819
Premia on redemption of loans and Senior and Senior Subordinated Notes	—		1,950		—
Finance charges payable under finance leases	4		—		—
	25,922		24,026		16,913
Similar charges
Gain on retranslation of Senior Notes	(887	)	(9,398	)	(8,686	)
Gain on redemption of Senior Notes	—		(1,280	)	—
Revaluation and write off of currency options	(1,684	)	9,507		4,055
Unwinding of discount included in provisions	109		29		31
	(2,462	)	(1,142	)	(4,600	)
Net interest payable and similar charges	21,274		20,532		12,094

10. Taxation

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

	52 weeks ended November 24, 2001		53 weeks ended November 30, 2002		52 weeks ended November 29, 2003
	(£ thousands)
Current tax:
Current tax on income for the period	1,250		608		1,774
Adjustments in respect of prior periods	—		(71	)	(669	)
	1,250		537		1,105
Deferred tax:
Origination and reversal of timing differences	1,117		(874	)	970
Adjustments in respect of prior periods	(1,762	)	476		(54	)
	(645	)	(398	)	916
Total tax on profit on ordinary activities	605		139		2,021

Factors affecting current tax charge:

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

	52 weeks ended November 24, 2001		53 weeks ended November 30, 2002		52 weeks ended November 29, 2003
	%		%		%
UK statutory rate	30.0		30.0		30.0
Disallowed expenses and non-taxable income	(25.8	)	(60.1	)	(3.8	)
Adjustments in respect of previous periods	—		(8.1	)	(6.4	)
Deferred tax recognised	(2.0	)	99.0		(9.2	)
Total current tax charge	2.2		60.8		10.6

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:

	52 weeks ended November 24, 2001		53 weeks ended November 30, 2002		52 weeks ended November 29, 2003
	%		%		%
UK statutory rate	30.0		30.0		30.0
Non-tax deductible depreciation of fixed assets	1.3		74.4		6.8
Permanent differences	(1.8	)	11.7		1.9
Non-taxable profit in respect of disposals	(25.3	)	(146.1	)	(12.5	)
Prior year adjustments	(3.1	)	45.8		(6.9	)
Effective tax rate	1.1		15.8		19.3

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 (2002: nil; 2001: nil).

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

	November 30, 2002		November 29, 2003
	(£ thousands)
At the beginning of the period	(110	)	(976	)
(Credit)/charge for the period	(398	)	916
Transfer to corporation tax	(468	)	—
At the end of the period	(976	)	(60	)

The deferred tax asset comprises:

	52 weeks ended November 24, 2001		53 weeks ended November 30, 2002		52 weeks ended November 29, 2003
	(£ thousands)
(Decelerated)/accelerated capital allowances	(114	)	(964	)	42
Other timing differences	4		(12	)	(102	)
Total asset included in debtors	(110	)	(976	)	(60	)

11. Dividends

	52 weeks ended November 24, 2001	53 weeks ended November 30, 2002	52 weeks ended November 29, 2003
	(£ 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 November 25, 2001	5,176
Additions	2,183
Disposals	(34	)
At November 30, 2002	7,325
Additions	1,245
Disposals	(37	)
At November 29, 2003	8,533
Amortisation:
At November 25, 2001	360
Provided during the year	257
Disposals	(10	)
At November 30, 2002	607
Provided during the year	398
Disposals	(5	)
At November 29, 2003	1,000
Net book value:
At November 30, 2002	6,718
At November 29, 2003	7,533

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 November 25, 2001	21,063		56,688		77,751
Additions	2,699		5,987		8,686
Acquisitions	—		194		194
Disposals	(1,785	)	(2,539	)	(4,324	)
At November 30, 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 29, 2003	22,055		65,303		87,358
Depreciation
At November 25, 2001	3,117		20,754		23,871
Charge for the period	2,175		8,298		10,473
Disposals	(866	)	(1,997	)	(2,863	)
At November 30, 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 29, 2003	6,105		33,525		39,630
Net book value
At November 30, 2002	17,551		33,275		50,826
At November 29, 2003	15,950		31,778		47,728

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, 2002	7,473	1,189	8,889	17,551
At November 29, 2003	6,518	1,096	8,336	15,950

14. Acquisitions and Disposals

During Fiscal 2001, Fiscal 2002 and Fiscal 2003, the Group made a number of small acquisitions, none of which was considered material to the Group, an analysis of which is shown below:

	52 weeks ended November 24, 2001	53 weeks ended November 30, 2002	52 weeks ended November 29, 2003
	(£ thousands)
Net assets at the date of acquisition Tangible fixed assets	112	194	1,151
Inventories	228	143	280
	340	337	1,431
Goodwill arising on acquisition	1,489	2,183	1,245
	1,829	2,520	2,676
Discharged by:
Cash paid	1,829	2,520	2,676

During Fiscal 2001, the Group disposed of the Mayfair Services business of TM Vending Limited, TM Group Limited, Vendepac Limited and its subsidiary companies. The disposals are summarised as follows:

	(£ thousands)
Net assets disposed of:
Tangible fixed assets	20,633
Goodwill (including amounts previously eliminated against reserves)	43,908
Stock	13,830
Debtors	10,414
Creditors	(23,957	)
Cash	1,836
	66,664
Pension scheme surplus released	(2,414	)
Profit on disposal (note 5)	51,507
	115,757
Satisfied by:
Cash	112,155
Deferred consideration	6.208
Disposal costs	(2,606	)
	115,757

During Fiscal 2003, 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 £2,500,000 in relation to the disposal of the Mayfair business is included in other debtors of which £1,250,000 is due after more than one year (note 16).

F -16-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

15. Inventories

	November 30, 2002	November 29, 2003
	(£ thousands)
Goods for resale	34,378	34,115

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

16. Debtors

	November 30, 2002	November 29, 2003
	(£ thousands)
Trade debtors	2,823	3,169
Other debtors	13,090	15,896
Pension asset	1,753	5,612
Deferred taxation	976	60
Pre-payments	3,747	3,107
	22,389	27,844
Due within one year	17,160	20,922
Other debtors due after more than one year	5,229	6,922
	22,389	27,844

Trade debtors at November 29, 2003 are shown net of provisions for bad and doubtful debts of £175,000 (2002: £182,000).

17. Other Current Assets

	November 30, 2002	November 29, 2003
	(£ thousands)
Currency options	2,780	177

18. Creditors: Amounts Falling Due Within One Year

	November 30, 2002	November 29, 2003
	(£ thousands)
Other liabilities:
Amount owed to parent undertaking	18	269
Group relief payable	36	33
Corporation tax	1,337	2,756
Taxation and social security	1,208	2,909
Other creditors	5,122	3,022
Accruals	5,251	8,037
	12,972	17,026

F -17-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

19. Loans

	November 30, 2002		November 29, 2003
	(£ thousands)
Bank and other loans repayable otherwise than by instalments
$145.3 million 11% Senior Notes due May 15, 2008	93,649		84,963
£53.3 million 12.25% Senior Subordinated Notes due May 15, 2008	53,300		53,300
	146,949		138,263
Less: unamortised issue costs	(2,479	)	(2,023	)
Total borrowings	144,470		136,240

The $145,297,000 Senior Notes due in May 2008 have been translated at November 29, 2003 at the rate of $1.7101 = £1 (2002: $1.5515). 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 30, 2002		November 29, 2003
	(£ thousands)
Amounts falling due:
In more than two years but not more than five years	—		138,263
In more than five years	146,949		—
	146,949		138,263
Less: unamortised issue costs	(2,479	)	(2,023	)
Total borrowings	144,470		136,240

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 30, 2002
Sterling	53,300	—	81,085	134,385
US dollar	93,649	—	—	93,649
	146,949	—	81,085	228,034
As at November 29, 2003
Sterling	53,300	—	82,275	135,575
US dollar	84,963	—	—	84,963
	138,263	—	82,275	220,538

	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 30, 2002
Sterling	12.25	5.50	0.41
US dollar	11.00	5.50	—
	11.45	5.50	0.41
As at November 29, 2003
Sterling	12.25	4.50	0.38
US dollar	11.00	4.50	—
	11.45	4.50	0.38

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 30, 2002
Sterling	—	21,410	18,693	40,103
As at November 29, 2003
Sterling	—	25,625	19,242	44,867

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 0.3 years (2002: 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 29, 2003 of which £5,000,000 was allocated as an overdraft facility. These facilities are renewable annually.

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.

Since 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 covers US borrowings of $125,000,000. A further option to purchase $145,000,000 at the rate of $1.7025 = £1 was acquired during March 2004 which expires on July 2, 2004.

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 2, 2004. The Group will continue to review its hedging arrangements and may amend them if it can do so on commercially attractive terms.

Maturity of financial liabilities

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

	November 30, 2002	November 29, 2003
	(£ thousands)
In one year or less, or on demand	78,312	79,980
In more than one year but not more than two	1,255	1,086
In more than two years, but no more than three	127	101
In more than three years, but no more than four	127	101
In more than four years, but not more than five	126	138,363
In more than five years	148,087	907
	228,034	220,538

F -20-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

20. Financial Risk Management (continued)

Borrowing facilities

The Group has certain borrowing facilities available to it for general working capital requirements, none of which were drawn at November 29, 2003 (2002 - nil). Expiration of these facilities is as follows:

	November 30, 2002	November 29, 2003
	(£ 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 30, 2002				At November 29, 2003
	Book Value		Fair Value		Book value		Fair value
	(£ thousands)
Primary financial instruments
Financial liabilities
Short-term creditors	(77,607	)	(77,607	)	(79,419	)	(79,419	)
Long-term borrowings	(146,949	)	(146,459	)	(138,263	)	(141,863	)
Long-term creditors	(767	)	(767	)	(697	)	(697	)
Provisions	(2,711	)	(2,711	)	(2,159	)	(2,159	)
	(228,034	)	(227,544	)	(220,538	)	(224,138	)
Financial assets
Currency Options	2,780		2,780		177		177
Short-term debtors	13,413		13,413		17,815		17,815
Long-term debtors	2,500		2,500		1,250		1,250
Cash and short-term deposits	21,410		21,410		25,625		25,625
	40,103		40,103		44,867		44,867

Derivative financial instruments held to hedge currency exposure

	At November 30, 2002		At November 29, 2003
	Book Value	Fair Value	Book value	Fair value
	(£ thousands)
Forward foreign currency contracts	—	199	—	—

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.

F -21-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

20. Financial Risk Management (continued)

Hedges

Unrecognised gains and losses on financial instruments used for hedging are as follows:

	Gains	Losses	Total
	(£ thousands)
As at November 30, 2002
Gains and losses unrecognised at November 30, 2002	199	—	199
Gains and losses expected to be recognised in the profit and loss account in the period to November 29, 2003	199	—	199
Gains and losses included in the profit and loss account that arose in previous periods	2,083	—	2,083

There were no unrecognised gains or losses on financial instruments used for hedging as at November 29, 2003.

There has been a recognised loss of £109,000 during Fiscal 2003 relating to the financial instruments held at November 30, 2002.

21. Provisions for Liabilities and Charges

	Dilapidations		Onerous Contracts		Other		Total
	(£ thousands)
At November 26, 2000	1,277		3,202		9		4,488
Released during the period	(21	)	(124	)	—		(145	)
Unwinding of discount included in provisions	8		101		—		109
Utilised during the period	(231	)	(1,052	)	(5	)	(1,288	)
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

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.

F -22-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

22. Other Financial Commitments

	November 30, 2002	November 29, 2003
	(£ thousands)
Capital commitments
Contracted but not provided for	72	821
Annual commitments under non-cancellable operating leases
Land and buildings leases expiring:
Within one year	543	952
Between two and five years	7,126	7,481
After more than five years	15,086	14,768
	22,755	23,201
Other leases expiring:
Between two and five years	—	116
	22,755	23,317

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

	November 29, 2003
	Land and Buildings	Other
	(£ thousands)
Within one year	23,201	116
Between one and two years	21,513	116
Between two and three years	19,572	58
Between three and four years	17,626	—
Between four and five years	15,920	—
After five years	91,009	—
	188,841	290

23. Cash Flow Statements

	52 weeks ended November 24, 2001		53 weeks ended November 30, 2002		52 weeks ended November 29, 2003
	(£ thousands)
Reconciliation of net cash flow to movement in net debt
(Decrease)/increase in cash in the period	(8,983	)	1,231		2,953
Increase/(decrease) in short-term deposits	82,637		(83,394	)	1,262
Repayment of loans	30,192		51,773		—
Repayment of lease financing	103		3		—
Change in net debt resulting from cash flows	103,949		(30,387	)	4,215
Change in net debt resulting from exchange movement	887		10,678		8,686
Movement in un-amortised finance costs	(1,417	)	(1,545	)	(456	)
Movement in net debt in the period	103,419		(21,254	)	12,445
Net debt at the beginning of the period	(205,225	)	(101,806	)	(123,060	)
Net debt at the end of the period	(101,806	)	(123,060	)	(110,615	)
Comprising:
Cash at bank and in hand	103,573		21,410		25,625
Loans due after one year	(187,052	)	(137,111	)	(137,567	)
Exchange differences arising on retranslation of Senior Notes	(18,037	)	(7,359	)	1,327
Loans due within one year	(287	)	—		—
Finance leases	(3	)	—		—
	(101,806	)	(123,060	)	(110,615	)

F -23-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

23. Cash Flow Statements (continued)

	52 weeks ended November 24, 2001		53 weeks ended November 30, 2002		52 weeks ended November 29, 2003
	(£ thousands)
Reconciliation of operating profit to net cashinflow from operating activities
Operating profit	23,514		17,508		18,651
Depreciation and amortisation charge	12,319		10,730		10,534
Decrease in provisions	(1,433	)	(482	)	(583	)
Decrease in inventories	1,161		555		543
Decrease/(increase) in debtors	(429	)	1,149		(7,621	)
(Decrease)/increase in creditors	(6,973	)	(9,843	)	3,446
Net cash inflow from operating activities	28,159		19,617		24,970
Analysis of changes in loan financing during the period
At the beginning of the period	235,038		205,376		144,470
Redemption of Senior and Senior Subordinated Notes	—		(21,486	)	—
Repayment of loans	(30,192	)	(30,287	)	—
Movement in exchange differences	(887	)	(10,678	)	(8,686	)
Movement in un-amortised finance costs	1,417		1,545		456
At the end of the period	205,376		144,470		136,240
Analysis of changes in finance leases during the period
At the beginning of the period	106		3		—
Capital element of finance lease rental payments	(103	)	(3	)	—
At the end of the period	3		—		—

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).

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	£24.3m

F -24-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

24. Pension Commitments (continued)

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:

	November 30, 2002		November 29, 2003
	£000		£000
Balance at the beginning of the period	1,391		1,753
Funding	1,181		4,500
Charged during the period	(819	)	(641	)
Balance at the end of the period	1,753		5,612

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 29, 2003 by qualified independent actuaries, using revised assumptions that are consistent with the requirements of FRS 17.

Main financial assumptions:

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

F -25-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

24. Pension Commitments (continued)

Expected return on assets:

	Long Term rate of return expected at		Value at November 30, 2002				Value at November 29, 2003
	November 30, 2002	November 29, 2003	TM Group Pension Scheme		TM Pension Plan		TM Group Pension Scheme		TM Pension Plan
	(% pa)		(£ millions)
Equities	7.7	8.0	42.1		14.5		40.6		16.4
Property	6.7	7.0	—		—		2.7		—
Government bonds	4.7	5.0	7.8		6.4		1.7		6.8
Corporate bonds	5.2	5.5	—		—		2.3		—
Other	4.2	4.5	0.9		—		0.5		—
Total market value of assets			50.8		20.9		47.8		23.2
Present value of scheme liabilities			(62.4	)	(28.9	)	(58.5	)	(31.5	)
Deficit in scheme			(11.6	)	(8.0	)	(10.7	)	(8.3	)
Related deferred tax asset			3.5		2.4		3.2		2.5
Net pension liability			(8.1	)	(5.6	)	(7.5	)	(5.8	)

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
	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
Settlement profit	—	—	(1.8	)	—
Total operating charge/(income)	1.0	0.5	(1.0	)	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
	TM Group Pension Scheme		TM Pension Plan		TM Group Pension Scheme		TM Pension Plan
	(£ millions)
Expected return on pension scheme assets	4.3		1.6		3.6		1.4
Interest on pension scheme liabilities	(4.0	)	(1.6	)	(3.4	)	(1.6	)
Total other finance income/(charge)	0.3		—		0.2		(0.2	)

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
	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
Experience gains and losses arising on the present value of scheme liabilities	3.7		1.1		(0.4	)	0.3
Changes in assumptions underlying the present value of scheme liabilities	5.8		0.6		(2.8	)	(2.1	)
Actuarial loss recognised in the statement of total recognised gains and losses	(2.5	)	(2.6	)	(3.3	)	(1.2	)

F -26-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

24. Pension Commitments (continued)

Analysis of movement in deficit during the period:

	53 weeks ended November 30, 2002				52 weeks ended November 29, 2003
	TM Group Pension Scheme		TM Pension Plan		TM Group Pension Scheme		TM Pension Plan
	(£ millions)
Opening balance	(9.1	)	(5.4	)	(11.6	)	(8.0	)
Total operating (charge)/income	(1.0	)	(0.5	)	1.0		(0.4	)
Total other finance income/(charge)	0.3		—		0.2		(0.2	)
Actuarial loss	(2.5	)	(2.6	)	(3.3	)	(1.2	)
Contributions	0.7		0.5		3.0		1.5
Closing balance	(11.6	)	(8.0	)	(10.7	)	(8.3	)

History of experience gains and losses:

	53 weeks ended November 30, 2002				52 weeks ended November 29, 2003
	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
Percentage of scheme assets	23.6	%	20.6	%	0.2	%	2.6	%
Experience gains and losses arising on the present value of scheme liabilities
Amount (£ millions)	3.7		1.1		(0.4	)	0.3
Percentage of the present value of scheme liabilities	5.9	%	3.8	%	0.7	%	1.0	%
Total actuarial loss recognised in statement of total recognised gains and losses
Amount (£ millions)	(2.5	)	(2.6	)	(3.3	)	(1.2	)
Percentage of the present value of scheme liabilities	4.0	%	9.0	%	5.7	%	3.8	%

Reconciliation of net liabilities and reserves under FRS 17:

	November 30, 2002		November 29, 2003
	(£ thousands)
Net liabilities as stated in balance sheet	(89,635	)	(81,191	)
SSAP 24 balance after deferred taxation	(1,227	)	(3,928	)
FRS 17 balance after deferred taxation	(13,700	)	(13,300	)
Net liabilities as adjusted for FRS 17	(104,562	)	(98,419	)
Profit and loss reserve as stated in balance sheet	(50,482	)	(42,038	)
SSAP 24 balance after deferred taxation	(1,227	)	(3,928	)
FRS 17 balance after deferred taxation	(13,700	)	(13,300	)
Profit and loss reserve as adjusted for FRS 17	(65,409	)	(59,266	)

25. Related Party Transactions

There were no related party transactions during Fiscal 2003. 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 Holdings 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 29, 2003. 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.

F -27-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

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 52 weeks ended November 24, 2001 and for the 53 weeks ended November 30, 2002, have been, and statutory accounts for the 52 weeks ended November 29, 2003 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 29, 2003, the Group would have reported a pension liability net of deferred taxation of £13.3 million, which compares with the pension asset net of deferred taxation of £3.9 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 £17.2 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.

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.

F -28-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

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

Discontinued operations

The operations of Mayfair and Vendepac have been treated as discontinued under both UK GAAP and US GAAP. However, unlike under UK GAAP, the result of discontinued operations is reported under US GAAP as one line, being net income for the period together with the profit on disposal of those operations.

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 for the period ended November 29, 2003. SFAS 142 requires that goodwill is not amortised, but is tested at least annually for impairment. The Group has performed the review at the start of the financial period (December 1, 2002) and at the end of Fiscal 2003. No impairment has resulted from these tests.

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.

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.

F -29-

TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

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

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. During the period ended November 29, 2003, the Group recognised a net loss of £139,000, net of tax, in other comprehensive income in respect of these changes. These cash flow hedges qualify for hedge accounting. 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

	52 weeks ended November 24, 2001		Restated(i) 53 weeks ended November 30, 2002		Restated(i) 52 weeks ended November 29, 2003
	(£ thousands)
Profit for the period as reported in the consolidated profit and loss account under UK GAAP	56,279		744		8,444
Adjustments
Pension costs	(1,729	)	(1,862	)	(6,403	)
Amortisation of goodwill	(5,202	)	(4,210	)	398
Profit on property sale and operating leaseback transactions	—		(481	)	(2,494	)
Goodwill in respect of disposals	12,945		66		—
Dilapidations provisions	900		31		8
Deferred taxation on adjustments	249		549		1,919
Net income/(loss) for the period as adjusted to accord with US GAAP	63,442		(5,163	)	1,872
Comprising:
Net income/(loss) for the period as adjusted to accord with US GAAP, as previously reported	63,442		(4,682	)	4,366
Restatement relating to deferral of gains on property sale and operating leaseback transactions(i)	—		(481	)	(2,494	)
Net income/(loss) for the period as adjusted to accord with US GAAP, as restated	63,442		(5,163	)	1,872

⁽ⁱ⁾ The restatement relates to the treatment under US GAAP of gains arising from property sale and operating leaseback transactions. Under US GAAP, such gains are recognised in proportion to the gross rental charged over the lease term. Under UK GAAP, gains arising from property sale and operating leaseback transactions are recognised in the period of the transaction. Previously, the Company accounted for gains arising from property sale and operating leaseback transactions under US GAAP using the same method as under UK GAAP. The effect of the restatement on the Company’s US GAAP financial statements is to decrease gains on property sale and operating leaseback transactions and thus increase net loss or decrease net income.

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)

Comprehensive income

Comprehensive income under US GAAP is as follows:

	52 weeks ended November 24, 2001		Restated(i) 53 weeks ended November 30, 2002		Restated(i) 52 weeks ended November 29, 2003
	(£ thousands)
Net income/(loss) for the period as adjusted to accord with US GAAP	63,442		(5,163	)	1,872
Other comprehensive income:
Pension (costs)/credit net of tax at 30%	—		(25,257	)	2,052
Change in fair value of derivatives net of tax at 30%	(820	)	(1,691	)	(139	)
Cumulative effect on prior periods of adoption of FAS 133 net of tax at 30%	2,650		—		—
	1,830		(26,948	)	1,913
Comprehensive income/(loss)	65,272		(32,111	)	3,785

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

	52 weeks ended November 24, 2001		53 weeks ended November 30, 2002		52 weeks ended November 29, 2003
Movement in Fair Value of Derivatives	(£ thousands)
At beginning of period	—		1,830		139
Effect on adoption of FAS 133	2,650		—		—
Losses during the period	(820	)	(1,691	)	(139	)
At end of period	1,830		139		—
Minimum pension accrual
At beginning of period	—		—		(25,257	)
Movement in the period	—		(25,257	)	2,052
At end of period	—		(25,257	)	(23,205	)
Total
At beginning of period	—		1,830		(25,118	)
Effect on adoption of FAS133	2,650		—		—
Movement in the period	(820	)	(26,948	)	1,913
At end of period	1,830		(25,118	)	(23,205	)

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)

Shareholder’s funds

	Restated(i) November 30, 2002		Restated(i) November 29, 2003
	(£ thousands)
Shareholder’s funds (deficit) as reported in the consolidated balance sheet under UK GAAP	(89,635	)	(81,191	)
Adjustments
Intangible fixed assets — goodwill Cost	85,585		65,205
Accumulated amortisation	(19,778	)	1,000
Net	65,807		66,205
Other intangible asset – pensions	211		120
Current assets - derivatives	199		—
Debtors due after more than one year:
Deferred issue costs	2,479		2,023
Pension accrual	(20,827	)	(24,207	)
Dilapidations provisions	(69	)	(61	)
Current liabilities:
Deferred gains on property sale and operating leaseback transactions	(36	)	(202	)
Deferred taxation
On adjustments	6,145		7,244
Creditors due after more than one year:
Deferred issue costs	(2,479	)	(2,023	)
Deferred gains on property sale and operating leaseback transactions	(445	)	(2,773	)
Shareholder’s equity (deficit) as adjusted to accord with US GAAP	(38,650	)	(34,865	)
Comprising:
Shareholder’s equity (deficit) as adjusted to accord with US GAAP, as previously reported	(38,169	)	(31,890	)
Restatement relating to deferral of gains on property sale and leaseback transactions	(481	)	(2,975	)
Shareholder’s equity (deficit) as adjusted to accord with US GAAP, as restated	(38,650	)	(34,865	)

(i) The restatement relates to the treatment under US GAAP of gains arising from property sale and operating leaseback transactions. Under US GAAP, such gains are recognised in proportion to the gross rental charged over the lease term. Under UK GAAP, gains arising from property sale and operating leaseback transactions are recognised in the period of the transaction. Previously, the Company accounted for gains arising from property sale and operating leaseback transactions under US GAAP using the same method as under UK GAAP. The effect of the restatement on the Company’s US GAAP financial statements is to decrease gains on property sale and operating leaseback transactions and thus decrease shareholder’s equity (increase shareholder’s deficit).

Reconciliation of movement in Shareholder’s funds under US GAAP

	Restated(i) November 29, 2003
	(£ thousands)
Shareholder’s equity (deficit) as adjusted to accord with US GAAP at beginning of the period	(38,650	)
Income for the period available for equity shareholders as adjusted to accord with US GAAP	1,872
Movement in other comprehensive income during period	1,913
Shareholder’s equity (deficit) as adjusted to accord with US GAAP at end of the period	(34,865	)

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)

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.

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

	52 weeks ended November 24, 2001		53 weeks ended November 30, 2002		52 weeks ended November 29, 2003
	(£ thousands)
Cash inflow/(outflow) from operating activities	6,775		(4,881	)	9,040
Cash inflow/(outflow) from investing activities	97,174		(3,056	)	(3,373	)
Cash outflow from financing activities	(30,295	)	(74,226	)	(1,452	)
Increase/(decrease) in cash and cash equivalents	73,654		(82,163	)	4,215
Cash and cash equivalents at: beginning of the period	29,919		103,573		21,410
end of the period	103,573		21,410		25,625
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:
	52 weeks ended November 24, 2001		53 weeks ended November 30, 2002		52 weeks ended November 29, 2003
	(£ thousands)
Service cost	2,425		1,641		1,672
Interest cost	4,786		4,599		5,462
Actual return on plan assets	(6,720	)	(5,539	)	(4,764	)
Net amortisation and deferral	18		1,395		3,791
Effect of settlement	(4	)	585		883
Net periodic pension cost	505		2,681		7,044
The major assumptions used in computing the pension cost were:
	November 24, 2001		November 30, 2002		November 29, 2003
Expected long-term rate of return on plan assets	6.50	%	6.70	%	6.60	%
Discount rate	5.50	%	5.70	%	5.60	%
Expected long-term rate of earnings increases	4.25	%	4.25	%	4.75	%

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TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

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

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

	November 30, 2002		November 29, 2003
	(£ thousands)
Accumulated benefit obligation (all vested)	90,748		89,414
Fair value of plan assets	71,674		70,819
Projected benefit obligation	(98,029	)	(97,475	)
Plan assets in deficit of projected benefit obligation	(26,355	)	(26,656	)
Unrecognised prior service cost	211		120
Unrecognised net loss	43,978		41,696
Prepaid pension cost	17,834		15,160

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

Reconciliation of plans’ projected benefit obligations is as follows:

	53 weeks ended November 30, 2002		52 weeks ended November 29, 2003
	(£ thousands)
Projected benefit obligation at beginning of period	85,412		98,029
Disposals	1,036		(6,891	)
Service cost	1,641		1,672
Interest cost	4,599		5,462
Plan participant contributions	415		350
Actuarial loss	9,545		7,029
Benefits paid	(4,619	)	(8,176	)
Projected benefit obligation at end of period	98,029		97,475

Reconciliation of change in fair value of plan assets:

	53 weeks ended November 30, 2002		52 weeks ended November 29, 2003
	(£ thousands)
Fair value of plan assets at beginning of period	86,149		71,674
Disposals	(1,231	)	(4,254	)
Actual return on plan assets	(10,221	)	6,725
Group contributions	1,181		4,500
Plan participant contributions	415		350
Benefits paid	(4,619	)	(8,176	)
Fair value of plan assets at end of period	71,674		70,819

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TM GROUP HOLDINGS PLC

NOTES TO THE FINANCIAL STATEMENTS (continued)

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

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 30, 2002		November 29, 2003
		(£ thousands)
Deferred taxation liabilities
Temporary differences		(60	)	—
Deficit of book value against taxation value of fixed assets		—		(40	)
		(60	)	(40	)
Deferred taxation assets Excess of book value over taxation value of fixed assets		962		—
Pension accrual		5,659		6,699
Taxation effect of losses carried forward		1,979		1,979
Taxation effect of provisions		560		645
		9,160		9,323
Less: Valuation allowance		(1,979	)	(1,979	)
Net deferred tax asset		7,121		7,304
Of which:
Current	��	(60	)	—
Non-current		7,181		7,304
		7,121		7,304

Concentrations of credit risk

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

At November 29, 2003 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 becomes 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 does not believe that this standard will result in any additional entities being consolidated into the Group.

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