LONDON -- Summary

Commenting on progress during the first half, Sir Terry Matthews, Chairman, said, "In cooperation with our channel partners, the Company is now well placed to address the needs of service providers around the world. I am pleased with our achievements to date. The Company is solid and has excellent business prospects."

*NEBS(3) - (Network Equipment Building System), ETSI - (European Telecommunications Standards Institute), BTNR - (British Telecom Network Requirement), IMS - (IP Multi-media Subsystem), TISPAN - (Telecoms and Internet converged Services & Protocols for Advanced Networks).

Chairman's Report for Newport Networks Group PLC ("Newport")

I am pleased to report that the market opportunities for the products and technology developed by Newport continue to grow generally as expected. The move by service providers to multimedia IP Broadband Networks is accelerating. As reported by major research organisations, the target market is expected to more than double next year to approximately $240m and the Newport technology is considered by most clients as best-in-class.

The Company has progressed well across all areas of operations, including the development of a broad range of sales opportunities across North and South America, Europe and Asia. While I am generally pleased with the progress of the Company, I am concerned with the timing and increased number of the programs we are involved with. In our 5th September Trading Update we disclosed that revenues for the current year are likely to be lower than that anticipated at the beginning of the year. This has come about as a result of delays in the timing of many of the programs, corresponding to a much wider range of interoperability testing than planned. The Company is accommodating a considerable increase in channel and client activity to address the many opportunities around the world.

Financial Performance.

Turnover in the six months to 30 June 2005 was £213,000 compared to £336,000 in the year to 31 December 2004. The loss after taxation for the six months to 30 June 2005 was £5.6m compared to a loss of £5.7m in the year to 31 December 2004. The claim for R&D Tax Credits for the year to 31 December 2004 has been agreed with the Inland Revenue and £1,030,000 has been received since 30 June 2005.

There has been a significant planned investment in capital equipment and inventory in the period, totaling over £2.6m. As a result of this investment, as well as the trading losses incurred, cash resources reduced from £18.9m at 31 December 2004 to £11.6m at 30 June 2005. At 31 August 2005 the cash balance was £9m.

Newport Networks Ltd.