content: <PAGE>
  
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                        SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549-1004
  
  
                                  --------------
  
                                     FORM 8-K
  
                                  --------------
  
                                  CURRENT REPORT
  
  
                      Pursuant to Section 13 or 15(d) of the
                          Securities Exchange Act of 1934
  
         Date of Report (Date of earliest event reported) June 14, 2000
  
                             -------------------
  
                               Global Crossing Ltd.
              (Exact name of registrant as specified in its charter)
  
                              -------------------
  
            Bermuda                     000-24565               98-0189783
  (State or other jurisdiction of      (Commission          (I.R.S. Employer
  incorporation or organization)       File Number)         Identification No.)
  
      Wessex House, 45 Reid Street
           Hamilton, Bermuda                               HM12
  (Address of principal executive offices)              (Zip Code)
  
  
         Registrant's telephone number, including area code (441) 296-8600
  
  ================================================================================
  <PAGE>
  
  Item 2. Acquisition or Disposition of Assets.
  
       On June 14, 2000, Global Crossing Ltd., a Bermuda company ("Global
  Crossing"), completed its acquisition of IPC Communications, Inc. and Ixnet,
  Inc. A copy of the Agreement and Plan of Merger among Global Crossing, Georgia
  Merger Sub Corporation, IPC Communications, Inc., IPC Information Systems,
  Inc., Idaho Merger Sub Corporation and IXnet, Inc. is incorporated by
  reference herein to Annex A of the information statement contained in Global
  Crossing's Registration Statement on Form S-4 (File No. 333-34592) filed on
  May 12, 2000.
  
  Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
  
       (a)  Financial Statements of Businesses Acquired.
  
            Consolidated and combined financial statements of IXnet, Inc. for the
            six months ended March 31, 2000;
  
            Consolidated and combined financial statements of IXnet, Inc. for each
            of the three years ended September 30, 1999;
  
            Consolidated financial statements of IPC Communications, Inc. for the
            six months ended March 31, 2000; and
  
            Consolidated financial statements of IPC Communications, Inc. for each
            of the three years ended September 30, 1999.
  
       (b)  Pro Forma Financial Information.
  
            Pro forma Global Crossing financial information as of and for the
            three months ended March 31, 2000; and
  
            Pro forma Global Crossing financial information for the year ended
            December 31, 1999.
  
                                         2
  <PAGE>
  
                                    IXNET, INC.
  
                            CONSOLIDATED BALANCE SHEETS
                                    (UNAUDITED)
  
                      (In thousands, except per share amount)
  
  <TABLE>
  <CAPTION>
                                                                   March 31,    September 30,
                                                                     2000          1999
                                                                     ----          ----
  <S>                                                            <C>            <C>
                          ASSETS
  Current assets:
   Cash and cash equivalents..................................   $  6,583       $ 39,020
    Marketable securities.....................................         --         28,357
    Marketable securities, restricted.........................      3,000         20,435
    Accounts receivable, net..................................     26,374         17,824
   Prepaids and other current assets..........................      6,946          5,505
                                                                 --------       --------
     Total current assets.....................................     42,903        111,141
  
  Long term marketable securities, restricted.................         --          6,065
  Property and equipment, net.................................    100,316         80,170
  Goodwill, net...............................................     73,809         49,773
  Other assets................................................        768            889
                                                                 --------       --------
     Total assets.............................................   $217,796       $248,038
                                                                 ========       ========
  
                        LIABILITIES AND STOCKHOLDERS' EQUITY
  Current liabilities:
   Accounts payable...........................................  $  28,599      $  10,198
   Accrued liabilities........................................     30,938         22,445
   Current portion of capital leases..........................      6,727          5,636
   Current portion of notes payable...........................      8,744         14,502
                                                                ---------      ---------
     Total current liabilities................................     75,008         52,781
  
  Note payable to parent......................................     65,851         52,122
  Lease obligations, less current portion.....................     18,504         15,412
  Notes payable, less current portion.........................      2,403          4,854
                                                                ---------      ---------
     Total liabilities........................................    161,766        125,169
                                                                ---------      ---------
  
  Commitments and contingencies
  
  Stockholders' equity:
   Common stock--$0.01 par value, authorized 100,000 shares;
     51,149 and 51,075 shares issued and outstanding at
      March 31, 2000 and September 30, 1999, respectively.....        511            511
   Paid-in capital............................................    256,337        249,080
   Accumulated deficit........................................   (180,524)      (109,176)
        Deferred compensation.................................    (18,548)       (16,797)
   Accumulated other comprehensive loss.......................     (1,746)          (749)
                                                                ---------      ---------
     Total stockholders' equity...............................     56,030        122,869
                                                                ---------      ---------
     Total liabilities and stockholders' equity...............  $ 217,796      $ 248,038
                                                                =========      =========
  </TABLE>
  
  
  
            See Notes to Consolidated and Combined Financial Statements
  
                                         3
  <PAGE>
  
                                    IXNET, INC.
  
                 CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
                                    (UNAUDITED)
  
                      (In thousands, except per share amounts)
  
  
  <TABLE>
  <CAPTION>
                                                    Three Months Ended March 31,          Six Months Ended March 31,
                                                     -----------    -----------          -----------    -----------
                                                         2000           1999                 2000          1999
                                                     -----------    -----------          -----------    -----------
  <S>                                                <C>            <C>                  <C>            <C>
  Revenue                                            $    29,017    $    19,859          $    52,142    $   32,611
  Cost of revenue (exclusive of depreciation and
     amortization shown separately below)                 30,950         18,476               55,695        30,934
  Sales and marketing expense                              7,931          2,786               13,736         4,878
  General and administrative expense                       5,881          1,600               10,357         2,815
  Depreciation and amortization                           10,157          5,586               18,368         9,508
  Stock compensation charge                                1,236              -                2,599             -
  Merger related costs                                    18,539              -               18,539             -
                                                     -----------    -----------          -----------    ----------
             Loss from operations                        (45,677)        (8,589)             (67,152)      (15,524)
  Interest expense, net                                   (1,693)        (2,493)              (2,853)       (4,318)
  Other income, net                                         (543)           (64)                (444)          (18)
                                                     -----------    -----------          -----------    ----------
             Loss before provision for income taxes      (47,913)       (11,146)             (70,449)      (19,860)
  Provision for income taxes                                 587            134                  899           257
                                                     -----------    -----------          -----------    ----------
             Net loss                                $   (48,500)   $   (11,280)         $   (71,348)   $  (20,117)
                                                     ===========    ===========          ===========    ==========
  
  Basic and diluted loss per share                   $     (0.95)   $     (0.26)         $     (1.40)   $    (0.47)
                                                     ===========    ===========          ===========    ==========
  Basic and diluted weighted average number of
            shares outstanding                            51,128         43,100               51,101        43,100
                                                     ===========    ===========          ===========    ==========
  </TABLE>
  
  
  
            See Notes to Consolidated and Combined Financial Statements.
  
                                         4
  <PAGE>
  
                                    IXNET, INC.
  
                 CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
                                    (UNAUDITED)
  
                                   (In thousands)
  <TABLE>
  <CAPTION>
                                                                                 Six Months ended March 31,
                                                                                 --------------------------
  
                                                                                      2000        1999
                                                                                      ----        ----
  
  <S>                                                                              <C>         <C>
  Cash flows from operating activities:
   Net loss.....................................................................   $(71,348)   $(20,117)
   Adjustments to reconcile net loss to net cash used in operating activities:
    Depreciation and amortization...............................................     13,830       6,226
    Amortization of goodwill....................................................      4,538       3,282
    Bad debt and sales credit provision.........................................      3,671         529
    Stock compensation charges..................................................      2,599          --
  
    Changes in operating assets and liabilities:
     Trade receivables..........................................................    (11,707)     (2,016)
     Prepaids and other assets..................................................       (851)        701
     Accounts payable and accrued liabilities...................................     24,331        (212)
                                                                                   --------    --------
    Net cash used in operating activities.......................................    (34,937)    (11,607)
                                                                                   --------    --------
  Cash flows from investing activities:
    Capital expenditures........................................................    (26,208)     (7,683)
    Acquisition of Saturn, net of cash acquired.................................         --     (34,713)
    Acquisition of Business Networks of New York (BNNY), net of cash
     acquired...................................................................    (23,571)         --
    Acquisition of Systems Programming & Network Computing, Inc. (SPNC), net of
     cash acquired .............................................................       (293)         --
    Net change in investment of marketable securities...........................     52,453          --
                                                                                   --------    --------
     Net cash provided (used by) investing activities...........................      2,381     (42,396)
                                                                                   --------    --------
  Cash flows from financing activities:
    Cash financing from parent, net.............................................     11,956      54,893
    Principal payments on capital leases........................................     (3,024)     (2,152)
    Issuance of note in connection with SPNC
     acquisition................................................................        100          --
    Capital transactions with parent............................................        587       5,254
    Repayment of notes payable..................................................     (8,503)       (555)
                                                                                   --------    --------
    Net cash provided by financing activities...................................      1,116      57,440
                                                                                   --------    --------
  Effect of exchange rate changes on cash.......................................       (997)       (631)
                                                                                   --------    --------
  Net (decrease)/increase in cash...............................................    (32,437)      2,806
  Cash and cash equivalents, beginning of period................................     39,020       1,255
                                                                                   --------    --------
  Cash and cash equivalents, end of period......................................   $  6,583    $  4,061
                                                                                   ========    ========
  
  Non-cash investing and financing activities-
    Capital lease obligations entered into during the period....................   $  7,207    $  5,345
    Deferred compensation in connection with grants of stock options............      4,416    --------
  </TABLE>
  
  
  
            See Notes to Consolidated and Combined Financial Statements.
  
                                         5
  <PAGE>
  
                                    IXNET, INC.
  
              NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
                                    (UNAUDITED)
  
  1.  Background and Basis of Presentation
  
  
  IXnet, Inc. ("IXnet" or the "Company") provides communications services tailored
  to the specialized needs of the worldwide financial services community. The
  Company has built and operates an Extranet, a global network connecting members
  of the financial services community as well as multiple offices within the same
  firm. The Company provides global services including managed voice and data
  services, switched voice communications and content hosting and distribution of
  news, research, analytics and market data.
  
  IXnet started its business as International Exchange Networks, Ltd. ("IEXN"),
  which was incorporated in Delaware on March 8, 1993.  On June 23, 1995, IPC
  Information Systems, Inc. ("IPC"), acquired 80% of the outstanding common stock
  of IEXN and acquired the remaining 20% on April 30, 1998.  On March 31, 1999,
  IPC contributed $73 million of IEXN's then outstanding note payable to IPC into
  IEXN's paid-in capital.
  
  MXNet, Inc. ("MXNet") was incorporated in Delaware on May 24, 1996, as a wholly
  owned subsidiary of National Discount Brokers Group, Inc.  On February 13, 1998,
  IPC acquired the outstanding common stock of MXNet, which was contributed to
  IEXN in May 1999.
  
  On May 4, 1999, IPC contributed 100% of the outstanding common stock of IEXN to
  the Company.  In addition, on May 4, 1999, the Company was incorporated in
  Delaware as a wholly owned subsidiary of IPC with 2,000 shares of common stock,
  par value $0.01 per share, authorized, and 1,000 shares issued to IPC.
  Effective July 1, 1999, the Company amended its certificate of incorporation to
  increase its authorized shares to 100,000,000.  On June 30, 1999, the Company
  declared a 43,100 for one stock split effective July 1, 1999, resulting in
  43,100,000 shares issued and outstanding.
  
  The Company completed an initial public offering (the "Offering") of 6,500,000
  shares of common stock at $15 per share on August 12, 1999.  On August 30, 1999,
  the underwriters exercised their over-allotment option and purchased an
  additional 975,000 shares of common stock at $15 per share.
  
  On February 22, 2000, the Company, IPC and IPC Communications, Inc. entered into
  a merger agreement with Global Crossing, Ltd. (the "Merger"). The Merger was
  approved by a majority of the Company's and IPC's stockholders. Under the terms
  of the Merger agreement, at the closing, Company stockholders will be entitled
  to receive 1.184 shares of Global Crossing common stock for each share of
  Company common stock and IPC stockholders will be entitled to receive 5.417
  shares of Global Crossing common stock for each share of IPC common stock. The
  Merger is expected to be completed by the end of the Company's third fiscal
  quarter. For the three and six months ended March 31, 2000, the Company recorded
  costs of $18.5 million related to the Merger. These costs primarily included
  investment banker fees, legal fees, other professional fees, and other direct
  costs.
  
  The financial statements as of and for the three and six months ended March 31,
  2000, and as of September 30, 1999, include the accounts of IXnet and its
  consolidated subsidiaries. The financial statements for the three and six months
  ended March 31, 1999, combine the historical financial information of IEXN and
  its consolidated subsidiaries with the historical financial information of
  MXNet. Intercompany balances and transactions between IEXN and MXNet have been
  eliminated. Additionally, the financial statements present the issued and
  outstanding shares of IXnet as if they had been in place for the quarter ended
  March 31, 1999. The financial statements include certain corporate expenses
  incurred by IPC that have been charged to the Company. Management believes these
  allocations are reasonable.
  
  In the opinion of management, the accompanying unaudited financial statements
  include all necessary adjustments (consisting of normal recurring accruals and
  appropriate inter-company elimination adjustments) for a fair presentation of
  the financial position of IXnet, Inc. as of March 31, 2000, and the results of
  its operations for the three and six months ended March 31, 2000 and 1999, in
  conformity with generally accepted accounting principles, commonly referred to
  as GAAP, for interim financial information applied on a consistent basis.  The
  results of operations for the three and six months ended March 31, 2000, are not
  necessarily indicative of the results to be expected for the full year.  Certain
  information and note disclosures normally included in financial statements
  prepared in accordance with GAAP have been omitted pursuant to the rules and
  regulations of the Securities and Exchange Commission.  These financial
  statements should be read in conjunction with IXnet's Annual Report on Form 10-K
  for the year ended September 30, 1999.
  
                                         6
  <PAGE>
  
                                    IXNET, INC.
  
        NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)
                                    (UNAUDITED)
  
  2.  Summary of Significant Accounting Policies
  
  
  Accounts Receivable
  
  Accounts receivable relate to the billing of communication services and are net
  of allowance for doubtful accounts and sales credit provision of $2.9 million
  and $2.1 million as of March 31, 2000 and September 30, 1999, respectively.
  
  Earnings Per Share
  
  Basic loss per share is computed using the weighted average number of common
  shares outstanding during the year.  Diluted loss per share is computed using
  the weighted average number of shares of common stock adjusted for the dilutive
  effect of common stock equivalent shares of common stock options.  Common stock
  equivalent shares are calculated using the treasury stock method.  All stock
  options outstanding have been excluded from the computation of diluted loss per
  share as their effect would be antidilutive.  Accordingly, there is no
  difference between basic and diluted EPS.
  
  3.  Comprehensive Loss
  
  Comprehensive loss includes the Company's net loss and foreign currency
  translation adjustments. The tax effect and reclassifications are not
  significant.   The Company's total comprehensive loss for the six months ended
  March 31, 2000 and 1999 was as follows (in thousands):
  
  <TABLE>
  <CAPTION>
                                                                              Six Months Ended March 31,
                                                                            ------------------------------
                                                                            2000                      1999
                                                                            ----                      ----
  <S>                                                                <C>                     <C>
                 Net loss                                                  $(71,348)                 $(20,117)
                 Translation adjustment                                        (997)                     (923)
                                                                     ------------------      --------------------
                 Total comprehensive loss                                  $(72,345)                 $(21,040)
                                                                     ==================      ====================
  </TABLE>
  
  
  4.  Acquisitions and Strategic Agreement
  
  
  Saturn Global Network Services Holdings Ltd.
  
  On December 18, 1998, the Company acquired all of the issued and outstanding
  common shares of Saturn Global Network Services Holdings Limited ("Saturn") from
  Marshalls 106 Limited  ("Marshalls"). The purchase price included the payment of
  cash in the amount of $35.7 million (paid by the Company through borrowings from
  IPC) and the issuance by the Company of a promissory note, guaranteed by IPC, in
  the amount of $7.5 million bearing interest at the UK Sterling Base Rate, as
  defined, plus three percent and payable over three years (the "Marshalls Note").
  In addition, the Company assumed indebtedness of Saturn due to Marshalls in the
  amount of $5 million payable over 24 months with interest at 9.25% (the "Saturn
  Note").  Under this agreement, the Marshalls note is subject to a working
  capital adjustment and right of offset.  The working capital adjustment was
  settled in June 1999 resulting in a reduction  of $2 million.
  
  Saturn, a UK holding company, owns telecommunication network operating
  subsidiaries in the United Kingdom, USA, Hong Kong, Australia, Japan and
  Singapore which sell managed premium grade voice and data communication services
  to the financial community. The acquisition was accounted for using the purchase
  method of accounting and resulted in $49.2 million of goodwill.  Saturn goodwill
  is being amortized over 10 years from the date of the  acquisition.
  
                                         7
  <PAGE>
  
                                    IXNET, INC.
  
        NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)
                                    (UNAUDITED)
  
  Strategic Agreement
  
  On September 24, 1999, IXnet entered into a strategic agreement (the "Strategic
  Agreement"), including the licensing of certain software products to enhance
  the intelligence of its network for a purchase price of $20.0 million
  consisting of $10.0 million in cash financed from the proceeds from IXnet's IPO
  and 500,000 shares of IXnet restricted common stock valued at an average closing
  price prior to the agreement date. The Strategic Agreement is designed to
  enhance IXnet's network capabilities with embedded intelligence, delivering
  financial enterprise integration, subject-based addressing, trading turret
  integration and application management.
  
  Business Networks of New York, Inc.
  
  Effective January 1, 2000, IXnet acquired all of the issued and outstanding
  common shares of Business Networks of New York, Inc. ("BNNY"). BNNY is a leader
  in providing voice and data services to the financial community, primarily in
  the New York Metropolitan Area.  The $26.5 million purchase price consisted of
  $24.5 million in cash and 45,707 shares of IXnet common stock.  The acquisition
  was accounted for using the purchase method of accounting and resulted in $27.3
  million of goodwill, which will be amortized over a 10 year period from the date
  of the acquisition.
  
  Systems Programming & Network Computing, Inc.
  
  On January 25, 2000, IXnet acquired all of the issued and outstanding common
  shares of Systems Programming & Network Computing, Inc. ("SPNC"). SPNC is a
  leader in providing and integrating sophisticated multi-system, multi-platform
  applications for the financial services community.  The purchase price was
  approximately $1.5 million and consisted of $300,000 in cash, a $100,000
  promissory note issued by the Company and 6,080 shares of IXnet common stock.
  The acquisition was accounted for using the purchase method of accounting and
  resulted in $111,000 of goodwill, which will be amortized over a 5 year period
  from the date of the acquisition.
  
  5.  Stock Compensation Charge
  
  In May 1999, IXnet recorded $26.4 million in non-cash deferred stock
  compensation reflecting the issuance by the Company of options to purchase
  6,530,184 shares of common stock of IXnet at $13.96 per share.  The deferred
  stock compensation is based upon the deemed fair market value of IXnet's common
  stock and the exercise price of such options issued on the date of grant.  The
  Company recorded an additional $2.1 million of non-cash deferred stock
  compensation during the quarter and $4.4 during the six months ended March 31,
  2000, which represents the charge for the issuance of options in May 1999 that
  are treated as variable options for accounting purposes. Stock compensation
  expense for the three and six months ended March 31, 2000 is $1.2 million and
  $2.6 million respectively. The remaining deferred compensation will be amortized
  over the remaining vesting period of the options.  In addition, certain of these
  options may be treated as variable options and may result in additional
  compensation expense in future periods.
  
  6.  Property and Equipment
  
  Property and equipment is comprised of the following (in thousands):
  
  <TABLE>
  <CAPTION>
                                                                          March 31,       September 30,
                                                       Useful Lives         2000             1999
                                                       ------------         ----             ----
  
  <S>                                                  <C>                <C>              <C>
  Network equipment.................................   2 to 5 years       $ 56,179         $39,700
  Network equipment under capital leases............        5 years         35,844          28,637
  Indefeasible rights of use........................       IRU term         10,760           6,571
  Network software..................................        3 years         24,546          21,485
  Office equipment and furniture....................        5 years          7,964           6,227
  Leasehold improvements............................     Lease term          3,827           2,524
                                                                          --------         -------
  
   Total depreciable property and equipment.........                       139,120         105,144
   Less accumulated depreciation and amortization...                       (38,804)        (24,974)
                                                                          --------         -------
  
                                                                          $100,316        $ 80,170
                                                                          ========        ========
  </TABLE>
  
                                         8
  <PAGE>
  
                                    IXNET, INC.
  
        NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)
                                    (UNAUDITED)
  
  
  Accumulated depreciation of network equipment under capital leases at March 31,
  2000 and September 30, 1999, was $13.9 million and $10.8 million,
  respectively.
  
  
  7.  Disclosures about Segments of an Enterprise and Related Information
  
  The Company is focused on providing a seamless global network providing a
  variety of voice, data, and content distribution services which has been
  specifically designed to meet the specialized requirements of the financial
  services industry.  All of our revenue is derived from our global network.  All
  operating expenses and assets of the Company are combined and reviewed by the
  chief operating decision makers on an enterprise wide-basis, resulting in no
  additional discrete reportable segment information.
  
  Our network connects customers in 38 countries around the world and we have
  major offices in New York, London and Sydney from which we coordinate our sales
  and marketing, finance and administrative functions in North America, Europe and
  the Asia Pacific countries.   We refer to these areas as regions.  All of our
  products and services are similar in each of the regions.  We specifically
  address the needs of the financial services industry and therefore the types and
  class of customers for all products and services in each of the regions are
  similar.  The methods of providing services on our global network are similar.
  
  Enterprise wide information is provided in accordance with SFAS 131
  "Disclosures about Segments of an Enterprise and Related Information".
  Geographic sales information is based on the currency in which the customer is
  billed. Long-lived asset information is based on the physical location of the
  assets. The following is revenue and long-lived asset information for geographic
  areas (in thousands):
  
                                           Six Months ended March 31,
                                          ----------------------------
  
                                          2000                   1999
                                          ----                   ----
  
                                             Long-Lived             Long-Lived
                                   Revenue     Assets     Revenue     Assets
                                   -------     ------     -------     ------
  North America...............     $29,736    $112,844    $18,046    $ 40,467
  Europe......................      12,628      57,652     10,011      59,909
  Asia/Pacific................       9,778       4,397      4,554       2,192
                                   -------    --------    -------    --------
                                   $52,142    $174,893    $32,611    $102,568
                                   =======    ========    =======    ========
  
  For the six months ended March 31, 2000, revenue from the United States, United
  Kingdom, and Australia represented 57.0%, 23.4%, and 9.8% of total revenue,
  respectively. For the six months ended March 31, 1999, revenue from the United
  States and the United Kingdom represented 54.0% and 28.0% of total revenue,
  respectively.
  
  As of March 31, 2000, long-lived assets located with the United States and the
  United Kingdom represented 64.5% and 31.8% of total long-lived assets,
  respectively.  As of March 31, 1999, long-lived assets located within the United
  States and the United Kingdom represented 39.5% and 58.3% of total long-lived
  assets, respectively.
  
  For the six months ended March 31, 2000, no individual customer  represented
  more than 10% of total revenue.  For the six months ended March 31, 1999, two
  customers accounted for 14.4% and 11.5% of total revenue.
  
  8.  Commitments and Contingencies:
  
    Intercompany Agreement
  
  As of July 1, 1999, the Company, IPC and IEXN entered into an intercompany
  agreement which provides, among other matters, for IPC to furnish up to $50.0
  million of credit, including the provision of letters of credit, guarantees and
  other forms of credit enhancements limited to $6.25 million per quarter,
  commencing July 1, 1999 and continuing through the quarter ending June 30, 2001.
  Outstanding notes payable on July 1, 1999 and additional amounts borrowed under
  the agreement bear interest at the Base Rate, as defined, plus 2%. Any and all
  amounts advanced by IPC which are outstanding on June 30, 2001 shall be
  immediately due and payable.
  
                                         9
  <PAGE>
  
                         REPORT OF INDEPENDENT ACCOUNTANTS
  
  To the Stockholders of
  IXnet, Inc.:
  
     In our opinion, the accompanying consolidated and combined balance sheets and
  the related consolidated and combined statements of operations, stockholders'
  equity and cash flows present fairly, in all material respects, the financial
  position of IXnet, Inc. and its subsidiaries at September 30, 1999 and 1998, and
  the results of their operations and their cash flows for each of the three years
  in the period ended September 30, 1999 in conformity with accounting principles
  generally accepted in the United States. These financial statements are the
  responsibility of the company's management; our responsibility is to express an
  opinion on these financial statements based on our audits. We conducted our
  audits of these statements in accordance with auditing standards generally
  accepted in the United States, which 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, assessing
  the accounting principles used and significant estimates made by management, and
  evaluating the overall financial statement presentation. We believe that our
  audits provide a reasonable basis for the opinion expressed above.
  
  /S/ PricewaterhouseCoopers LLP
  
  PricewaterhouseCoopers LLP
  
  New York, New York
  November 30, 1999
  
                                        10
  <PAGE>
  
                                    IXNET, INC.
  
                      CONSOLIDATED AND COMBINED BALANCE SHEETS
                  (Amounts in thousands, except per share amount)
  
  <TABLE>
  <CAPTION>
                                                               September 30,
                                                             -------------------
                                                               1999       1998
                                                             ---------  --------
  <S>                                                        <C>        <C>
                            ASSETS
  Current assets:
    Cash and cash equivalents............................... $  39,020  $  1,255
    Marketable securities...................................    28,357       --
    Marketable securities, restricted.......................    20,435       --
    Accounts receivable, net................................    17,824     9,844
    Prepaids and other current assets.......................     5,505     2,707
                                                             ---------  --------
      Total current assets..................................   111,141    13,806
  Property and equipment, net...............................    80,170    36,351
  Long term marketable securities, restricted...............     6,065       --
  Goodwill, net.............................................    49,773     9,023
  Other assets..............................................       889     1,152
                                                             ---------  --------
      Total assets.......................................... $ 248,038  $ 60,332
                                                             =========  ========
        LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
  
  Current liabilities:
    Accounts payable........................................ $  10,198  $  7,028
    Accrued liabilities.....................................    22,445     9,007
    Current portion of capital leases.......................     5,636     4,057
    Current portion of notes payable........................    14,502       --
                                                             ---------  --------
      Total current liabilities.............................    52,781    20,092
  Note payable to parent....................................    52,122    43,629
  Lease obligations, less current portion...................    15,412    11,570
  Notes payable, less current portion.......................     4,854       --
                                                             ---------  --------
      Total liabilities.....................................   125,169    75,291
                                                             ---------  --------
  Commitments and contingencies
  Stockholders' equity (deficit):
    Common stock--$0.01 par value, authorized 100,000
     shares;
     51,075 and 43,100 shares issued and outstanding at Sep-
     tember 30, 1999 and 1998, respectively.................       511       431
    Paid-in Capital.........................................   249,080    33,830
    Accumulated deficit.....................................  (109,176)  (49,709)
    Deferred compensation...................................   (16,797)      --
    Accumulated other comprehensive (loss) income...........      (749)      489
                                                             ---------  --------
      Total stockholders' equity (deficit)..................   122,869   (14,959)
                                                             ---------  --------
      Total liabilities and stockholders' equity (deficit).. $ 248,038  $ 60,332
                                                             =========  ========
  </TABLE>
  
            See Notes to Consolidated and Combined Financial Statements
  
                                        11
  <PAGE>
  
                                    IXNET, INC:
  
                 CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
                      (In thousands, except per share amounts)
  
  <TABLE>
  <CAPTION>
                                                    Year ended September 30,
                                                   ----------------------------
                                                     1999      1998      1997
                                                   --------  --------  --------
  <S>                                              <C>       <C>       <C>
  Revenue......................................... $ 73,615  $ 35,853  $ 17,838
  Cost of revenue (exclusive of depreciation and
   amortization shown separately below)...........   73,097    35,652    19,823
  Sales and marketing expense.....................   13,063     8,455     4,172
  General and administrative expense..............    8,312     5,001     3,439
  Depreciation and amortization...................   21,575     9,060     3,460
  Special charge..................................      --      1,350       --
  Stock compensation charge.......................    9,079       --        --
                                                   --------  --------  --------
    Loss from operations..........................  (51,511)  (23,665)  (13,056)
  Interest expense, net...........................   (6,999)   (3,527)   (2,040)
  Other income (expense), net.....................      336        26       117
                                                   --------  --------  --------
    Loss before provision for income taxes........  (58,174)  (27,166)  (14,979)
  Provision for income taxes......................    1,293       473       229
                                                   --------  --------  --------
    Net loss...................................... $(59,467) $(27,639) $(15,208)
                                                   ========  ========  ========
  Basic and diluted loss per share................ $  (1.35) $  (0.64) $  (0.35)
                                                   ========  ========  ========
  Basic and diluted weighted average number of
   shares outstanding.............................   44,085    43,100    43,100
                                                   ========  ========  ========
  </TABLE>
  
  
            See Notes to Consolidated and Combined Financial Statements.
  
                                        12
  <PAGE>
  
                                    IXNET, INC.
  
                 CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
                           (Dollar amounts in thousands)
  
  <TABLE>
  <CAPTION>
                                                     Year ended September 30,
                                                    ----------------------------
                                                      1999      1998      1997
                                                    --------  --------  --------
  <S>                                               <C>       <C>       <C>
  Cash flows from operating activities:
    Net loss....................................... $(59,467) $(27,639) $(15,208)
    Adjustments to reconcile net loss to net cash
     used in operating activities:
    Depreciation and amortization..................   15,656     6,865     3,279
    Amortization of goodwill.......................    5,919     2,195       181
    Provision for doubtful accounts................    1,693     1,674       325
    Deferred compensation charges..................    9,079       --        --
    Changes in operating assets and liabilities:
      Trade receivables............................   (6,190)   (5,957)   (3,178)
      Prepaids and other assets....................   (1,566)     (135)   (2,471)
      Accounts payable and accrued liabilities.....    5,762     7,904     2,403
                                                    --------  --------  --------
    Net cash used in operating activities..........  (29,114)  (15,093)  (14,669)
                                                    --------  --------  --------
  Cash flows from investing activities:
      Capital expenditures.........................  (24,208)  (12,930)   (3,495)
      Acquisition of Saturn, net of cash acquired..  (34,713)      --        --
      Investment in marketable securities..........  (28,357)     (842)      --
                                                    --------  --------  --------
      Net cash used in investing activities........  (87,278)  (13,772)   (3,495)
                                                    --------  --------  --------
  Cash flows from financing activities:
      Net proceeds from initial public offering....  102,775       --        --
      Financings from parent, net..................   82,792    23,476    12,887
      Capital transactions with parent.............    3,098     9,478     5,535
      Principal payments on capital leases.........   (5,214)   (3,125)   (1,818)
      Repayment of notes payable...................   (1,556)      --        --
                                                    --------  --------  --------
      Net cash provided by financing activities....  181,895    29,829    16,604
                                                    --------  --------  --------
  Effect of exchange rate changes on cash..........   (1,238)     (234)      469
                                                    --------  --------  --------
  Net increase (decrease) in cash..................   64,265       730    (1,091)
  Cash and cash equivalents, beginning of period...    1,255       525     1,616
                                                    --------  --------  --------
  Cash and cash equivalents, end of period......... $ 65,520  $  1,255  $    525
                                                    ========  ========  ========
  Cash paid during the period for interest......... $  6,118  $  3,527  $  2,040
  Non-cash investing and financing activities--
    Capital contributed by parent:
      Acquisition of remaining 20% of International
       Exchange
       Networks, Ltd............................... $    --   $  4,800  $    --
      Acquisition of MXNet Inc., net of cash
       acquired....................................      --      6,660       --
      Capitalization of note payable to parent.....   73,000       --        --
    Installment purchase of indefeasible rights of
     use...........................................      --      3,600       --
    Capital lease obligations entered into during
     the period....................................   10,284     6,414     9,685
    Deferred compensation in connection with grants
     of stock options..............................   26,382       --        --
    Purchase of software in connection with the
     strategic agreement...........................   20,000       --        --
  Acquisition of Saturn:
    Fair value of assets acquired.................. $ 58,456  $    --   $    --
    Less: Fair value of liabilities assumed and
     note issued...................................   23,743       --        --
                                                    --------  --------  --------
    Acquisition of Saturn, net of cash acquired.... $ 34,713  $    --   $    --
                                                    ========  ========  ========
  </TABLE>
  
            See Notes to Consolidated and Combined Financial Statements.
  
                                        13
  <PAGE>
  
                                    IXNET, INC.
  
                 CONSOLIDATED AND COMBINED STATEMENTS OF CHANGES IN
                         STOCKHOLDERS' EQUITY (DEFICIT)(1)
                                   (In thousands)
  
  <TABLE>
  <CAPTION>
                           Common Stock
                           -------------
                                         Paid-in   Accumulated   Deferred
                           Shares Amount Capital     Deficit   Compensation Subtotal(1)
                           ------ ------ --------  ----------- ------------ -----------
  <S>                      <C>    <C>    <C>       <C>         <C>          <C>
  Balance, September 30,
   1996................... 43,100  $431  $  7,357   $  (6,862)   $    --     $    926
    Paid-in capital.......    --    --      5,535         --          --        5,535
    Net loss..............    --    --        --      (15,208)        --      (15,208)
    Translation
     adjustment...........    --    --        --          --          --          --
                           ------  ----  --------   ---------    --------    --------
  Balance, September 30,
   1997................... 43,100   431    12,892     (22,070)        --       (8,747)
    Paid-in capital.......    --    --     20,938         --          --       20,938
    Net loss..............    --    --        --      (27,639)        --      (27,639)
    Translation
     adjustment...........    --    --        --          --          --          --
                           ------  ----  --------   ---------    --------    --------
  Balance, September 30,
   1998................... 43,100   431    33,830     (49,709)        --      (15,448)
    Issuance of common
     stock in initial
     public offering, net
     of expenses..........  7,475    75   102,775         --          --      102,850
    Issuance of common
     stock in connection
     with strategic
     agreement............    500     5     9,995         --          --       10,000
    Capitalization of note
     payable to Parent....    --    --     73,000         --          --       73,000
    Deferred stock option
     compensation.........    --    --     26,382         --      (26,382)        --
    Amortization of
     deferred
     compensation.........    --    --        --          --        9,079       9,079
    Other deferred
     compensation
     adjustments..........    --    --       (506)        --          506         --
    Capital contribution
     for IPC's utilization
     of tax benefits......    --    --      3,604         --          --        3,604
      Net loss............    --    --        --      (59,467)        --      (59,467)
      Translation
       adjustment.........    --    --        --          --          --          --
                           ------  ----  --------   ---------    --------    --------
  Balance, September 30,
   1999................... 51,075  $511  $249,080   $(109,176)   $(16,797)   $123,618
                           ======  ====  ========   =========    ========    ========
  </TABLE>
  --------
  (1) The Consolidated and Combined Statements of Changes in Stockholders' Equity
      (Deficit) continues on page 15.
  
  
             See Notes to Consolidated and Combined Financial Statements.
  
                                        14
  <PAGE>
  
                                    IXNET, INC.
  
                  CONSOLIDATED AND COMBINED STATEMENTS OF CHANGES
                         IN STOCKHOLDERS' EQUITY (DEFICIT)
                                   (In thousands)
  
  <TABLE>
  <CAPTION>
                                              Accumulated
                                                 Other
                                             Comprehensive           Comprehensive
                                 Subtotal(1) Income (Loss)  Total        Loss
                                 ----------- ------------- --------  -------------
  <S>                            <C>         <C>           <C>       <C>
  Balance, September 30, 1996..   $    926      $   (36)   $    890         --
      Paid-in capital..........      5,535          --        5,535         --
      Net loss.................    (15,208)         --      (15,208)   $(15,208)
      Translation adjustment...        --           202         202         202
                                  --------      -------    --------    --------
        Total comprehensive
         loss..................                                        $(15,006)
                                                                       ========
  Balance, September 30, 1997..     (8,747)         166      (8,581)        --
      Paid-in capital..........     20,938          --       20,938         --
      Net loss.................    (27,639)         --      (27,639)   $(27,639)
      Translation adjustment...        --           323         323         323
                                  --------      -------    --------    --------
        Total comprehensive
         loss..................                                        $(27,316)
                                                                       ========
  Balance, September 30, 1998..    (15,448)         489     (14,959)
    Issuance of common stock in
     initial public offering,
     net of expenses...........    102,850          --      102,850         --
    Issuance of common stock in
     connection with strategic
     agreement.................     10,000          --       10,000         --
    Capitalization of note
     payable to Parent.........     73,000          --       73,000         --
    Deferred stock option
     compensation..............        --           --          --          --
    Amortization of deferred
     compensation..............      9,079          --        9,079         --
    Other deferred compensation
     adjustments...............        --           --          --          --
    Capital contribution for
     IPC's utilization of tax
     benefits..................      3,604          --        3,604         --
      Net loss.................    (59,467)         --      (59,467)   $(59,467)
      Translation adjustment...        --        (1,238)     (1,238)     (1,238)
                                  --------      -------    --------    --------
        Total comprehensive
         loss..................                                        $(60,705)
                                                                       ========
  Balance, September 30, 1999..   $123,618      $  (749)   $122,869
                                  ========      =======    ========
  </TABLE>
  --------
  (1) The Consolidated and Combined Statements of Changes in Stockholders' Equity
      (Deficit) is continued from page 14.
  
  
             See Notes to Consolidated and Combined Financial Statements.
  
                                        15
  <PAGE>
  
                                    IXNET, INC.
  
              NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
  
  1. Background and Basis of Presentation:
  
     IXnet, Inc. ("IXnet" or the "Company") provides communications services
  tailored to the specialized needs of the worldwide financial services
  community. The Company established and operates an extranet, a global network
  connecting members of the financial services community as well as multiple
  offices within the same firm. The Company's services include globally available
  services including managed voice and data services, switched voice
  communications and content hosting and distribution of news, research,
  analytics and market data.
  
     The Company completed an initial public offering (the "Offering") of
  6,500,000 shares of common stock at $15 per share on August 12, 1999. On August
  30, 1999, the underwriters exercised their over-allotment option and purchased
  an additional 975,000 shares of common stock at $15 per share. In connection
  with the Offering, IXnet was incorporated in Delaware on May 4, 1999, as a
  wholly owned subsidiary of IPC Information Systems, Inc. ("IPC") with 2,000
  shares of common stock, par value $0.01 per share, authorized, and 1,000 shares
  issued to IPC. Effective July 1, 1999 the Company amended its certificate of
  incorporation to increase its authorized shares to 100,000,000. On June 30,
  1999, the Company declared a 43,100 for one stock split effective July 1, 1999,
  resulting in 43,100,000 shares issued and outstanding.
  
     On May 4, 1999, IPC contributed 100% of the outstanding common stock of
  International Exchange Networks, Ltd. ("IEXN") to the Company.
  
     IEXN was incorporated in Delaware on March 8, 1993, with 10,000 shares of
  common stock, par value $0.01 per share, authorized. On June 23, 1995, IPC
  acquired 2,280 shares of IEXN (80% of the outstanding common stock after the
  acquisition) and acquired the remaining 560 shares outstanding on April 30,
  1998. On March 31, 1999, IPC contributed $73.0 million of IEXN's then
  outstanding note payable to IPC into IEXN's paid-in capital.
  
     MXNet Inc. ("MXNet") was incorporated in Delaware on May 24, 1996, as a
  wholly owned subsidiary of National Discount Brokers Group, Inc. with 3,000
  shares of common stock, par value $0.01 per share, authorized. On February 13,
  1998, IPC acquired the outstanding common stock of MXNet which was contributed
  to IEXN in May 1999.
  
     The financial statements present the consolidated financial position,
  results of operations, changes in stockholder's (deficit) equity and cash flows
  of IEXN and its subsidiaries combined with the financial position, results of
  operations, changes in stockholder's deficit and cash flows of MXNet as of and
  for the periods that they were under common control. Additionally, the
  financial statements present the issued and outstanding shares of IXnet as if
  they had been in place for all periods presented. The financial statements
  include certain corporate expenses (see Note 11) incurred by IPC that have been
  charged to the Company on a direct or allocated basis. Management believes
  these allocations are reasonable.
  
  2. Summary of Significant Accounting Policies:
  
   Principles of Consolidation and Combination
  
     The consolidated financial statements as of and for the year ended September
  30, 1999 include the accounts of IXnet and its consolidated subsidiaries. The
  financial statements as of September 30, 1998 combine the historical financial
  information of IEXN and its consolidated subsidiaries with the historical
  financial information of MXNet from the date of its acquisition. Intercompany
  balances and transactions within and between IEXN and MXNet have been
  eliminated. The financial statements for the year ended September 30, 1997,
  include the historical financial information of IEXN and its consolidated
  subsidiaries.
  
                                        16
  <PAGE>
  
                                    IXNET, INC.
  
        NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)
  
  
   Cash and Cash Equivalents
  
     The Company places cash with high-credit quality financial institutions.
  Temporary cash investments with original maturities of three months or less are
  considered cash equivalents. Temporary cash investments are stated at cost,
  which approximates fair value. These investments are not subject to significant
  market risk.
  
   Marketable Securities
  
     Marketable securities consist of investments in short term government grade
  commercial paper with maturities less than 1 year. Such securities are
  classified as available for sale and, accordingly, are carried at fair value,
  which approximates cost at September 30, 1999. The amortized cost of debt
  securities is adjusted for amortization of premium and accretion of discounts
  to maturity. Amortization of purchase premiums or accretion of discounts and
  realized gains and losses are included in interest income.
  
     On September 24, 1999, the Company entered into a strategic agreement
  including the licensing of certain software products to enhance the
  intelligence of the network. The purchase price included $10.0 million in cash
  to be paid in installments over six months beginning on October 30, 1999.
  Separately, the Company also entered into agreements to purchase indefeasible
  rights of use ("IRU's") over the next three years in an aggregate amount of
  $16.5 million. In accordance with an amendment to IPC's credit agreement
  revised in connection with the strategic agreement, these amounts are invested
  in marketable securities dedicated to satisfy these commitments.
  
   Accounts Receivable
  
     Accounts receivable relate to the billing of communication services and are
  net of allowance for doubtful accounts of $2.1 million and $0.6 million for the
  year ended September 30, 1999 and 1998, respectively.
  
   Revenue Recognition
  
     Revenues are billed and recognized monthly based on flat-rate monthly
  charges. Installation revenue is deferred and recognized ratably over the
  average contract term. Bandwidth and switched voice charges are billed and
  recognized monthly based on customer usage.
  
   Property and Equipment
  
     Property and equipment are stated at cost and depreciated or amortized on a
  straight-line basis over their estimated useful lives or related contract
  terms, beginning in the year the asset is placed into service. Direct costs
  related to the installation of network equipment are capitalized and
  depreciated over the life of the asset.
  
   Goodwill
  
     Goodwill represents the excess of the purchase price over the fair value of
  the identifiable net assets acquired in purchase acquisitions. Goodwill is
  amortized on a straight-line basis over the periods benefited. Goodwill
  includes the related amounts recorded in connection with IPC's acquisitions of
  IEXN and MXNet and IXnet's acquisition of Saturn. The Company assesses whether
  its goodwill is impaired as required by SFAS 121, "Accounting for the
  Impairment of Long Lived Assets and for Long Lived Assets to be Disposed of".
  
                                        17
  <PAGE>
  
                                    IXNET, INC.
  
        NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)
  
  
   Comprehensive Loss
  
     Effective October 1, 1998, the Company adopted SFAS No. 130, "Reporting
  Comprehensive Income." This statement requires the Company to include within
  its financial statements information on comprehensive income, which is defined
  as all activity impacting equity from non-owner sources. Comprehensive loss
  includes the Company's net loss and foreign currency translation adjustments.
  The tax effect and reclassifications were not significant.
  
   Income Taxes
  
     The Company recognizes deferred income taxes for the tax consequences in
  future years of differences between the tax bases of assets and liabilities and
  the financial reporting amounts at each year end, based on enacted tax laws and
  statutory tax rates applicable to the periods in which the differences are
  expected to affect taxable income. Valuation allowances are established when
  necessary to reduce deferred tax assets to the amount that is more likely than
  not to be realized. The provision for income taxes is the tax payable for the
  period and the change during the period in deferred tax assets and liabilities.
  
     The Company is included in the consolidated federal income tax return of IPC
  and computes its federal income tax provision on a separate return basis. Under
  the tax sharing arrangement with its parent, the Company is reimbursed for the
  benefit derived from inclusion of its tax losses in the consolidated federal
  income tax return. Any difference between the amount of the federal income tax
  provision or benefit determined on a separate return basis and the amount
  received under the tax sharing arrangement is treated as a contribution to
  paid-in capital.
  
   Use of Estimates
  
     The preparation of financial statements in conformity with generally
  accepted accounting principles requires management to make estimates and
  assumptions that affect the reported amounts of assets and liabilities and the
  disclosure of contingent assets and liabilities at the date of the financial
  statements and the amounts of revenues and expenses during the period reported.
  Actual results could differ from those estimates.
  
   Segment Information
  
     In 1999, the Company adopted Statement of Financial Accounting Standards
  (SFAS) 131, "Disclosures about Segments of an Enterprise and Related
  Information". SFAS 131 supersedes SFAS 14, "Financial Reporting for Segments of
  a Business Enterprise", replacing the "industry" segment approach with the
  "management" approach. The management approach designates the internal
  organization that is used by management for making operating decisions and
  assessing performance as the source of the Company's reportable segments. SFAS
  131 also requires disclosures about products and services, geographic areas and
  major customers. The adoption of SFAS 131 did not effect the Company's results
  of operations or financial position.
  
   Foreign Currency Translation Adjustment
  
     The balance sheets and statements of operations of the Company's foreign
  operations are recorded using the local currency as the functional currency.
  Assets and liabilities of these foreign operations are translated at the year-
  end exchange rates and revenue and expense amounts are translated at the
  average rates of exchange prevailing during the periods reported. Translation
  adjustments arising from the use of differing exchange rates from period to
  period are included in the cumulative translation adjustment account in
  stockholders' equity (deficit).
  
                                        18
  <PAGE>
  
                                    IXNET, INC.
  
        NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)
  
  
   Earnings Per Share
  
     Basic loss per share is computed using the weighted average number of common
  shares outstanding during the year. Diluted loss per share is computed using
  the weighted average number of shares of common stock adjusted for the dilutive
  effect of common stock equivalent shares of common stock options. Common stock
  equivalent shares are calculated using the treasury stock method. All stock
  options outstanding have been excluded from the computation of diluted loss per
  share as their effect would be antidilutive. Accordingly, there is no
  difference between basic and diluted EPS.
  
  3. Effects of Recently Issued Accounting Standards
  
     In June 1998, the Financial Accounting Standards Board issued SFAS 133,
  "Accounting for Derivatives and Hedging Activities," which establishes
  accounting and reporting standards for derivative instruments and hedging
  activities. The effective date of this standard was deferred to all fiscal
  quarters of fiscal years beginning after June 15, 2000 by SFAS 137, "Accounting
  for Derivative Instruments and Hedging Activities--Deferral of the Effective
  Date of FASB Statement No. 133", which was issued on June 30, 1999. Management
  does not believe the adoption of this standard will have a material impact on
  the Company's operations.
  
     In March 1998, the American Institute of Certified Public Accountants issued
  Statement of Position 98-1, "Accounting for the Cost of Computer Software
  Developed or Obtained for Internal Use." SOP 98-1 is effective for financial
  statements for fiscal years beginning after December 15, 1998. The Company does
  not anticipate the adoption of the standard to have a material effect on its
  financial position, results of operations or cash flows.
  
  4. Acquisitions and Strategic Agreement:
  
   IEXN
  
     During June 1995, IPC acquired an 80% interest in IEXN for $5.5 million in
  cash. The acquisition was accounted for using the purchase method of accounting
  and resulted in $1.3 million of goodwill. Under the initial acquisition
  agreement, the Company is obligated to pay additional consideration to former
  shareholders using a formula based upon operating results and market
  capitalization through fiscal 2000. Based upon data as of September 30, 1999,
  the Company's obligation calculated under this agreement is not material. On
  April 30, 1998, IPC acquired the remaining 20% interest in IEXN held by two
  management shareholders in exchange for 457,140 shares of IPC common stock,
  valued at $4.8 million based upon the IPC closing share price on that date. The
  acquisition of the remaining interest was accounted for using the purchase
  method of accounting and resulted in $4.8 million of goodwill is being
  amortized over seven years from the date of the original acquisition.
  
   MXNet
  
     In February 1998, IPC acquired, by the issuance of a promissory note in the
  amount of $6.7 million, all of the issued and outstanding common stock of
  MXNet, a wholly owned subsidiary of National Discount Brokers Group, Inc. The
  promissory note plus accrued interest was paid on April 8, 1998. This
  acquisition was accounted for using the purchase method of accounting and
  resulted in $5.5 million of goodwill. MXNet goodwill is being amortized over
  2.25 years from the date of acquisition.
  
                                        19
  <PAGE>
  
                                    IXNET, INC.
  
        NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)
  
  
     The following unaudited pro forma statement of operations data for the years
  ended September 30, 1998 and 1997, gives effect to the acquisition of MXNet as
  if it had occurred on October 1, 1997 and 1996, respectively (in thousands):
  
  <TABLE>
  <CAPTION>
                                                                 Year ended
                                                                September 30,
                                                              ------------------
                                                                1998      1997
                                                              --------  --------
        <S>                                                   <C>       <C>
        Revenue.............................................. $ 36,386  $ 18,663
        Loss before provision for income taxes............... $(28,669) $(18,804)
  </TABLE>
  
     Pro forma adjustments include: (i) financial results of MXNet for the year
  ended September 30, 1997; (ii) financial results of MXNet from October 1, 1997
  to the date of acquisition; and (iii) amortization of goodwill over 2.25 years.
  The pro forma financial information presented above is not necessarily
  indicative of the operating results which would have been achieved had the
  acquisition occurred at October 1, 1996 or 1997, or of the results to be
  achieved thereafter.
  
  Saturn Global Network Services Holdings Ltd.
  
     On December 18, 1998, the Company acquired all of the issued and outstanding
  common shares of Saturn Global Network Services Holdings Limited ("Saturn")
  from Marshalls 106 Limited ("Marshalls"). The purchase price included the
  payment of cash in the amount of $35.7 million (paid by the Company through
  borrowings from IPC) and the issuance by the Company of a promissory note,
  guaranteed by IPC, in the amount of $7.5 million bearing interest at the UK
  Sterling Base Rate, as defined, plus three percent and payable over three years
  (the "Marshalls Note"). In addition, the Company assumed indebtedness of Saturn
  due to Marshalls in the amount of $5.0 million payable over 24 months with
  interest at 9.25% (the "Saturn Note"). Under this agreement, the Marshalls note
  is subject to a working capital adjustment and right of offset. The working
  capital adjustment was settled in June 1999 resulting in a reduction of our
  obligation by approximately $2.0 million. These notes, including interest, is
  payable in the amounts of $4.7 million, $3.2 million and $2.4 million in 2000,
  2001 and 2002, respectively.
  
     Saturn, a UK holding company, owns telecommunication network operating
  subsidiaries in the United Kingdom, USA, Hong Kong, Australia, Japan and
  Singapore. It has an established business of selling managed premium grade
  voice and data communication services to the financial community. The
  acquisition was accounted for using the purchase method of accounting and
  resulted in $49.2 million of goodwill. Saturn goodwill is being amortized over
  10 years from the date of the original acquisition.
  
     The following unaudited pro forma statement of operations data for the years
  ended September 30, 1999 and 1998 gives effect to the Saturn acquisition as if
  it had occurred on October 1, 1998 and 1997, respectively (in thousands):
  
  <TABLE>
  <CAPTION>
                                                                 Year ended
                                                                September 30,
                                                              ------------------
                                                                1999      1998
                                                              --------  --------
        <S>                                                   <C>       <C>
        Revenue.............................................. $ 78,414  $ 61,171
        Loss before provision for income taxes............... $(60,686) $(37,834)
  </TABLE>
  
     Pro forma adjustments include: (i) amortization of goodwill over 10 years;
  (ii) interest expense on the Saturn Note and the Marshalls Note; and (iii)
  interest expense on borrowings from IPC at a US bank prime rate plus two
  percent. The pro forma financial information presented above is not necessarily
  indicative of the operating results which would have been achieved had the
  acquisition occurred at October 1, 1998 or 1997, or of the results to be
  achieved thereafter.
  
                                        20
  <PAGE>
  
                                    IXNET, INC.
  
        NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)
  
  
   Strategic Agreement
  
     On September 24, 1999, IXnet entered into a $20 million strategic agreement,
  including the licensing of certain software products to enhance the
  intelligence of the network, for a purchase price consisting of $10.0 million
  in cash, payable within the next twelve months, and 500,000 shares of
  restricted IXnet common stock valued at an average closing price prior to the
  agreement date. The strategic agreement is intended to create a unique network
  infrastructure with embedded intelligence, delivering financial enterprise
  integration, subject-based addressing, trading turret integration and
  application management capabilities.
  
  5. IPC Merger and Special Charge:
  
     On April 30, 1998, Arizona Acquisition Corp. was merged into IPC (the
  "Merger"). In connection with the Merger, IPC issued $247.4 million aggregate
  principal amount at maturity of 10 7/8% Senior Discount Notes due 2008 (the
  "Notes"). The Notes were issued under an indenture between IPC, as issuer, and
  United States Trust Company of New York, as trustee.
  
     The indenture contains various covenants and conditions which impose
  limitations on IPC and its subsidiaries (including IXnet), including, (i)
  indebtedness, (ii) restricted payments, (iii) dividends, (iv) issuance and sale
  of capital stock of subsidiaries, (v) issuance of guarantees by subsidiaries,
  (vi) certain transactions with shareholders and affiliates, (vii) liens, (viii)
  sale-leaseback transactions, (ix) asset sales, and (x) maintaining various
  financial ratios.
  
     In connection with the Merger, IEXN incurred a special charge for bonuses
  and the cancellation of IPC stock options of $1.4 million.
  
  6. Property and Equipment:
  
     Property and equipment is comprised of the following (in thousands):
  
  <TABLE>
  <CAPTION>
                                                                  September 30,
                                                                 ----------------
                                                    Useful Lives   1999    1998
                                                    ------------ -------- -------
     <S>                                            <C>          <C>      <C>
     Network equipment............................. 2 to 5 years $ 39,700 $15,907
     Network equipment under capital leases........      5 years   28,637  20,717
     Indefeasible rights of use....................     IRU term    6,571   4,448
     Network software..............................      3 years   21,485     --
     Office equipment and furniture................      5 years    6,227   3,871
     Leasehold improvements........................   Lease term    2,524   2,127
                                                                 -------- -------
       Total depreciable property and equipment....               105,144  47,070
       Less accumulated depreciation and
        amortization...............................                24,974  10,719
                                                                 -------- -------
                                                                 $ 80,170 $36,351
                                                                 ======== =======
  </TABLE>
  
     Included in accumulated depreciation and amortization at September 30, 1999
  and 1998, was $10.8 million and $5.8 million, respectively, representing
  accumulated depreciation of network equipment under capital leases.
  
                                        21
  <PAGE>
  
                                    IXNET, INC.
  
        NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)
  
  
  7. Benefit Plans:
  
   Pension Plans
  
     The Company participates in IPC's defined contribution plan covering all
  eligible US employees. According to plan provisions, IPC contributions are
  discretionary and are subject to approval by IPC's board of directors. Eligible
  employees may contribute 15% of their compensation up to $10,000 annually. The
  Company contributed $184,519, $103,000 and $48,000 to the plan on behalf of the
  Company's employees for the years ended September 30, 1999, 1998 and 1997.
  
   IPC's Stock Option and Incentive Plans
  
     Under IPC's 1994 Stock Option and Incentive Plan, 1998 Stock Option Plan,
  and 1999 Incentive Stock Option Plan certain employees of the Company received
  grants of stock options.
  
     A summary of IPC's stock option plan and changes related to employees of the
  Company as of September 30, 1999, 1998, and 1997, and for the years then ended
  is presented below.
  
  <TABLE>
  <CAPTION>
                                                                          Weighted
                                                                          Average
                                                                 Option   Exercise
                                                                 Shares    Price
                                                                --------  --------
  <S>                                                           <C>       <C>
  Outstanding at September 30, 1996............................  231,000   $ 7.93
    Options granted............................................  186,000   $ 7.25
    Options forfeited..........................................  (53,334)  $ 7.53
    Options exercised..........................................  (26,666)  $ 6.83
                                                                --------   ------
  Outstanding at September 30, 1997............................  337,000   $ 7.71
    Options forfeited..........................................   (4,002)  $ 7.63
    Options exercised..........................................   (4,998)  $ 8.00
    Options exercised and retired at merger.................... (328,000)  $ 7.70
    Options granted (1998 Option Plan).........................  401,734   $10.50
                                                                --------   ------
  Outstanding at September 30, 1998............................  401,734   $10.50
    Options forfeited..........................................  (22,868)  $10.50
    Options exercised.......................................... (160,300)  $10.50
    Options granted............................................  195,146   $10.50
                                                                --------   ------
  Outstanding at September 30, 1999............................  413,712   $10.50
                                                                ========   ======
  </TABLE>
  
     There were 413,712, 0, and 53,445 options exercisable at September 30, 1999,
  1998 and 1997, respectively. The weighted average fair value per share of
  options granted was $10.50, $4.10, $3.31 for the years ended September 30,
  1999, 1998 and 1997, respectively. The weighted average contractual life of
  stock options outstanding at September 30, 1999 was 9.1 years.
  
     In connection with the Merger, IPC terminated the 1994 Option Plan and
  replaced it with the 1998 Option Plan. Under the 1998 Option Plan, employees
  generally vest in stock options over a five-year period, subject to certain
  accelerated vesting provisions based on IPC common stock achieving specified
  fair market levels for specified periods. Such fair market levels have been met
  and accordingly, all options are vested and exercisable.
  
                                        22
  <PAGE>
  
                                    IXNET, INC.
  
       NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)
  
  
   IXnet 1999 Stock Option Plan
  
     During May 1999, IXnet's Board of Directors and IPC approved the 1999 Stock
  Option Plan, authorizing the grant of options to purchase up to 7,053,409
  shares of the Company's common stock. At that time, options to purchase
  6,530,184 shares were granted to employees, directors and others at an
  exercise price of $13.96 per share. Except for 1,763,352 options granted to
  the Chief Executive Officer which vested immediately, such options vest over
  four years. Options become exercisable, to the extent then vested, 30 months
  from the date of grant.
  
     In connection with the issuance of stock options under the Plan, the
  Company recorded deferred compensation in the aggregate amount of
  approximately $26.4 million based upon the deemed fair market value for
  accounting purposes of IXnet's common stock at the date of grant. For the year
  ended September 30, 1999, $9.1 million of the deferred compensation was
  included as expense. The remaining balance will be amortized over the
  remaining vesting period of the options. In addition, certain of these options
  are treated as variable options for accounting purposes and may result in
  additional deferred compensation expense in future periods.
  
     A summary of IXnet's stock option plan from the initial issuance to
  September 30, 1999 is as follows:
  
  <TABLE>
  <CAPTION>
                                                        Option    Weighted Average
                                                        Shares     Exercise Price
                                                       ---------  ----------------
        <S>                                            <C>        <C>
        Beginning Balance............................. 6,530,184       $13.96
        Options granted...............................   489,764       $16.04
        Options forfeited.............................  (193,919)      $13.98
                                                       ---------       ------
        Outstanding at September 30, 1999............. 6,826,029       $14.11
                                                       =========       ======
  </TABLE>
  
   Stock-Based Compensation
  
     IXnet applies Accounting Principles Board Opinion No. 25, "Accounting for
  Stock Issued to Employees" and related interpretations in accounting for its
  stock based compensation plans. Accordingly, no compensation expense has been
  recognized for the 1994 or 1998 IPC Option Plan. The Company has adopted the
  disclosure-only provisions of SFAS 123, "Accounting for Stock-Based
  Compensation". In connection with the IPC Merger, the Company recognized
  compensation expense in the amount of $875,000 in the year ended September 30,
  1998, representing payments to IXnet option holders upon cancellation of their
  IPC stock options. Had compensation expense for employees of the Company
  receiving stock options under IXnet's 1999 Stock Option Plan, IPC's 1998 Stock
  Option Plan and IPC's 1994 Option Plan been determined based on the fair value
  at the grant date for awards under these plans in the years ended September
  30, 1999, 1998, and 1997 respectively, consistent with the provisions of SFAS
  123, the Company's net loss would have been increased to the pro forma amounts
  indicated below (in thousands):
  
  <TABLE>
  <CAPTION>
                                                    Year ended September 30,
                                                   ----------------------------
                                                     1999      1998      1997
                                                   --------  --------  --------
       <S>                                         <C>       <C>       <C>
       Net loss--as reported...................... $(59,467) $(27,639) $(15,208)
       Net loss--pro forma........................ $(63,076) $(28,114) $(15,859)
       Basic and diluted loss per share--as
        reported.................................. $  (1.35) $  (0.64) $  (0.35)
       Basic and diluted loss per share--pro
        forma..................................... $  (1.43) $  (0.65) $  (0.37)
  </TABLE>
  
     The fair value of each option grant is estimated on the date of the grant
  using the Black-Scholes Option-Pricing Model with the following weighted
  average assumptions used for grants for the years ended
  
                                        23
  <PAGE>
  
                                    IXNET, INC.
  
        NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)
  
  September 30, 1999, 1998 and 1997, respectively: zero dividend yield and
  expected volatility of 0.3%, 0.5% and 0.5%; weighted average risk-free interest
  rate of 6.0%, 5.61% and 6.01%; and expected lives of 4, 3 and 4 years.
  
  8. Supplemental Financial Data:
  
     Prepaids and other current assets include the following (in thousands):
  
  <TABLE>
  <CAPTION>
                                                                    September 30,
                                                                    -------------
                                                                     1999   1998
                                                                    ------ ------
        <S>                                                         <C>    <C>
        Value added tax recoverable................................ $3,349 $1,211
        Prepaid telecommunication transport lines and circuits.....    --     376
        Deposits...................................................    --     750
        Other receivables..........................................    590    --
        Other......................................................  1,566    370
                                                                    ------ ------
                                                                    $5,505 $2,707
                                                                    ====== ======
  </TABLE>
  
     Accounts payable include the following (in thousands):
  
  <TABLE>
  <CAPTION>
                                                                    September 30,
                                                                    --------------
                                                                     1999    1998
                                                                    ------- ------
        <S>                                                         <C>     <C>
        Installment purchase of IRU................................ $   --  $3,600
        Trade accounts payable.....................................  10,198  3,428
                                                                    ------- ------
                                                                    $10,198 $7,028
                                                                    ======= ======
  </TABLE>
  
     Accrued liabilities include the following (in thousands):
  
  <TABLE>
  <CAPTION>
                                                                    September 30,
                                                                    --------------
                                                                     1999    1998
                                                                    ------- ------
        <S>                                                         <C>     <C>
        Carrier costs.............................................. $12,351 $3,815
        Compensation and benefits..................................   3,463  2,206
        Deferred revenue...........................................   2,695    615
        Other......................................................   3,936  2,371
                                                                    ------- ------
                                                                    $22,445 $9,007
                                                                    ======= ======
  </TABLE>
  
  9. IPC's Revolving Credit Facility:
  
     On June 21, 1999, IPC amended and restated its $55.0 million Revolving
  Credit Facility to provide for a Working Capital Facility of $45.0 million and
  a $20.0 million Term Loan. In addition, certain terms relating to eligibility
  of receivables used in determining the amount available under the Working
  Capital Facility were changed to increase the availability. The amendment and
  restatement also provided for a pledge by IPC Communications of IPC common
  stock and a pledge by IPC of IXnet common stock and certain additional
  financial covenants including a leverage ratio and fixed charge ratio. All of
  the Company's real and personal property will continue to be pledged as
  collateral and the Company and its subsidiaries will continue to be guarantors
  under IPC's revolving credit agreement. The $20.0 million Term Loan is
  repayable in quarterly installments of $1.3 million, commencing September 30,
  1999 and bears interest at LIBOR plus 2.75% or at the Base Rate plus 1.75% at
  IPC's option. IPC's credit agreement, which provides for both the Working
  Capital Facility and the Term Loan, matures on April 30, 2003.
  
                                        24
  <PAGE>
  
                                    IXNET, INC.
  
        NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)
  
  
  10. Commitments and Contingencies:
  
   Leases
  
     The Company has entered into various operating leases for real estate,
  equipment, and telecommunication transport lines and circuits and has entered
  into capital lease agreements for certain network equipment.
  
     Future minimum lease payments required under noncancellable capital and
  operating leases at September 30, 1999 are as follows (in thousands):
  
  <TABLE>
  <CAPTION>
                                                               Capital Operating
        Fiscal                                                 Leases   Leases
        ------                                                 ------- ---------
        <S>                                                    <C>     <C>
        2000.................................................. $ 7,608 $ 24,154
        2001..................................................   7,322    5,438
        2002..................................................   5,184    4,268
        2003..................................................   3,414    3,853
        2004..................................................   1,525    3,813
        Thereafter............................................     --     2,142
                                                               -------  -------
        Total................................................. $25,053  $43,668
                                                                        =======
        Less, amounts representing interest...................   4,005
                                                               -------
        Net present value of minimum lease payments under
         capital leases....................................... $21,048
                                                               =======
  </TABLE>
  
     Expenses under operating leases were $17.1 million, $13.3 million, and $8.3
  million for the years ended September 30, 1999, 1998, and 1997 respectively.
  
   Indefeasible Rights of Use
  
     The Company may enter into IRU agreements for participation in international
  cable systems. Commitments under these agreements are payable as follows (in
  thousands):
  
  <TABLE>
  <CAPTION>
           Fiscal
           ------
           <S>                                             <C>
           2000........................................... $10,435
           2001...........................................   5,202
           2002...........................................     863
                                                           -------
                                                           $16,500
                                                           =======
  </TABLE>
  
   Intercompany Agreement
  
     As of July 1, 1999, the Company, IPC and IEXN entered into an intercompany
  agreement which provides, among other matters, for IPC to furnish up to $50.0
  million of credit, including the provision of letters of credit, guarantees and
  other forms of credit enhancements limited to $6.25 million per quarter,
  commencing July 1, 1999 and continuing through the quarter ending June 30,
  2001. Outstanding notes payable on July 1, 1999 and additional amounts borrowed
  under the agreement bear interest at the Base Rate, as defined, plus 2%. Any
  and all amounts advanced by IPC which are outstanding on June 30, 2001 shall be
  immediately due and payable.
  
                                        25
  <PAGE>
  
                                    IXNET, INC.
  
        NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)
  
  
     The amount due IPC at September 30, 1999 and 1998, respectively, was $52.1
  million and $43.6 million. For the quarter ended September 30, 1999, the $6.25
  million limitation had been exceeded representing a delay in reimbursement of a
  fourth quarter funding by IPC, the transfer of a UK VAT receivable from IPC to
  the Company and interest expense on the outstanding amounts. The amounts were
  subsequently reimbursed and the balances are now consistent with the
  intercompany agreement.
  
   Employment Agreements
  
     The Company has executed employment contracts with certain senior executives
  for future services that vary in length up to 5 years, for which the Company
  has a minimum commitment aggregating $8.6 million at September 30, 1999.
  
  11. Transactions with IPC:
  
     IPC provided certain corporate functions on behalf of IXnet (relating to
  accounting, executive management, legal, administrative, human resources,
  information systems, insurance and other corporate functions). These expenses
  have been allocated to IXnet based on its direct and indirect utilization of
  specific services. Indirect expenses were allocated based on IXnet's headcount
  in proportion to combined IXnet and IPC headcount. Included in general and
  administrative expenses were corporate allocations of $1.8 million, $1.5
  million, and $0.9 million for the years ended September 30, 1999, 1998 and
  1997, respectively. Management believes these allocations are reasonable.
  Amounts due IPC for these expenses are included in note payable to parent.
  
     The note payable to parent includes net cash advances, payments of third-
  party liabilities on behalf of IXnet and amounts due for direct and indirect
  services performed by IPC, offset in part by tax benefits related to IXnet
  which were utilized by IPC in its consolidated tax return. Interest expense in
  the amounts of $5.1 million, $2.2 million, and $1.1 million for the years ended
  September 30, 1999, 1998 and 1997, respectively, was charged based on a U.S.
  bank prime rate plus two percent on the average net amount outstanding each
  month. In addition, the Company uses IPC technicians to install certain network
  equipment. Costs incurred for these technicians for the years ended September
  30, 1999, 1998 and 1997 were $1.9 million, $325,000 and $250,000, respectively.
  
     IXnet provides domestic and international long distance telecommunications
  services to IPC as well as private line services between IPC's domestic
  locations. Amounts charged to IPC were $155,000, $170,000 and $165,000 for the
  years ended September 30, 1999, 1998 and 1997, respectively.
  
  12. Income Taxes:
  
     Pre tax earnings consisted of the following (in thousands):
  <TABLE>
  <CAPTION>
                                                      Year ended September 30,
                                                     ----------------------------
                                                       1999      1998      1997
                                                     --------  --------  --------
        <S>                                          <C>       <C>       <C>
        United States............................... $(55,768) $(28,218) $(15,425)
        Foreign.....................................   (2,406)    1,052       446
                                                     --------  --------  --------
        Total pretax earnings....................... $(58,174) $(27,166) $(14,979)
                                                     ========  ========  ========
  </TABLE>
  
                                        26
  <PAGE>
  
                                    IXNET, INC.
  
        NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)
  
     The provision for income taxes consisted of the following (in thousands):
  
  <TABLE>
  <CAPTION>
                                                                    Year ended
                                                                  September 30,
                                                                ------------------
                                                                 1999  1998  1997
                                                                ------ ----- -----
        <S>                                                     <C>    <C>   <C>
        Current:
          Federal.............................................. $  --  $ --  $ --
          State and local......................................    --    --    --
          Foreign..............................................  1,149   358   --
                                                                ------ ----- -----
                                                                $1,149 $ 358 $ --
                                                                ====== ===== =====
        Deferred:
          Federal.............................................. $  --  $ --  $ --
          State and local......................................    --    --    --
          Foreign..............................................    144   115   229
                                                                ------ ----- -----
                                                                   144   115   229
                                                                ------ ----- -----
        Income tax provision................................... $1,293 $ 473 $ 229
                                                                ====== ===== =====
  </TABLE>
  
     The components of net deferred tax liabilities are as follows (in
  thousands):
  <TABLE>
  <CAPTION>
                                                      September 30,
                           ------------------------------------------------------------------------
                                         1999                                 1998
                           -----------------------------------  -----------------------------------
                           Federal    State   Foreign  Total    Federal    State   Foreign  Total
                           --------  -------  ------- --------  --------  -------  ------- --------
  <S>                      <C>       <C>      <C>     <C>       <C>       <C>      <C>     <C>
  Deferred tax assets:
   Amortization of
    intangibles........... $  3,343  $   544   $ --   $  3,887  $    481  $    80   $ --   $    561
   Accounts receivable....      --       --      --        --        217       36     --        253
   Accrued expenses.......      398       65     --        463       477       80     --        557
   Net operating loss.....   33,300    5,421     --     38,721    17,512    2,927     --     20,439
                           --------  -------   -----  --------  --------  -------   -----  --------
     Total deferred tax
      assets..............   37,041    6,030     --     43,071    18,687    3,123     --     21,810
  Deferred tax
   liabilities:
   Excess tax over book
    depreciation..........    1,701      367     550     2,618     1,402      234     406     2,042
                           --------  -------   -----  --------  --------  -------   -----  --------
   Net deferred tax
    (liability) asset.....   35,340    5,663    (550)   40,453    17,285    2,889    (406)   19,768
     Less valuation
      allowance...........  (35,340)  (5,663)    --    (41,003)  (17,285)  (2,889)    --    (20,174)
                           --------  -------   -----  --------  --------  -------   -----  --------
     Net deferred tax
      liability........... $    --   $   --    $(550) $   (550) $    --   $   --    $(406) $  (406)
                           ========  =======   =====  ========  ========  =======   =====  ========
  </TABLE>
  
     The Company is included in the IPC consolidated federal income tax return
  and the benefits of their net operating losses have been realized on such
  return. Amounts received from IPC related to these benefits have been recorded
  as capital contributions. Future income tax benefits from operating losses and
  temporary timing differences will be recognized to the extent they would be
  realized on a separate return basis.
  
     The following table summarizes the significant differences between the U.S.
  federal statutory income tax rate and the Company's effective tax rate for
  financial statement purposes.
  <TABLE>
  <CAPTION>
                                                  Year ended September 30,
                                                 ------------------------------
                                                   1999       1998       1997
                                                 --------   --------   --------
       <S>                                       <C>        <C>        <C>
       U.S. federal statutory income tax rate..     (35.0)%    (35.0)%    (35.0)%
       State and local taxes, net of federal
        income tax effect......................      (5.9)      (5.9)      (5.9)
       Change in valuation allowance...........      35.8       41.2       41.3
       Other...................................       2.9        1.4        1.1
                                                 --------   --------   --------
                                                      2.2%       1.7%       1.5%
                                                 ========   ========   ========
  </TABLE>
  
                                        27
  <PAGE>
  
                                    IXNET, INC.
  
        NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)
  
  
  13. Disclosures about Segments of an Enterprise and Related Information
  
     The Company is focused on providing a seamless global network providing a
  variety of voice, data, and content distribution services which has been
  specifically designed to meet the specialized requirements of the financial
  services industry. All of our revenue is derived from our global network. All
  operating expenses and assets of the Company are combined and reviewed by the
  chief operating decision makers on an enterprise wide-basis, resulting in no
  additional discrete financial information or reportable segment information.
  
     Our network connects customers in 37 countries around the world and we have
  major offices in New York, London and Sydney from which we coordinate our sales
  and marketing, finance and administrative functions in North America, Europe
  and the Asia Pacific countries. We refer to these areas as regions. All of our
  products and services are similar in each of the regions. We specifically
  address the needs of the financial services industry and therefore the types
  and class of customers for all products and services in each of the regions are
  similar. The methods of providing services on our global network are similar.
  
     Enterprise wide information is provided in accordance with SFAS 131
  "Disclosures about Segments of an Enterprise and Related Information"
  Geographic sales information is based on the currency in which the customer is
  billed. Long-lived asset information is based on the physical location of the
  assets. The following is revenue and long-lived asset information for
  geographic areas (in thousands):
  
  <TABLE>
  <CAPTION>
                                              Year ended September 30,
                                  ------------------------------------------------
                                        1999            1998            1997
                                  ---------------- --------------- ---------------
                                  Revenue  Assets  Revenue Assets  Revenue Assets
                                  ------- -------- ------- ------- ------- -------
  <S>                             <C>     <C>      <C>     <C>     <C>     <C>
    North America................ $38,764 $ 78,958 $21,892 $40,404  $7,757 $15,298
    Europe.......................  22,131   10,693  12,596   6,122   9,712   4,245
    Asia/Pacific.................  12,720   47,246   1,365     --      369     --
                                  ------- -------- ------- ------- ------- -------
                                  $73,615 $136,897 $35,853 $46,526 $17,838 $19,543
                                  ======= ======== ======= ======= ======= =======
  </TABLE>
  
     For the year ended September 30, 1999, revenue from the United States,
  United Kingdom, and Australia represented 51.6%, 27.7%, and 10.7% of total
  revenue, respectively. For the years ended September 30, 1998 and 1997, revenue
  was generated primarily from the United States and the United Kingdom.
  
     Long-lived assets primarily located within the United States, represent
  31.8%, 67.0%, and 55.3% of total assets, as of September 30, 1999.
  
     For the year ended September 30, 1999, two customers accounted for 14.0% and
  10.0% of total revenue. For the year ended September 30, 1998, two customers
  accounted for 23% and 14% of total revenue For the year ended September 30,
  1997, one customer accounted for 45% of the total revenue.
  
                                        28
  <PAGE>
  
                              IPC COMMUNICATIONS, INC.
                            CONSOLIDATED BALANCE SHEETS
                                    (Unaudited)
                 (In thousands, except share and per share amounts)
  
  <TABLE>
  <CAPTION>
                                                                                    March 31,   September 30,
                                                                                    ----------  --------------
                                                                                       2000         1999
                                                                                    ----------  --------------
  <S>                                                                               <C>         <C>
                         ASSETS
  Current assets:
   Cash and cash equivalents....................................................    $  31,621       $  43,946
   Marketable securities........................................................            -          28,357
   Marketable securities, restricted............................................        3,000          20,435
   Trade receivables............................................................       83,600          80,309
   Inventories..................................................................       39,022          31,903
   Prepaids and other current assets............................................       25,308          24,807
                                                                                    ---------       ---------
       Total current assets.....................................................      182,551         229,757
  
  Property, plant and equipment, net............................................      117,382          98,682
  Long term marketable securities, restricted...................................            -           6,065
  Debt issuance costs, net......................................................       10,264          10,675
  Goodwill and intangible assets, net...........................................       88,097          66,203
  Other assets..................................................................        1,725           1,827
                                                                                    ---------       ---------
       Total assets.............................................................    $ 400,019       $ 413,209
                                                                                    =========       =========
  
                 LIABILITIES AND STOCKHOLDERS' DEFICIT
  Current liabilities:
   Accounts payable.............................................................    $  40,625       $  23,485
   Accrued liabilities..........................................................       48,320          46,343
   Customer advances and deferred revenue.......................................       41,368          30,432
   Current portion of notes payable.............................................       50,316          34,425
   Current portion of capital leases............................................        7,205           6,265
                                                                                    ---------       ---------
       Total current liabilities................................................      187,834         140,950
  
  Senior unsecured notes........................................................      220,647         209,230
  Notes payable, less current portion...........................................        5,503          18,354
  Lease obligations, less current portion.......................................       18,648          15,651
  Other liabilities.............................................................        3,558           3,575
                                                                                    ---------       ---------
       Total liabilities........................................................      436,190         387,760
                                                                                    ---------       ---------
  
  Minority interest.............................................................       14,627          25,828
  
  Commitments and contingencies
  
  Stockholders' deficit:
   Common stock - $0.01 par value, authorized 25,000,000 shares;
      8,838,855 shares issued and outstanding at March 31, 2000; 8,577,480
      shares issued and outstanding at September 30, 1999.......................           88              86
   Paid-in capital..............................................................      115,900         104,913
   Accumulated deficit..........................................................     (165,580)       (105,594)
   Accumulated other comprehensive income.......................................       (1,206)            216
                                                                                    ---------       ---------
       Total stockholders' deficit..............................................      (50,798)           (379)
                                                                                    ---------       ---------
       Total liabilities and stockholders' deficit..............................    $ 400,019       $ 413,209
                                                                                    =========       =========
  </TABLE>
  
  
                  See Notes to Consolidated Financial Statements.
  
                                        29
  <PAGE>
  
                              IPC COMMUNICATIONS, INC.
                       CONSOLIDATED STATEMENTS OF OPERATIONS
                                    (Unaudited)
                      (In thousands, except per share amounts)
  
  
  <TABLE>
  <CAPTION>
  
  
                                                                    Three months ended               Six months ended
                                                                         March 31                        March 31
                                                                  --------------------------    -------------------------
                                                                    2000         1999             2000         1999
                                                                  -------      --------         -------      --------
  <S>                                                          <C>            <C>            <C>            <C>
  
  Revenue:
     Product sales and installation..........................    $ 35,013      $ 38,803         $ 73,766     $ 73,159
     Service.................................................      52,727        42,130           97,454       75,524
                                                                 --------      --------         --------     --------
                                                                   87,740        80,933          171,220      148,683
                                                                 --------      --------         --------     --------
  Cost of revenue (exclusive of depreciation and amortization
     shown separately below)
     Product sales and installation..........................      20,335        22,409           44,103       41,192
     Service.................................................      45,968        31,807           83,928       56,821
                                                                 --------      --------         --------     --------
                                                                   66,303        54,216          128,031       98,013
                                                                 --------      --------         --------     --------
          Gross profit.......................................      21,437        26,717           43,189       50,670
  
  Research and development expenses..........................       3,201         2,193            6,113        4,594
  Selling, general and administrative expenses...............      22,777        12,749           41,689       25,343
  Depreciation and amortization..............................      12,632         7,613           23,415       13,274
  Stock compensation charge..................................       1,236             -            2,599            -
  Merger related costs.......................................      23,288             -           23,288            -
                                                                 --------      --------         --------     --------
           (Loss) income from operations.....................     (41,697)        4,162          (53,915)       7,459
  
  Interest expense, net......................................      (7,447)       (6,953)         (14,240)     (13,144)
  Other (expense) income, net................................        (768)          (22)            (572)          54
                                                                 --------      --------         --------     --------
            Loss before provision for income taxes
              and minority interest..........................     (49,912)       (2,813)         (68,727)      (5,631)
  Provision for income taxes.................................       1,219           478            2,460        1,319
                                                                 --------      --------         --------     --------
           Loss before minority interest.....................     (51,131)       (3,291)         (71,187)      (6,950)
  Minority interest..........................................       7,634             -           11,201            -
                                                                 --------      --------         --------     --------
           Net loss..........................................    $(43,497)     $ (3,291)        $(59,986)    $ (6,950)
                                                                 ========      ========         ========     ========
  Basic and diluted loss per share...........................    $  (4.97)     $  (0.41)        $  (6.91)    $  (0.86)
                                                                 ========      ========         ========     ========
  Basic and diluted weighted average number of shares
       outstanding...........................................       8,748         8,076            8,681        8,076
                                                                 ========      ========         ========     ========
  </TABLE>
  
  
  
                   See Notes to Consolidated Financial Statements
  
                                        30
  <PAGE>
  
                             IPC COMMUNICATIONS, INC.
                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                    (Unaudited)
                                   (In thousands)
  
                                                      Six months ended
                                                          March 31,
                                                     -------------------
                                                       2000        1999
                                                     ---------   -------
  
  Cash flows from operating activities:
  Net loss......................................... $ (59,986) $  (6,950)
  Adjustments to reconcile net loss to net cash
       (used in) provided by (used in)
       operating activities
     Stock compensation charge.....................     2,599          -
     Minority interest.............................   (11,201)         -
     Depreciation and amortization.................    23,415     13,349
     Other interest amortization...................    12,241     11,217
     Bad debt and sales credit provision...........     1,632        672
  Changes in operating assets and liabilities:
     Trade receivables.............................    (4,409)    11,267
     Inventories...................................    (7,119)    (2,194)
     Prepaids and other current assets.............       (49)    (2,010)
     Other assets..................................    (1,654)       239
     Accounts payable..............................    16,153     (1,094)
     Accrued liabilities and other liabilities.....     2,122        938
     Customer advances and deferred revenue........    10,936     (4,783)
                                                     ---------   -------
       Net cash (used in) provided by operating
         activities................................   (15,320)    20,651
                                                     ---------   -------
  Cash flows from investing activities:
     Capital expenditures..........................   (27,666)    (9,410)
     Net change in marketable securities...........    52,453          -
     Acquisitions, net of cash acquired............   (23,863)   (40,418)
                                                     ---------   -------
       Net cash provided by (used in) investing
         activities................................       924    (49,828)
                                                     ---------   -------
  Cash flows from financing activities:
     Proceeds from revolving credit borrowings.....    15,150     22,082
     Repayments of revolving credit borrowings.....         -     (5,276)
     Principal payments on capital leases..........    (3,269)    (2,376)
     Principal payments on notes payable...........   (12,303)      (555)
     Debt issuance costs...........................      (413)      (384)
     Proceeds from the exercise of stock options...     4,328          -
     Other.........................................         -        (42)
                                                     ---------   -------
       Net cash provided by financing activities...     3,493     13,449
                                                     ---------   -------
  Effect of exchange rate changes on cash..........    (1,422)      (317)
                                                     ---------   -------
  Net decrease in cash.............................   (12,325)   (16,045)
  Cash and cash equivalents, beginning of period...    43,946     28,084
                                                     ---------   -------
  Cash and cash equivalents, end of period......... $  31,621    $12,039
                                                     =========   =======
  
  Non-cash investing and financing activities:
    the period
  
  Capital lease obligations entered
    into during the period......................... $   7,207    $ 5,318
  
  Deferred compensation in
    connection with grants of stock options........     2,599          -
  
  
                  See Notes to Consolidated Financial Statements
  
                                        31
  <PAGE>
  
  1.  Background and basis for presentation
  
     IPC Communications, Inc. ("IPC" or the "Company") is the world's leading
  supplier of voice trading systems to the financial services community with a
  sophisticated suite of globally integrated voice and data telecommunications
  products. IPC focuses on serving the financial trading environment by designing,
  manufacturing, installing, and servicing products that allow traders around the
  world to communicate with each other instantly and reliably. In addition,
  through its subsidiary, IXnet, Inc. ("IXnet"), the Company provides a high
  performance intelligent global extranet (the "IXnet Extranet") designed
  exclusively for the financial community. Through a single connection, IXnet
  delivers end-to-end managed data and voice communications solutions to the
  financial services community around the world. The Company's primary customers
  include securities and investment banking firms, merchant and commercial banks,
  interdealer brokers, foreign exchange and commodity brokers and dealers,
  securities and commodity exchanges, mutual and hedge fund companies, asset
  managers and insurance companies. The Company uses an integrated approach to
  marketing its products and services, leveraging its established customer base
  throughout the financial sector.
  
     IPC became the holding company for IPC Information Systems, Inc. ("IPC
  Information Systems") effective May 21, 1999 through a merger. Following the
  merger, IPC represented the same consolidated financial position as IPC
  Information Systems prior to the merger. Accordingly, the consolidated financial
  statements included in this Form 10-Q reflect the operations of IPC Information
  Systems and its subsidiaries through May 20, 1999 and of IPC thereafter.
  
       On February 22, 2000, the Company, IPC Information Systems and IXnet
  entered into a merger agreement with Global Crossing, Ltd. (the "Merger"). The
  Merger was approved by a majority of the Company's and IXnet's stockholders.
  Under the terms of the Merger agreement, at the closing, Company stockholders
  will be entitled to receive 5.417 shares of Global Crossing common stock for
  each share of Company common stock and IXnet stockholders will be entitled to
  receive 1.184 shares of Global Crossing common stock for each share of IXnet
  common stock. The Merger is expected to close by the end of the Company's third
  fiscal quarter. For the three and six months ended March 31, 2000, the Company
  recorded costs of $23.3 million related to the Merger. These costs primarily
  included investment banker fees, legal fees, other professional fees, and other
  direct costs.
  
       In the opinion of management, the accompanying unaudited financial
  statements include all necessary adjustments (consisting of normal recurring
  accruals and appropriate intercompany elimination adjustments) for a fair
  presentation of the financial position of IPC as of March 31, 2000, and the
  results of its operations for the three and six months ended March 31, 2000 and
  1999 and cash flows for the six months ended March 31, 2000 and 1999, in
  conformity with generally accepted accounting principles, commonly referred to
  as "GAAP", for interim financial information applied on a consistent basis. The
  results of operations for the three and six months ended March 31, 2000 are not
  necessarily indicative of the results to be expected for the full year. Certain
  information and note disclosures normally included in financial statements
  prepared in accordance with GAAP have been omitted pursuant to the rules and
  regulations of the Securities and Exchange Commission. These financial
  statements should be read in conjunction with IPC's Annual Report on Form 10-K
  for the fiscal year ended September 30, 1999.
  
  2. Summary of Significant Accounting Policies
  
  Trade Receivables
  
  Trade accounts receivable relate to Trading Systems and ITS sales and
  installations which are progress billed until the installation is complete.
  Turret sales to distributors are billed after the product is shipped and service
  contract invoices are billed in advance. Trade receivables are recorded net of
  allowance for doubtful accounts of $4.6 million and $2.3 million for the period
  ended March 31, 2000 and 1999, respectively.
  
  Reclassifications
  
  Certain reclassifications have been made to the 1999 financial statements in
  order to conform to the current period's presentation.
  
  Earnings Per Share:
  
  Basic loss per share is computed using the weighted average number of common
  shares outstanding during the year.  Diluted loss per share is computed using
  the weighted average number of shares of common stock adjusted for the dilutive
  effect of common stock equivalent shares of common stock options.  Common stock
  equivalent shares are calculated using the treasury stock method.  All stock
  options outstanding have been excluded from the computation of diluted loss per
  share as their effect would be antidilutive.  Accordingly, there is no
  difference between basic and diluted EPS.
  
  
  3.  Comprehensive loss
  
     Effective October 1, 1998, IPC adopted SFAS No. 130, "Reporting Comprehensive
  Income". This statement requires the Company to include within its financial
  statements information on comprehensive income/loss, which is defined as all
  activity impacting equity from non-owner sources. Comprehensive income/loss
  includes IPC's net income/loss and foreign currency translation adjustments.
  
     IPC's total comprehensive loss for the six months ended March 31, 2000 and
  1999 was as follows (in thousands):
  
  
                                                 Six Months Ended
                                                      March 31,
                                          ----------------------------------
                                            2000                       1999
                                          --------                   -------
     Net loss                             $(59,986)                  $(6,950)
     Translation adjustment                 (1,422)                   (1,045)
                                          --------                   -------
     Total comprehensive loss             $(61,408)                  $(7,995)
                                          ========                   =======
  
                                        32
  <PAGE>
  
  4.  Acquisitions and Strategic Agreement:
  
  Systems Programming & Network Computing, Inc. ("SPNC")
  
  On January 25, 2000, IXnet acquired all of the issued and outstanding common
  shares of SPNC which is a leader in providing and integrating sophisticated
  multi-system, multi-platform applications for the financial services community.
  The purchase price was approximately $1.5 million and consisted of $300,000 in
  cash, a $100,000 promissory note issued by the Company and 6,080 shares of IXnet
  common stock. The acquisition was accounted for using the purchase method of
  accounting and resulted in $111,000 of goodwill, which will be amortized over a
  5 year period from the date of the acquisition.
  
  Business Networks of New York, Inc. ("BNNY")
  
  Effective January 1, 2000, IXnet acquired all of the issued and outstanding
  common shares of BNNY which is a leader in providing voice and data services to
  the financial community, primarily in the New York Metropolitan Area.  The $26.5
  million purchase price consisted of $24.5 million in cash and 45,707 shares of
  IXnet common stock.  The acquisition was accounted for using the purchase method
  of accounting and resulted in $27.3 million of goodwill, which will be amortized
  over a 10 year period from the date of the acquisition.
  
  Strategic Agreement
  
    On September 24, 1999, IXnet entered into a strategic agreement (the
  "Strategic Agreement"), including the licensing of certain software products to
  enhance the intelligence of its network for a purchase price of $20.0 million
  consisting of $10.0 million in cash financed from the proceeds from IXnet's IPO
  and 500,000 shares of IXnet restricted common stock valued at an average closing
  price prior to the agreement date. The Strategic Agreement is designed to
  enhance IXnet's network capabilities with embedded intelligence, delivering
  financial enterprise integration, subject-based addressing trading turret
  integration and application management.
  
  V-Band Corporation ("V-Band")
  
    On June 21, 1999, the Company acquired V-Band for approximately $1.5 million
  in cash. The purchase was financed through a combination of cash from operations
  and borrowings under the Revolving Credit Facility.
  
  Reuters Voice Systems ("RVS")
  
    On December 31, 1998, the Company purchased the assets of RVS, a business unit
  of Reuters Group PLC, for approximately $5.7 million in cash. The purchase was
  financed through a combination of cash from operations and borrowings under the
  Revolving Credit Facility.
  
  Saturn Global Network Service Holdings Ltd. ("Saturn")
  
    On December 18, 1998, International Exchange Networks, Ltd. ("IENL") acquired
  all of the issued and outstanding common shares of Saturn from Marshalls 106
  Limited ("Marshalls"). The acquisition was accounted for using the purchase
  method of accounting.
  
    The purchase price for Saturn included a cash payment in the amount of $35.7
  million and the issuance of a promissory note in the amount of $7.5 million
  bearing interest at the UK Sterling Base Rate, as defined, plus three percent
  and payable over three years. In addition, IENL assumed indebtedness of Saturn
  due to Marshalls in the amount of $5.0 million payable over 24 months with
  interest at 9.25%. Under this agreement, the Marshalls Note is subject to a
  working capital adjustment and right of offset. The working capital adjustment
  was settled in June 1999 resulting in a reduction of the obligation by
  approximately $2.0 million.
  
                                        33
  <PAGE>
  
  5.  Property, Plant and Equipment (In thousands):
  
  
                                                        March 31,   September 30,
                                                        ----------  -------------
                                                           2000         1999
                                                        ----------  -------------
    Building                                             $  2,463        $  2,463
    Machinery and equipment                                39,247          36,300
    Furniture and fixtures                                  3,004           2,812
    Leasehold improvements                                 10,576           9,092
    Network equipment                                      49,586          39,865
    Network equipment under capital leases                 43,444          28,649
    Network software                                       24,547          21,561
    IRU's                                                  10,759           6,692
                                                         --------        --------
      Total depreciable property, plant and equipment     183,626         147,434
      Less accumulated depreciation and amortization      (66,595)        (49,761)
                                                         --------        --------
                                                          117,031          97,673
       Land and other                                         351           1,009
                                                         --------        --------
                                                         $117,382        $ 98,682
                                                         ========        ========
  
                                        34
  <PAGE>
  
  6.  Business Segments:
  
     The Company's operations include Trading Systems, Information Transport
  Systems ("ITS") and IXnet. Trading Systems reports sales of turret systems as
  "Product sales and installation." It reports revenue from turret system
  maintenance, including annual and multi-year service contracts, and from moves,
  additions and changes to existing turret system installations as "Service." ITS
  reports revenue from the design, integration and implementation of cabling
  infrastructure projects, including Local and Wide Area Networks, and from the
  sales of intelligent network products, such as hubs, bridges and routers, as
  "Product sales and installation." It reports revenue from on-site maintenance of
  customer cable infrastructure, including annual and multi-year contracts, and
  from the provision of outsourcing services for the support, expansion and
  upgrading of existing customer networks as "Service." IXnet reports revenue from
  sales of premium voice, managed bandwidth and outsourcing services, switched
  voice, shared internet protocol and other services (In thousands):
  
  
  <TABLE>
  <CAPTION>
  
  
                                                        Trading
                                                        Systems       I T S         IXnet     Consolidated
                                                        -------    ----------- -------------  ------------
  <S>                                                  <C>       <C>           <C>           <C>
  For the Six Months ended March 31, 2000
  Revenue:
     Product sales and installation................... $ 54,433    $ 19,333        $      -     $  73,766
     Service..........................................   38,250       7,097          52,107        97,454
                                                       --------    --------        --------      --------
  Total revenue....................................... $ 92,683    $ 26,430        $ 52,107     $ 171,220
                                                       ========    ========        ========     =========
  Gross profit (loss).................................   43,824       2,953          (3,588)       43,189
  Research & development expenses.....................    6,113           -               -         6,113
  Selling, general & administrative expenses (a)......   12,146       2,014          24,060        41,689
  Depreciation and amortization.......................    4,884         195          18,336        23,415
  Merger related costs................................    4,750                      18,538        23,288
  Stock compensation charge...........................        -           -           2,599         2,599
                                                       --------    ---------      ---------       -------
  Income (loss) from operations....................... $ 15,931    $    744       $ (67,121)    $ (53,915)
                                                       ========    ========       =========     =========
  
  EBITDA (b).......................................... $ 17,346    $    939       $ (46,186)    $ (27,901)
                                                       ========    ========       =========     =========
  
  Total assets........................................ $222,093    $ 26,206       $ 151,720     $ 400,019
                                                       ========    ========       =========     =========
  </TABLE>
  
  
  (a) Consolidated selling, general & administrative expenses include corporate
  general & administrative expenses of $3,469 for the six months ended
  March 31, 2000
  
  (b) EBITDA represents operating income before net interest, other expenses,
  income taxes, depreciation and amortization and non-cash stock compensation
  charges. EBITDA is not a measurement of financial performance under generally
  accepted accounting principles. It is not intended to represent cash flow from
  operations and should not be considered as an alternative to net loss as an
  indicator of our operating performance or to cash flows as a measure of
  liquidity. We believe that EBITDA is widely used by analysts, investors and
  others in the telecommunications industry. EBITDA is not necessarily comparable
  with similarly titled measures used by other companies.
  
                                        35
  <PAGE>
  
  <TABLE>
  <CAPTION>
  
  
                                                       Trading
                                                       Systems     I T S        IXnet   Consolidated
                                                      --------   --------    ---------  ------------
  <S>                                               <C>          <C>        <C>        <C>
  For the Six Months ended March 31, 1999
  Revenue:
     Product sales and installation                  $ 56,933    $ 16,226    $       -    $ 73,159
     Service                                           34,332       8,680       32,512      75,524
                                                     --------    --------    ---------    --------
  Total revenue                                      $ 91,265    $ 24,906    $  32,512    $148,683
                                                     ========    ========    =========    ========
  Gross profit (loss)                                  45,762       3,330        1,578      50,670
  Research & development expenses                       4,594                        -       4,594
  Selling, general & administrative expenses (a)       11,373       2,095        7,693      25,343
  Depreciation and amortization                         3,598         168        9,508      13,274
                                                     --------    --------    ---------    --------
  Income (loss) from operations                      $ 26,197     $ 1,067    $ (15,623)   $  7,459
                                                     ========    ========    =========    ========
  
  EBITDA (b)                                         $ 29,795     $ 1,235    $  (6,115)   $ 20,733
                                                     ========    ========    =========    ========
  
  Total assets                                       $125,578    $ 31,465    $ 125,440    $282,483
                                                     ========    ========    =========    ========
  
  </TABLE>
  
  
  (a) Consolidated selling, general & administrative expenses include corporate
  general & administrative expense of $4,182 for the six months ended March 31,
  1999
  
  (b) EBITDA represents operating income before net interest, other expenses,
  income taxes, depreciation and amortization and non-cash stock compensation
  charges. EBITDA is not a measurement of financial performance under generally
  accepted accounting principles. It is not intended to represent cash flow from
  operations and should not be considered as an alternative to net loss as an
  indicator of our operating performance or to cash flows as a measure of
  liquidity. We believe that EBITDA is widely used by analysts, investors and
  others in the telecommunications industry. EBITDA is not necessarily comparable
  with similarly titled measures used by other companies.
  
  7.  Stock Compensation Charge:
  
       In May 1999, IXnet recorded $26.4 million in non-cash deferred stock
  compensation reflecting the issuance by the Company of options to purchase
  6,530,184 shares of common stock of IXnet at $13.96 per share. The deferred
  stock compensation is based upon the deemed fair market value of IXnet's common
  stock and the exercise price of such options issued on the date of grant. The
  Company recorded an additional $2.1 million of non-cash deferred stock
  compensation during the quarter and $4.4 million during the six months ended
  March 31, 2000, which represents the charge for the issuance of options in May
  1999 that are treated as variable options for accounting purposes. Stock
  compensation expense for the three and six months ended March 31, 2000 is $1.2
  million and $2.6 million respectively. The remaining deferred compensation will
  be amortized over the remaining vesting period of the options.
  
                                        36
  <PAGE>
  
                         REPORT OF INDEPENDENT ACCOUNTANTS
  
  To the Stockholders
  of IPC Communications, Inc.:
  
       In our opinion, the accompanying consolidated financial statements
  present fairly, in all material respects, the consolidated financial position
  of IPC Communications, Inc. and its subsidiaries at September 30, 1999 and
  1998, and the results of their operations and cash flows for each of the three
  years in the period ended September 30, 1999, in conformity with accounting
  principles generally accepted in the United States. These financial statements
  are the responsibility of the Company's management; our responsibility is to
  express an opinion on these financial statements based on our audits. We
  conducted our audits in accordance with auditing standards generally accepted
  in the United States, which 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, assessing
  the accounting principles used and significant estimates made by management,
  and evaluating the overall financial statement presentation. We believe that
  our audits provide a reasonable basis for the opinion expressed above.
  
  /S/ PricewaterhouseCoopers LLP
  
  PricewaterhouseCoopers LLP
  
  New York, New York
  November 30, 1999
  
                                        37
  <PAGE>
  
                              IPC COMMUNICATIONS, INC.
                             CONSOLIDATED BALANCE SHEETS
          (Dollar amounts in thousands, except share and per share amounts)
  <TABLE>
  <CAPTION>
  
                                                                                                      September 30,
                                                                                              ---------------------------
                                                                                                   1999          1998
                                                                                              ------------  -------------
                                                  ASSETS
  Current assets:
  <S>                                                                                          <C>             <C>
     Cash and cash equivalents............................................................      $  43,946       $  28,084
     Marketable securities................................................................         28,357               -
     Marketable securities, restricted....................................................         20,435               -
     Trade receivables....................................................................         80,309          71,521
     Inventories..........................................................................         31,903          40,046
     Prepaids and other current assets....................................................         24,807          15,214
                                                                                                ---------       ---------
               Total current assets.......................................................        229,757         154,865
  
  Property, plant and equipment, net......................................................         98,682          57,113
  Long term marketable securities, restricted.............................................          6,065               -
  Debt issuance costs, net................................................................         10,675          10,707
  Goodwill and intangible assets, net.....................................................         66,203          15,639
  Other assets............................................................................          1,827           3,318
                                                                                                ---------       ---------
               Total assets...............................................................      $ 413,209       $ 241,642
                                                                                                =========       =========
  
                                   LIABILITIES AND STOCKHOLDERS' DEFICIT
  Current liabilities:
    Accounts payable......................................................................      $  23,485       $  20,094
    Accrued liabilities...................................................................         46,343          40,704
    Customer advances and deferred revenue................................................         30,432          38,469
    Current portion of notes payable......................................................         34,425               -
    Current portion of capital leases.....................................................          6,265           4,462
                                                                                                ---------       ---------
               Total current liabilities..................................................        140,950         103,729
   Senior unsecured notes.................................................................        209,230         188,223
   Notes payable, less current portion....................................................         18,354               -
   Lease obligations, less current portion................................................         15,651          12,490
   Other liabilities......................................................................          3,575           3,741
                                                                                                ---------       ---------
               Total liabilities..........................................................        387,760         308,183
                                                                                                ---------       ---------
  
  Minority Interest.......................................................................         25,828               -
  
  Commitments and contingencies
  
  Stockholders' deficit:
    Common stock - $0.01 par value, authorized 25,000,000 shares; 8,577,480 shares
       issued and outstanding at September 30, 1999; 8,076,188
       shares issued and outstanding at September 30, 1998................................             86              81
    Paid-in capital.......................................................................        104,913           5,855
    Accumulated deficit...................................................................       (105,594)        (73,049)
    Accumulated other comprehensive income................................................            216             572
                                                                                                ---------       ---------
               Total stockholders' deficit................................................           (379)        (66,541)
                                                                                                ---------       ---------
               Total liabilities and stockholders' deficit................................      $ 413,209       $ 241,642
                                                                                                =========       =========
  
  </TABLE>
  
                       See Notes to Consolidated Financial Statements.
  
                                        38
  <PAGE>
  
                              IPC COMMUNICATIONS, INC.
                        CONSOLIDATED STATEMENTS OF OPERATIONS
              (Dollar amounts in thousands, except per share amounts)
  
  
  <TABLE>
  <CAPTION>
  
                                                                                              For the year ended September 30,
                                                                                        ------------------------------------------
                                                                                            1999           1998          1997
                                                                                        -------------  ------------- -------------
  Revenue:
  <S>                                                                                 <C>                <C>                <C>
     Product sales and installation.................................................. $ 178,201          $ 173,350          $ 179,978
     Service.........................................................................   160,991            122,467             90,080
                                                                                      ---------          ---------          ---------
                                                                                        339,192            295,817            270,058
                                                                                      ---------          ---------          ---------
  Cost of revenue (excluding depreciation and amortization
    shown separately below)
     Product sales and installation..................................................   103,837             99,974            126,623
     Service.........................................................................   127,404             89,084             68,674
                                                                                      ---------          ---------          ---------
                                                                                        231,241            189,058            195,297
                                                                                      ---------          ---------          ---------
          Gross profit...............................................................   107,951            106,759             74,761
  
  Research and development expenses..................................................     9,786              8,276              8,490
  Selling, general and administrative expenses.......................................    58,047             53,345             48,100
  Depreciation and amortization......................................................    30,110             15,690              8,630
  Stock compensation charge..........................................................     9,079               --                 --
  Change in control expense..........................................................      --               10,640               --
                                                                                      ---------          ---------          ---------
           Income from operations....................................................       929             18,808              9,541
  
  Interest expense, net..............................................................   (27,263)           (10,337)            (1,844)
  Other income (expense), net........................................................       451                 (2)               417
                                                                                      ---------          ---------          ---------
           (Loss) income before provision for income taxes
              and minority interest..................................................   (25,883)             8,469              8,114
  Provision for income taxes.........................................................     7,968              6,191              4,280
                                                                                      ---------          ---------          ---------
           (Loss) income before minority interest....................................   (33,851)             2,278              3,834
  Minority interest..................................................................     1,395               --                 --
                                                                                      =========          =========          =========
           Net (loss) income......................................................... $ (32,456)         $   2,278          $   3,834
                                                                                      =========          =========          =========
  
  Basic (loss) earnings per share.................................................... $   (3.97)         $    0.14          $    0.18
                                                                                      =========          =========          =========
  
  Basic weighted average number of shares outstanding................................     8,172             15,774             21,328
                                                                                      =========          =========          =========
  
  Diluted (loss) earnings per share.................................................. $   (3.97)         $    0.14          $    0.18
                                                                                      =========          =========          =========
  
  Diluted weighted average number of shares outstanding..............................     8,172             15,941             21,408
                                                                                      =========          =========          =========
  </TABLE>
  
                   See Notes to consolidated Financial Statements
  
                                        39
  <PAGE>
  
                              IPC COMMUNICATIONS, INC.
                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (Dollar amounts in thousands)
  
  <TABLE>
  <CAPTION>
  
                                                                                     For the year ended September 30,
                                                                                  -------------------------------------------
                                                                                      1999           1998           1997
                                                                                  -------------  ------------  --------------
  Cash flows from operating activities:
  <S>                                                                         <C>            <C>              <C>
  Net (loss) income........................................................       $ (32,456)    $   2,278     $   3,834
  Adjustments to reconcile net (loss) income to net cash provided by
       (used in) operating activities:
     Stock compensation charge.............................................           9,079          --            --
     Minority Interest.....................................................           1,395          --            --
     Depreciation and amortization.........................................          30,110        15,158         8,416
     Non-cash interest on senior discount notes............................          21,007         8,212          --
     Other interest amortization...........................................           1,703           842           327
     Provision for doubtful accounts.......................................           3,236         2,786           338
     Deferred income taxes.................................................           3,720        (4,769)           83
  Changes in operating assets and liabilities:
     Trade receivables.....................................................          (7,061)      (11,126)        4,909
     Inventories...........................................................          11,043        (5,978)        3,240
     Prepaids and other current assets.....................................             841         3,218        (2,926)
     Other assets..........................................................           2,377        (2,077)          (45)
     Accounts payable......................................................          (1,708)       (2,690)        2,859
     Accrued liabilities and other liabilities.............................         (15,635)       20,569         5,099
     Customer advances and deferred revenue................................         (11,033)       20,339        (1,453)
                                                                                  ---------     ---------     ---------
  
  
              Net cash provided by operating activities....................          16,618        46,762        24,681
                                                                                  ---------     ---------     ---------
  Cash flows from investing activities:
     Capital expenditures..................................................         (26,645)      (18,293)      (13,509)
     Purchase of marketable securities.....................................         (54,857)         --            --
     Acquisitions, net of cash acquired....................................         (42,913)       (7,535)       (1,500)
                                                                                  ---------     ---------     ---------
              Net cash (used in) investing activities......................        (124,415)      (25,828)      (15,009)
                                                                                  ---------     ---------     ---------
  Cash flows from financing activities:
     Net proceeds from IXnet initial public offering.......................         102,775          --            --
     Proceeds from revolving credit borrowings.............................          66,817          --            --
     Repayments of revolving credit borrowings.............................         (52,095)         --            --
     Proceeds from notes payable...........................................            --            --           2,182
     Principal payments on notes payable...................................          (5,948)       (8,807)      (12,526)
     Proceeds from issuance of senior discount notes.......................            --         180,011          --
     Proceeds from equity investment.......................................            --          54,721          --
     Purchase of IPC common stock at Merger................................            --        (200,271)         --
     Costs, Obligations and equity charges at Merger.......................          (1,380)      (19,778)         --
     Proceeds from the exercise of stock options...........................          13,551           468           301
                                                                                  ---------     ---------     ---------
  
              Net cash provided by (used in) financing activities..........         123,720         6,344       (10,043)
                                                                                  ---------     ---------     ---------
     Effect of exchange rate changes on cash...............................             (61)         (659)         (470)
                                                                                  ---------     ---------     ---------
     Net increase (decrease) in cash.......................................          15,862        26,619          (841)
     Cash and cash equivalents, beginning of period........................          28,084         1,465         2,306
                                                                                  ---------     ---------     ---------
     Cash and cash equivalents, end of period..............................       $  43,946     $  28,084     $   1,465
                                                                                  =========     =========     =========
  Supplemental disclosures of cash flow information:
  Cash paid during the year for-
     Income taxes..........................................................       $   4,282     $   4,822     $   4,100
     Interest..............................................................       $   4,323     $   2,138     $   1,040
  Non-cash investing and financing activities-
     Issuance of stock to acquire remaining 20% interest in subsidiary.....       $    --       $   4,799     $    --
     Installment purchase for property, plant and equipment................       $    --       $   3,600     $    --
     Retirement of treasury stock..........................................       $    --       $     718     $    --
     Capital lease obligations entered into during the year................       $  10,284     $   7,092     $  10,776
     Purchase of software in connection with Strategic Agreement...........       $  20,000     $    --       $    --
     Working capital adjustment in connection with Saturn..................       $   1,952     $    --       $    --
     Additional amount payable in connection with the aquisition of
        Bridge Electronics, Inc............................................       $    --       $    --       $   3,500
  </TABLE>
  
                  See Notes to Consolidated Financial Statements.
  
                                        40
  <PAGE>
  
                              IPC COMMUNICATIONS, INC.
              CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
                       (Dollar and share amounts in thousands)
  <TABLE>
  <CAPTION>
  
  
  
  
                                                                                                    Paid-      Accumulated
                                                                               Common Stock          in         (deficit)
                                                                            Shares     Amount      capital       earnings
                                                                            -------    --------    ---------     ---------
  <S>                                                                       <C>          <C>       <C>           <C>
  Consolidated balance, September 30, 1996............................      10,618       $ 109     $ 47,889      $ 24,341
     Net income.......................................................           -           -            -         3,834
     Translation adjustment...........................................           -           -            -             -
          Total comprehensive income..................................           -           -            -             -
     Issuance of common stock under employment contracts..............          32           -          478             -
     Issuance of common stock under stock purchase plan...............          21           -          312             -
     Issuance of common stock under stock option plan.................          20           -          301             -
                                                                            -------    --------    ---------     ---------
  Consolidated balance, September 30, 1997............................      10,691         109       48,980        28,175
     Net income.......................................................           -           -            -         2,278
     Translation adjustment...........................................           -           -            -             -
          Total comprehensive income
     Issuance of common stock under stock purchase plan...............          18           -          262             -
     Issuance of common stock under stock option plan.................          32           1          467             -
     Repurchase and retirement of IPC common stock from...............           -           -            -             -
        Merger dated April 30, 1998...................................      (9,537)        (95)    (103,346)      (96,830)
     Retirement of treasury stock.....................................           -          (2)           -          (716)
     Issuance of Common Stock from Merger.............................       2,606          26       54,695             -
     Equity charges related to the Merger.............................           -           -            -        (5,916)
     Issuance of common stock to acquire remaining 20% interest
        in subsidiary.................................................         228           2        4,797             -
    Two-for-one stock split effected in the form of a 100% stock
       dividend, issued on June 10, 1998..............................       4,038          40            -           (40)
                                                                            -------    --------    ---------     ---------
  Consolidated balance, September 30, 1998............................       8,076          81        5,855       (73,049)
     Net loss.........................................................           -           -            -       (32,456)
     Translation adjustment...........................................           -           -            -             -
          Total comprehensive income..................................           -           -            -             -
     IXnet initial public offering....................................           -           -       93,799             -
     Equity charges related to the Merger.............................           -           -            -           (89)
     Issuance of common stock under stock option plan.................         491           5        5,259             -
                                                                            -------    --------    ---------     ---------
  Consolidated balance, September 30, 1999............................       8,567        $ 86     $ 104,913    $ (105,594)
                                                                            =======    ========    =========     =========
  </TABLE>
  
  
  
  <TABLE>
  <CAPTION>
  
  
  
                                                                      Accumulated
                                                                         Other                            Total
                                                                     Comprehensive       Treasury     stockholders'    Comprehensive
                                                                         Income           stock     (deficit) equity    Income (loss)
                                                                      --------------      -------   ---------------------------------
  <S>                                                                <C>                 <C>        <C>                <C>
  Consolidated balance, September 30, 1996............................         $ 94       $ (718)        $71,715
     Net income.......................................................            -            -           3,834          $ 3,834
     Translation adjustment...........................................          270            -             270              270
                                                                                                                          -------
          Total comprehensive income..................................            -            -               -          $ 4,104
                                                                                                                          =======
     Issuance of common stock under employment contracts..............            -            -             478
     Issuance of common stock under stock purchase plan...............            -            -             312
     Issuance of common stock under stock option plan.................            -            -             301
                                                                      --------------      -------       ---------
  Consolidated balance, September 30, 1997............................          364          (718)        76,910
     Net income.......................................................            -            -           2,278          $ 2,278
     Translation adjustment...........................................          208            -             208              208
                                                                                                                          -------
          Total comprehensive income..................................                                                    $ 2,486
                                                                                                                          =======
     Issuance of common stock under stock purchase plan...............            -            -             262
     Issuance of common stock under stock option plan.................            -            -             468
     Repurchase and retirement of IPC common stock from...............            -            -               -
        Merger dated April 30, 1998...................................            -            -        (200,271)
     Retirement of treasury stock.....................................            -          718               -
     Issuance of Common Stock from Merger.............................            -            -          54,721
     Equity charges related to the Merger.............................            -            -          (5,916)
     Issuance of common stock to acquire remaining 20% interest
        in subsidiary.................................................            -            -           4,799
    Two-for-one stock split effected in the form of a 100% stock
       dividend, issued on June 10, 1998..............................            -            -               -
                                                                      --------------      -------       ---------
  Consolidated balance, September 30, 1998............................          572            -         (66,541)
     Net loss.........................................................            -            -         (32,456)        $(32,456)
     Translation adjustment...........................................         (356)           -            (356)            (356)
                                                                                                                         --------
          Total comprehensive income..................................            -            -               -         $(32,812)
                                                                                                                         ========
     IXnet initial public offering....................................            -            -          93,799
     Equity charges related to the Merger.............................            -            -             (89)
     Issuance of common stock under stock option plan.................            -            -           5,264
                                                                      --------------      -------       ---------
  Consolidated balance, September 30, 1999............................       $ 216          $ -           $ (379)
                                                                      ==============      =======       =========
  
  </TABLE>
  
                    See Notes to Consolidated Financial Statements.
  
                                        41
  <PAGE>
  
                             IPC COMMUNICATIONS, INC.
                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  
  1.  Basis of Presentation:
  
       IPC Communications, Inc. ("IPC") is the leading provider of integrated
       telecommunications equipment and services that facilitate the execution of
       transactions by the worldwide financial services community.  These
       transactions involve the trading of equity and debt securities,
       commodities, currencies and other financial instruments.  The Company
       designs, manufactures, installs and services turret systems which provide
       desktop access to time-sensitive communications and data.  In addition,
       through its subsidiary, IXnet, Inc. ("IXnet"), the Company operates a
       global network (the "IXnet Extranet"), providing a variety of voice, data
       and content distribution services specifically designed to meet the
       specialized communications requirements of the financial services
       community.  The Company's primary customers include securities and
       investment banking firms, merchant and commercial banks, interdealer
       brokers, foreign exchange and commodity brokers and dealers, securities and
       commodity exchanges, mutual and hedge fund companies, asset managers and
       insurance companies.  The Company uses an integrated approach to marketing
       its products and services, leveraging its established customer base
       throughout the financial sector.
  
       IPC became the holding company for IPC Information Systems, Inc. ("IPC
       Information Systems") effective May 21, 1999 through a merger.  Following
       the merger, IPC represented the same consolidated financial position as IPC
       Information Systems prior to the merger.  Accordingly, the consolidated
       financial statements included in this Form 10-K reflect the operations of
       IPC Information Systems and its subsidiaries through May 20, 1999 and of
       IPC thereafter.
  
  2.  Summary of Significant Accounting Policies:
  
      Principles of Consolidation
  
      The consolidated financial statements include the accounts of the Company
      and its subsidiaries.  Intercompany balances and transactions have been
      eliminated.
  
      Revenue Recognition
  
      Revenue from product sales and related installation is recognized upon
      completion of the installation except for revenue from sales to
      distributors, which is recognized upon shipment. Under contract provisions,
      customers may be progress-billed prior to the completion of the
      installations. The revenue related to these advance payments is deferred
      until the system installations are completed. Contracts for maintenance are
      billed in advance, and are recorded as deferred revenue and recognized
      ratably over the contractual periods. Revenue from network services are
      recognized in the month the related service is provided and related
      installation revenue is deferred and recognized ratably over the average
      contract term. Bandwidth and switched voice charges are billed and
      recognized monthly based on customer usage. All other revenues are billed
      and recognized monthly based on flat-rate monthly charges.
  
      Cash and Cash Equivalents
  
      The Company places cash with high credit quality financial institutions.
      Temporary cash investments with original maturities of three months or less
      are considered cash equivalents. Temporary cash investments are stated at
      cost, which approximates fair value. These investments are not subject to
      significant market risk.
  
                                        42
  <PAGE>
  
                             IPC COMMUNICATIONS, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
  
  
      Marketable Securities
  
      Marketable securities consist of investments in short-term government grade
      commercial paper with maturities of less than one year. Such securities are
      classified as available for sale and, accordingly, are carried at fair
      value, which approximates cost at September 30, 1999.  The amortized cost of
      debt securities is adjusted for amortization of premium and accretion of
      discounts to maturity.  Amortization of purchase premiums or accretion of
      discounts and realized gains and losses are included in interest income.
  
      On September 24, 1999, IXnet entered into a strategic agreement (the
      "Strategic Agreement"), including the license of certain software products
      to enhance the intelligence of its network. The purchase price included
      $10.0 million of cash to be paid in installments over six months beginning
      on October 30, 1999.  Separately, IXnet also entered into agreements to
      purchase indefeasible rights of use ("IRU's") over the next three years in
      an aggregate amount of $16.5 million.  In accordance with an amendment to
      the Revolving Credit Facility revised in connection with the Strategic
      Agreement, these amounts are invested in marketable securities dedicated to
      satisfy these commitments.
  
      Trade Receivables
  
      Trade accounts receivable potentially expose the Company to concentrations
      of credit risk, as a large volume of business is conducted with several
      major financial institutions, primarily companies in the brokerage, banking
      and financial services industries.  To help reduce this risk, customers may
      be progress-billed prior to the completion of the contract.  Trade
      receivables are recorded net of allowance for doubtful accounts of $3.6
      million and $2.4 million for the years ended September 30, 1999 and 1998,
      respectively.
  
      Inventories
  
      Inventories are stated at the lower of FIFO (first in, first out) cost or
      market.  Inventory costs include all direct manufacturing costs and applied
      overhead.
  
      Property, Plant and Equipment
  
      Property, plant and equipment are stated at cost and depreciated or
      amortized on a straight-line basis over their estimated useful lives or
      related contract terms beginning in the year the asset was placed into
      service.  Network switching equipment includes direct costs of installation.
      Amortization of network switching equipment under capital leases and IRUs is
      calculated using the straight-line method over the terms of the lease or
      IRU's and is included in depreciation and amortization expense.
  
                                        43
  <PAGE>
  
                             IPC COMMUNICATIONS, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
  
  
  
      Debt Issuance Costs
  
      Debt issuance costs represent costs associated with the issuance of the
      Senior Discount Notes and in connection with the Revolving Credit Facility.
      These costs are amortized to interest expense utilizing the effective
      interest method over the life of the Senior Discount Notes and on a
      straight-line basis over the term of the Revolving Credit Facility.
  
      Intangible Assets
  
      Intangible assets, which are carried at cost less accumulated amortization,
      consist primarily of acquired technology and goodwill.  Goodwill represents
      the excess of the cost over the fair value of the identifiable tangible and
      intangible assets acquired in various acquisitions. Costs allocated to
      technology and goodwill are amortized on a straight-line basis over the
      periods benefited, principally 2.75 to 10 years.
  
      Research and Development
  
      Research and development expenditures are charged to expense as incurred.
  
      Stock Options
  
      Statement of Financial Accounting Standards ("SFAS") No. 123, Accounting for
      Stock-Based Compensation ("SFAS No. 123") requires the Company to choose
      between two different methods of accounting for stock options.  The
      Statement defines a fair-value-based method of accounting for stock options
      but allows an entity to continue to measure compensation cost for stock
      options using the accounting prescribed by Accounting Principles Board
      ("APB") Opinion No. 25, Accounting for Stock Issued to Employees ("APB No.
      25").  The Company has elected to continue using the accounting methods
      prescribed by APB No. 25 and to disclose the amount of the proforma
      compensation expense required to be disclosed under SFAS No. 123.
  
      Income Taxes
  
      In accordance with SFAS No. 109, Accounting for Income Taxes ("SFAS No.
      109"), the Company recognizes deferred income taxes for the tax consequences
      in future years of differences between the tax bases of assets and
      liabilities and their financial reporting amounts at each year end, based on
      enacted tax laws and statutory tax rates applicable to the periods in which
      the differences are expected to affect taxable income.  Valuation allowances
      are established when necessary to reduce deferred tax assets to the amount
      that is "more likely than not" to be realized.  The provision for income
      taxes is the tax payable for the period and the change during the period in
      deferred tax assets and liabilities.
  
      IXnet IPO and Minority Interest
  
      The Company recorded an increase to paid-in-capital representing the
      increase in its share of IXnet's net assets as a result of the proceeds from
      the offering.  The Company continues to consolidate the financial statements
      of IXnet, with an allocation of the net loss of IXnet to its minority
      shareholders.
  
      Foreign Currency Translation Adjustment
  
      The balance sheets and statements of operations of the Company's foreign
      operations are measured using the local currency as the functional currency.
      Assets and liabilities of these foreign operations are translated at the
      year-end exchange rate and revenue and expense amounts are translated at the
      average rate of exchange prevailing during the year.  Translation
      adjustments arising from the use of differing exchange rates from period to
      period are included in accumulated other comprehensive income account in
      stockholders' (deficit) equity.
  
                                        44
  <PAGE>
  
                             IPC COMMUNICATIONS, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
  
  
  
      Earnings Per Share
  
      Basic earnings per share is computed based upon the weighted average number
      of common shares outstanding during the periods.  Diluted earnings per share
      is computed based upon the weighted average number of common shares
      outstanding plus the assumed issuance of common stock equivalents computed
      in accordance with the treasury stock method.
  
      Comprehensive Income
  
      Effective October 1, 1998, the Company adopted SFAS No. 130, Reporting
      Comprehensive Income.  This statement requires the Company to include within
      its financial statements information on comprehensive income/loss, which is
      defined as all activity impacting equity from non-owner sources.
      Comprehensive income/loss includes the Company's net income/loss and foreign
      currency translation adjustments.
  
      Use of Estimates
  
      The preparation of financial statements in conformity with generally
      accepted accounting principles requires management to make estimates and
      assumptions that affect the reported amounts of assets, and liabilities, and
      disclosure of contingent assets and liabilities at the date of the financial
      statements and the reported amounts of revenues and expenses during the
      reporting period.  Actual results could differ from those estimates.
  
      Reclassifications
  
      Certain reclassifications have been made to the 1998 and 1997 financial
      statements in order to conform to the current year's presentation.
  
      Effects of Recently Issued Accounting Standards
  
      In June 1998, the Financial Accounting Standards Board issued SFAS 133,
      Accounting for Derivatives and Hedging Activities, which establishes
      accounting and reporting standards for derivative instruments and hedging
      activities. The effective date of this standard was deferred to all fiscal
      quarters of fiscal years beginning after June 15, 2000 by SFAS 137,
      Accounting for Derivative Instruments and Hedging Activities - Deferral of
      the Effective Date of FASB Statement No. 133 which was issued on June 30,
      1999. Management does not believe the adoption of this standard will have a
      material impact on the Company's operations.
  
      In March 1998, the American Institute of Certified Public Accountants issued
      Statement of Position 98-1 ("SOP 98-1"), Accounting for the Cost of Computer
      Software Developed or Obtained for Internal Use.  SOP 98-1 is effective for
      financial statements for fiscal years beginning after December 15, 1998.
      The Company does not anticipate the adoption of this standard to have a
      material effect on its financial position, results of operations or cash
      flows.
  
  3.  Acquisitions and Strategic Agreement:
  
      Strategic Agreement
  
      On September 24, 1999, IXnet entered into a strategic agreement (the
      "Strategic Agreement"), including the licensing of certain software products
      to enhance the intelligence of its netowork for a purchase price of $20.0
      million consisting of $10.0 million in cash financed from the proceeds from
      IXnet's IPO and 500,000 shares of IXnet restricted common stock valued at an
      average closing price prior to the agreement date.  The Strategic Agreement
      is designed to enhance IXnet's
  
                                        45
  <PAGE>
  
                             IPC COMMUNICATIONS, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
  
  
  
      network capabilities with embedded intelligence, delivering financial
      enterprise integration, subject-based addressing, trading turret integration
      and application management.
  
      V-Band Corporation ("V-Band")
  
      On June 21, 1999, IPC acquired V-Band Corporation for approximately $1.5
      million in cash.  The purchase was financed through a combination of cash
      from operations and borrowings under the Revolving Credit Facility.  The
      acquisition was accounted for using the purchase method of accounting and
      resulted in approximately $7.5 million of goodwill, of which approximately
      $7.0 million remains unamortized at September 30, 1999.
  
      Reuters Voice Systems ("RVS")
  
      On December 31, 1998, IPC purchased the assets of Reuters Voice Systems,  a
      business unit of Reuters Group PLC, for approximately $5.7 million in cash.
      The purchase was financed through a combination of cash from operations and
      borrowings under the Revolving Credit Facility.  The acquisition was
      accounted for using the purchase method of accounting and resulted in
      approximately $5.3 million in goodwill, of which approximately $3.8 million
      remains unamortized at September 30, 1999.
  
      Saturn Global Network Service Holdings Ltd. ("Saturn")
  
      On December 18, 1998, IENL acquired all of the issued and outstanding common
      shares of Saturn from Marshalls.  The acquisition was accounted for using
      the purchase method of accounting.  As a result of the acquisition, IENL
      recorded approximately $49.2 million of goodwill, which is being amortized
      on a straight-line basis over ten years.
  
        The purchase price for Saturn included a cash payment in the amount of
      $35.7 million and the issuance of a promissory note in the amount of $7.5
      million bearing interest at the UK Sterling Base Rate, as defined, plus
      three percent and payable over three years.  In addition, IXnet assumed
      indebtedness of Saturn due to Marshalls in the amount of $5.0 million
      payable over 24 months with interest at 9.25%. Under this agreement, the
      Marshalls Note is subject to a working capital adjustment and right of
      offset.  The working capital adjustment was settled in June 1999 resulting
      in a reduction of the obligation by approximately $2.0 million.
  
      The following unaudited pro forma statement of operations data for the years
      ended September 30, 1999 and 1998 gives effect to the Saturn acquisition as
      if it had occurred on October 1, 1999 and 1998 respectively (In thousands):
  
  <TABLE>
  <CAPTION>
                                                                                        September 30,
                                                                                    1999               1998
                                                                                  --------           --------
  <S>                                                                           <C>                 <C>
  Revenue                                                                        $ 343,991           $321,135
  Loss before provision for income taxes and minority interest                    ($35,065)           ($5,700)
  </TABLE>
  
      Pro forma adjustments include (i) amortization of goodwill over 10 years and
      (ii) interest expense on the Saturn Note and the Marshalls Note.  The pro
      forma financial information presented above does not purport to be
      indicative of the operating results which would have been achieved had the
      acquisition occurred at October 1, 1998 or 1997, or the results to be
      achieved thereafter.
  
                                        46
  <PAGE>
  
                             IPC COMMUNICATIONS, INC.
                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
  
  
  
      MXNet Inc. ("MXNet")
  
      In February 1998, the Company acquired, by the issuance of a promissory note
      in the amount of $6.7 million, all of the issued and outstanding common
      stock of MXNet, a wholly owned subsidiary of National Discount Brokers
      Group, Inc.  The promissory note plus accrued interest was paid on April 8,
      1998. In addition, MXNet entered into employment agreements with four MXNet
      executives which included signing and retention bonuses in the aggregate
      amount of approximately $1.1 million payable over two years.  This
      acquisition was accounted for using the purchase method of accounting and
      resulted in $5.5 million of goodwill of which $1.5 million remains in
      intangible assets at September 30, 1999.
  
      IXnet
  
      During June 1995, the Company acquired an 80% interest in IXnet for $5.5
      million in cash.  The acquisition was accounted for using the purchase
      method of accounting.  Included in intangible assets is $0.7 million and
      $0.9 million at September 30, 1998 and 1997, respectively, representing
      acquired technology.
  
      In conjunction with the April 1998 Merger, the Company acquired the
      remaining 20% interest in IXnet (the "IXnet Exchange") through the issuance
      of 457,142 shares of Surviving Corporation Common Stock, valued at $4.8
      million. Included in intangible assets is $3.7 million at September 30,
      1999, representing acquired technology.
  
  4.  Merger and Recapitalization:
  
      On April 30, 1998, Arizona Acquisition Corp. ("AAC") was merged into IPC
      Information Systems (the "Merger"). Under the terms of the Merger, each
      share of common stock of IPC Information Systems was converted at the
      election of the holder thereof into either (i) the right to receive $10.50
      in cash (on a post split basis) or (ii) the right to retain one share of
      common stock of the surviving corporation.  In connection with the Merger,
      the Company issued $247.4 million aggregate principal amount at maturity
      ($180.0 million initial proceeds upon issuance) of 10 7/8% Senior Discount
      Notes due 2008 (the "Notes").  A portion of the proceeds from the Notes
      ($145.6 million), together with $54.7 million of capital provided by AAC
      were used to repurchase 19,073,330 shares (on a post split basis) of IPC
      Common Stock, at a price of $10.50 per share, from IPC shareholders who did
      not elect to retain stock of the surviving corporation upon the Merger.
      Prior to the Merger, AAC was owned by (i) Cable Systems Holdings LLC ("CSH
      LLC"), whose membership interests were owned by Citicorp Venture Capital,
      Ltd. and David Kirby and John O'Mara, private investors, (ii) CSH LLC's
      indirect subsidiary Cable Systems International, Inc. and (iii) the
      investment fund of Lawrence Smith & Horey III, L.P. (now known as Allegra
      Capital Partners III, L.P.).  The Merger was accounted for as a leveraged
      recapitalization. Accordingly, the historical basis of the Company's assets
      and liabilities has not been impacted by the Merger.
  
      In connection with the Merger, the Company incurred various non-recurring
      costs totaling approximately $27.8 million. These costs consist primarily of
      professional fees, printing costs, change of control costs and other
      expenses. Of this amount, $10.6 million was recorded in  fiscal 1998 as a
      non-recurring charge for change in control expenses, comprised of certain
      change in control bonuses and severance payments ($4.3 million), payments to
      option holders upon cancellation of their stock options ($5.9 million) and
      miscellaneous other expenses ($0.5 million).
  
                                        47
  <PAGE>
  
                             IPC COMMUNICATIONS, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
  
  
      Unaudited pro forma statement of operations information for the years ended
      September 30, 1998 and 1997, as if the Merger occurred on October 1, 1996 is
      as follows (In thousands, except per share amounts):
  
  <TABLE>
  <CAPTION>
                                                                        For the year ended
                                                                           September 30,
                                                                   -----------------------------
                                                                       1998              1997
                                                                      ------            ------
  <S>                                                             <C>              <C>
  Revenue                                                            $295,817          $270,058
  Operating Income (loss)                                            $ 18,129          $ (2,263)
  Net loss                                                           $ (6,447)         $(14,943)
  Basic loss per share                                               $  (0.80)         $  (1.85)
  Basic and diluted weighted average number of
       common shares outstanding (in thousands)                         8,076             8,076
  </TABLE>
  
  
      Pro forma adjustments include: (i) elimination of non-recurring charge for
      change in control expense; (ii) full year of interest expense on the Notes
      and related amortization of debt issuance costs and discount; and (iii)
      amortization of the acquired technology related to the IXnet Exchange.  All
      pro forma adjustments were tax effected at the Company's 44% incremental tax
      rate.  The pro forma financial information presented above is not
      necessarily indicative of the operating results which would have been
      achieved had the Merger occurred at October 1, 1996 or of the results to be
      achieved in the future.
  
  5.  Stock Split:
  
      On May 29, 1998 the Company declared a two-for-one stock split effected in
      the form of a 100% stock dividend (the "Stock Dividend").  The Stock
      Dividend was distributed on June 24, 1998 to holders of record on June 10,
      1998.  As a result, the number of shares increased from 4,038,094 shares
      (the number of shares issued and outstanding subsequent to the Merger and
      IXnet Exchange) to 8,076,188 shares.  Unless otherwise indicated, all share
      and per share data, including stock option information, is stated to reflect
      the Stock Dividend.
  
  6.  Inventories (In thousands):
  <TABLE>
  <CAPTION>
                                                                                       September 30,
                                                                              -----------------------------
                                                                                   1999            1998
                                                                              ------------    -------------
  
  <S>                                                                           <C>             <C>
  Components and work in process                                                   $16,519          $13,639
  Inventory on customer sites awaiting installation                                 11,554           21,516
  Parts and maintenance supplies                                                     3,830            4,891
                                                                              ------------    -------------
                                                                                   $31,903          $40,046
                                                                              ============    =============
  </TABLE>
  
                                        48
  <PAGE>
  
                             IPC COMMUNICATIONS, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
  
  
  
  7.  Property, Plant and Equipment (In thousands):
  
  <TABLE>
  <CAPTION>
                                                                                     September 30,
                                                                      ----------------------------------------
                                                                               1999                  1998
                                                                      -------------------    -----------------
  
  <S>                                                                   <C>                    <C>
     Building                                                                    $  2,463             $  2,462
     Machinery and Equipment                                                       36,300               36,230
     Furniture and Fixtures                                                         2,812                2,758
     Leasehold Improvements                                                         9,092                8,503
     Network Equipment                                                             39,865               13,638
     Network Equipment under capital leases                                        28,649               20,717
     Network Software                                                              21,561                    -
     IRU's                                                                          6,692                4,000
                                                                      -------------------    -----------------
       Total depreciable property, plant and equipment                            147,434               88,308
       Less accumulated depreciation and amortization                             (49,761)             (32,502)
                                                                      -------------------    -----------------
                                                                                   97,673               55,806
     Land and other                                                                 1,009                1,307
                                                                      -------------------    -----------------
                                                                                 $ 98,682             $ 57,113
                                                                      ===================    =================
  </TABLE>
  
  8.    Supplemental Financial Data:
  
       Prepaids and other current assets include the following (In thousands):
  
  
                                                       September 30,
                                                     1999         1998
                                                    -------      -------
  
               Deferred taxes                      $ 5,634      $ 9,354
               Prepaid expenses                      3,318        3,808
               ACT recoverable                       9,257            -
               Other current assets                  6,598        2,052
                                                    -------      -------
                   Total                            $24,807      $15,214
                                                    =======      =======
  
  
      Accrued liabilities includes the following (In thousands):
  
  
                                                      September 30,
                                                    1999         1998
                                                   -------      -------
  
               Compensation                        $14,051      $12,351
               Income taxes                          2,263        1,859
               Carrier costs                        12,351        3,815
               Other expenses                       17,678       22,679
                                                   -------      -------
                  Total                            $46,343      $40,704
                                                   =======      =======
  
  
      9.  Short-Term Credit Facilities:
  
      As a result of the Merger, the Company's short-term credit facilities with
      various banks of up to $35.0 million were terminated on April 30, 1998.
  
                                        49
  <PAGE>
  
                             IPC COMMUNICATIONS, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
  
  
  
      In April 1998, IPC Information Systems entered into a five year $55.0
      million senior secured revolving credit agreement (the "Revolving Credit
      Facility"), with Morgan Stanley Senior Funding, Inc., as syndication agent,
      and other lenders , to be used for working capital and other general
      corporate purposes. The Revolving Credit Facility was subject to borrowing
      base limitations, which at September 30, 1998 approximated $33.6 million.
  
      Borrowings under the Revolving Credit Facility bore interest at a rate equal
      to, at the Company's option, the base rate plus 1.5% or the LIBOR rate plus
      a margin of 1.5% to 2.5% depending upon the Company's leverage ratio.  The
      base rate was a fluctuating interest rate equal to the higher of (i) the
      rate of interest announced publicly by Citibank, N.A. as its base rate and
      (ii) a rate equal to  1/2 of 1% per annum above the weighted average of the
      rates on overnight Federal funds transactions with members of the Federal
      Reserve System as published by the Federal Reserve Bank of New York.
  
      The Revolving Credit Facility contained various covenants and conditions,
      including restrictions on (i) asset dispositions, (ii) mergers and
      acquisitions, (iii) capital expenditures, (iv) restricted payments, (v) the
      incurrence of indebtedness, (vi) loans and investments, (vii) liens, (viii)
      certain transactions with affiliates and (ix) maintaining various financial
      ratios.
  
      On June 21, 1999, IPC Information Systems, IPC, General Electric Capital
      Corporation, as the Administrative Agent and Collateral Agent, First Union
      Capital Markets, Inc., as Documentation Agent, and the Lenders and the
      Issuing Bank named therein, amended the Revolving Credit Facility to provide
      for (1) a working capital facility of $45.0 million, based on eligible
      accounts receivable and inventory, and (2) a $20.0 million term loan.  In
      addition, certain terms relating to the eligibility of accounts receivable
      used in determining the amount available under the working capital facility
      were relaxed.  The amendment also provides for certain additional financial
      covenants including a leverage ratio and fixed charge ratio. The Revolving
      Credit Facility was further amended to permit the issuance of additional
      shares of IXnet common stock, to permit the incurrence of certain deferred
      payment obligations, and to modify certain financial ratios applicable
      through January 15, 2000, at which time the Company expects that such ratios
      will be reset in accordance with updated future projections.  The Company
      has segregated marketable securities to satisfy such deferred payment
      obligations.
  
      Under the Revolving Credit Facility, substantially all of the Company's real
      and personal property is pledged as collateral, including inventory,
      accounts receivable and substantially all of the common stock of its
      significant subsidiaries.
  
      The $20.0 million term loan is repayable in quarterly installments of $1.3
      million, which commenced on September 30, 1999 and initially bears interest
      at LIBOR plus 2.75% or at the base rate plus 1.75%, at the Company's option.
      The base rate is equal to the higher of (1) the rate of interest announced
      publicly by Citibank, N.A. at its head office in New York as the base rate
      of Citibank and (2)  1/2 of 1% per annum above the federal funds rate, as
      defined in the Revolving Credit Facility.  The proceeds of the term loan
      were used to repay borrowings outstanding under and for fees incurred in
      connection with the Revolving Credit Facility.
  
      Loans made under the working capital facility initially bear interest, at
      the Borrower's option, at the base rate plus 1.5% or LIBOR plus 2.5%.  At
      September 30, 1999, $14.7 million was outstanding.  The Revolving Credit
      Facility also provides a $10.0 million sub-limit for the issuance of letters
      of credit, of which $8.9 million was outstanding at September 30, 1999.
      Availability
  
                                        50
  <PAGE>
  
                             IPC COMMUNICATIONS, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
  
  
      under the working capital facility at September 30, 1999, after giving
      effect to the outstanding borrowings and letters of credit, approximated
      $17.9 million.
  
      The base rate and LIBOR rate for the Revolving Credit Facility are subject
      to step-downs based on the Company's leverage ratio.
  
      The Revolving Credit Facility requires the Company to pay a commitment fee
      equal to 0.5% per annum on the unused commitment amount.  The Company
      incurred $0.1 million and $0.3 million in commitment fees and $0.4 million
      and $0.1 million of interest amortization, for the years ended September 30,
      1999 and 1998, respectively, associated with the Revolving Credit Facility.
  
  10. Long-Term Debt:
  
      Senior Discount Notes
  
      On April 30, 1998, the Company issued $247.4 million aggregate principal
      amount at maturity ($180.0 million proceeds at issuance) of 10 7/8% Senior
      Discount Notes due 2008.  The Notes were issued under an indenture between
      the Company, as issuer, and United States Trust Company of New York, as
      trustee. The indenture contains certain restrictive covenants which impose
      limitations on the Company and its subsidiaries, including, (i)
      indebtedness, (ii) restricted payments, (iii) dividends, (iv) issuance and
      sale of capital stock of subsidiaries, (v) issuance of guarantees by
      subsidiaries, (vi) certain transactions with shareholders and affiliates,
      (vii) liens, (viii) sale-leaseback transactions, and (ix) asset sales.
  
      The Notes were issued at a discount to their aggregate principal amount
      resulting in gross proceeds to the Company of $180.0 million.  Although
      interest on the Notes will not accrue until May 1, 2001 (the "Interest
      Accrual Date"), the Notes will accrete in value to the principal amount by
      the Interest Accrual Date.  The Notes will bear interest at 10 7/8% from the
      Interest Accrual Date through redemption and is payable semiannually on May
      1 and November 1.  There are no sinking fund payments related to the Notes.
  
      Up to 35% of the Notes may be redeemed by the Company at 110.875% of the
      accreted value plus accrued and unpaid interest with the proceeds of one or
      more equity offerings, as defined, prior to May 1, 2001.  In addition, the
      Company may redeem the Notes in whole or in part, at any time after May 1,
      2003 and prior to maturity at a premium of 105.428% decreasing to the
      principal amount on May 1, 2006.  The indenture also provides for a
      mandatory offer by the Company to repurchase the Notes in the event of a
      change of control at 101% of the accreted value plus accrued interest.
  
      The Notes are unsubordinated, unsecured indebtedness of IPC Information
      Systems, ranking pari passu in right of payment with all existing and future
      unsubordinated, unsecured indebtedness of IPC Information Systems and senior
      in right of payment to all existing and future subordinated indebtedness of
      IPC Information Systems.
  
      Interest expense, net includes $21.0 million and $8.2 million related to the
      amortization of the discount of the Notes and $0.3 million and $0.4 million
      related to issuance costs of the Notes, for the years ended September 30,
      1999 and 1998, respectively.
  
      The estimated fair value of the Notes, calculated using the quoted closing
      price of the bonds was $192.7 million and $178.1 million at September 30,
      1999 and 1998, respectively.
  
                                        51
  <PAGE>
  
                             IPC COMMUNICATIONS, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
  
  
  
      Saturn Note
  
      In conjunction with the acquisition of Saturn, two notes were issued and
      assumed by the Company in the aggregate amount of $12.5 million.  The first
      is a 3 year $7.5 million note issued to Marshalls Finance Ltd. bearing
      interest at a rate of the UK Sterling plus 3%. The second note assigned to
      IXnet in accordance with the acquisition of Saturn amounting to $5.0
      million.  Under the agreement, the assumed Marshalls note is subject to a
      working capital adjustment and right of offset.  This working capital
      adjustment was settled in June 1999 resulting in a reduction of the
      obligation by approximately $2.0 million.
  
      Strategic Agreement
  
      In connection with the Strategic Agreement, IXnet agreed to pay $10.0
      million over a six-month period ending on April 1, 2000.
  
      Future debt payments required by the Saturn Note, the Marshalls Note, the
      Strategic Agreement and the Revolving Credit Facility (included as a $14.7
      million payment in fiscal 2000) at September 30, 1999 are as follows (In
      thousands):
  
                 Fiscal
                 ------
                  2000                      $29,402
                  2001                        3,189
                  2002                        2,445
                                            -------
                                            $35,036
                                            =======
  
      The future payments noted above exclude any payments in relation to the
      Senior Note Indenture.  The interest payments relating to the indenture
      begin paying semi-annually on November 1, 2001.
  
  11. Deferred Compensation and Other Benefit Plans:
  
      Deferred Compensation
  
      The Company has deferred compensation agreements with certain past key
      officers and employees. Payments began in 1992 and continue through 2019.
      The gross and discounted present value (using an interest rate of 7.5%), net
      of cash payments, of the amounts to be paid under these agreements,
      aggregated $6.6 million and $3.6 million at September 30, 1999 and $6.9
      million and $3.9 million at September 30, 1998, respectively.
  
                                        52
  <PAGE>
  
                             IPC COMMUNICATIONS, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
  
  
  
      Approximate payments for subsequent annual periods related to the deferred
      compensation agreements, at September 30, 1999, are as follows (In
      thousands):
  
      2000                                                       $   320
      2001                                                           390
      2002                                                           471
      2003                                                           490
      2004                                                           434
      Thereafter                                                   4,503
                                                                  ------
                                                                  $6,608
                                                                  ======
  
      Pension Plans
  
      IPC maintains a 401(k) savings plan for all eligible US employees. According
      to plan provisions, IPC contributions are discretionary and are subject to
      approval by the Board of Directors.  Eligible employees may contribute up to
      15% of their annual compensation. IPC contributed $0.7 million, $0.6 million
      and $0.4 million to the plan for the years ended September 30, 1999, 1998
      and 1997, respectively.
  
      IPC-UK has a defined contribution plan covering all UK employees.  Employee
      contributions are limited by statute, generally not to exceed 17.5% of base
      salary.  IPC-UK contributions, net of forfeitures, were $0.2 million per
      year for the years ended September 30, 1999, 1998 and 1997.
  
      The Company paid to Kleinknecht Electric Company ("KEC") and Kleinknecht
      Electric Company - New Jersey ("KEC-NJ"), both affiliated companies, in
      accordance with labor pooling agreements, approximately $8.1 million, $7.6
      million, and $7.6 million for the years ended September 30, 1999, 1998 and
      1997, respectively, representing pass-through contributions to various union
      sponsored pension plans.
  
      IPC Employee Stock Option and Purchase Plan
  
      In connection with the Merger, the employee stock purchase plan was
      terminated April 30, 1998. On April 30, 1998 the Company terminated its
      existing plan and replaced it with a new stock option plan. Under the new
      plan, employees generally vest in stock options over a five-year period.
  
      In connection with the Reorganization, IPC Information Systems assigned, and
      IPC assumed, the obligations for the performance of the IPC Information
      Systems, Inc. 1998 Stock Incentive Plan, which, effective as of December 3,
      1998 had been amended to increase its share reserve from 1,108,224 to
      1,538,322 shares of the Company's Common Stock and which was renamed the
      "IPC Communications, Inc. 1999 Stock Incentive Plan." The Stock Incentive
      Plan provides for the grant of options to purchase Common Stock of the
      Company to certain officers, employees, consultants and directors of the
      Company and its subsidiaries.
  
      IXnet Stock Option Plan
  
      During May 1999, IXnet's Board of Directors and the Company approved the
      IXnet, Inc. 1999 Stock Option Plan authorizing the grant of options to
      purchase up to 7,053,409 shares of IXnet's common stock. At that time,
      options to purchase 6,530,184 shares were granted to employees, directors
      and others at an exercise price of $13.96 per share. Except for 1,763,352
      options granted
  
                                        53
  <PAGE>
  
                             IPC COMMUNICATIONS, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
  
  
  
      to IXnet's chief executive officer which vested immediately, such options
      vest over four years. Such options become exercisable, to the extent then
      vested, 30 months from the date of grant.
  
      Stock Compensation Data
  
      A summary of the Company's stock option plan as of September 30, 1999, 1998
      and 1997 and changes during the years then ended is presented below (In
      thousands).
  
  <TABLE>
  <CAPTION>
                                                          IPC Stock Option Plan
                                                          ---------------------
                                            Consolidated                   IXnet Employee Options       IXnet 1999 Stock Option Plan
                                           --------------                  ------------------------     ----------------------------
                                                         Weighted                          Weighted                     Weighted
                                     Number of           Average            Number of       Average       Number of     Average
                                      Options         Exercise Price         Options    Exercise Price     Options   Exercise Price
                                     ---------           ---------          ---------      ---------      ---------   ------------
  
  
  <S>                                <C>             <C>                   <C>            <C>            <C>           <C>
  Outstanding at September 30, 1996   1,652,402           $ 8.05            231,000         $ 7.93            -               -
  Granted                               791,000           $ 7.42            186,000         $ 7.25            -               -
  Exercised                             (39,730)          $ 7.00            (26,666)        $ 6.83            -               -
  Forfeited                            (356,472)          $ 8.18            (53,334)        $ 7.53            -               -
                                     ----------                            --------
  Outstanding at September 30, 1997   2,047,200           $ 7.81            337,000         $ 7.71            -               -
  Granted                               200,000           $12.50            401,734         $10.50            -               -
  Granted                             1,071,284           $10.50                  -              -            -               -
  Exercised                             (63,722)          $ 7.47             (4,998)        $ 8.00            -               -
  Exercised and retired at merger    (1,814,266)          $ 7.37           (328,000)        $ 7.70            -               -
  Forfeited                            (369,212)          $12.58             (4,002)        $ 7.63            -               -
                                     ----------                            --------
  Outstanding at September 30, 1998   1,071,284           $10.50            401,734         $10.50            -               -
  May 4, 1999 initial grant                   -                -                  -              -    6,530,184          $13.96
  Granted                               647,443           $20.13            195,146         $10.50      489,764          $16.04
  Exercised                            (490,576)          $10.50           (160,300)        $10.50            -               -
  Forfeited                            (120,220)          $10.50            (22,868)        $10.50      193,919          $13.98
                                     ----------                            --------                   ---------
  Outstanding at September 30, 1999   1,107,931           $16.13            413,712         $10.50    6,826,029          $14.11
                                     ==========                            ========                   =========
  
  Options exercisable
     At September 30, 1997              544,990           $ 7.44                  -              -            -               -
     At September 30, 1998                    -                -                  -              -            -               -
     At September 30, 1999            1,107,931           $10.50            413,712         $10.50            -               -
  </TABLE>
  
      The weighted average contractual life of stock options outstanding at
      September 30, 1999 was 9.1 years.
  
      In connection with the IPO of IXnet, the Company recognized $9.1 million of
      compensation expense during the year ended September 30, 1999.
      Additionally, in connection with the April 30, 1998 Merger, included in the
      $10.6 million non-recurring change in control expense, the Company
      recognized compensation expense in the amount of $5.9 million, representing
      payments to option holders upon cancellation of their stock options.  As a
      result of the charges mentioned above, under the provisions of SFAS No. 123,
      the Company's net income and earnings per share on a pro forma basis is the
      same as actual for the years ended September 30, 1999 and 1998.  Had
      compensation cost for the Company's stock option plan and employee stock
      purchase plan been determined based on the fair value at the grant date for
      awards in fiscal 1997, consistent with the provisions of
  
                                        54
  <PAGE>
  
                             IPC COMMUNICATIONS, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
  
  
      SFAS No. 123, the Company's net income and earnings per share would have
      been reduced to the pro forma amounts indicated below (In thousands, except
      per share amounts).
  
  <TABLE>
  <CAPTION>
                                                                             For the year ended
                                                                                 September 30,
                                                                  -----------------------------------------
                                                                    1999             1998            1997
                                                                  -------           -------         -------
  <S>                                                             <C>               <C>             <C>
  Net (loss) income - as reported..............................   $(32,456)          $2,278          $3,834
  Net (loss) income - pro forma................................   $(37,039)          $2,278          $2,934
  Basic (loss) earnings per share - as reported................   $  (3.97)          $ 0.14          $ 0.18
  Basic (loss) earnings per share - pro forma..................   $  (4.53)          $ 0.14          $ 0.14
  Diluted (loss) earnings per share - as reported..............   $  (3.97)          $ 0.14          $ 0.18
  Diluted (loss) earnings per share - pro forma................   $  (4.53)          $ 0.14          $ 0.14
  </TABLE>
  
      The fair value of each option grant is estimated on the date of the grant
      using the "Black-Scholes option-pricing model" with the following weighted
      average assumptions used for grants for the years ended September 30, 1999,
      1998 and 1997; zero dividend yield; expected volatility of 55%; weighted
      average risk-free interest rate of 6.5% in fiscal 1999, 6.19% in fiscal 1998
      and 6.03% in fiscal 1997; and expected lives of 5 years in fiscal 1999, 4.78
      years in 1998 and 4 years for fiscal 1997.
  
  12. Earnings Per Share:
  
      The following is a reconciliation of the computations of  basic and diluted
      earnings per share (In thousands, except per share amounts).
  
  <TABLE>
  <CAPTION>
                                                                 Year Ended September 30,
                                                      --------------------------------------------
                                                            1999            1998           1997
                                                      ------------      -----------    -----------
  <S>                                                 <C>               <C>            <C>
  Basic earnings (loss) per share computation
  Net Income (loss)..................................      $(32,456)        $ 2,278        $ 3,834
                                                      -------------     -----------    -----------
  Weighted average common shares outstanding.........         8,172          15,774         21,328
  Total shares.......................................         8,172          15,774         21,328
                                                      =============     ===========    ===========
  Basic earnings (loss) per share....................      $  (3.97)        $  0.14        $  0.18
                                                      =============     ===========    ===========
  
                                                                 Year Ended September 30,
                                                      --------------------------------------------
                                                           1999            1998           1997
                                                      -------------     -----------    -----------
  Diluted earnings (loss) per share computation
  Net income (loss)..................................      $(32,456)        $ 2,278        $ 3,834
                                                      -------------     -----------    -----------
    Weighted average common shares outstanding.......         8,172          15,774         21,328
    Common stock equivalent of stock options.........             -             167             80
                                                      -------------     -----------    -----------
  Total shares.......................................         8,172          15,941         21,408
                                                      =============     ===========    ===========
  Diluted earnings (loss) per share..................      $  (3.97)        $  0.14        $  0.18
                                                      =============     ===========    ===========
  </TABLE>
  
       Approximately 1,071,284 and 318,000 stock options were outstanding for the
       years ended September 30, 1998 and 1997, respectively, which were not
       included in the computation of diluted earnings per share because the
       exercise prices exceeded the average market price of the Company's common
       stock for each period.  For the year ended September 30, 1999, Common
  
                                        55
  <PAGE>
  
                             IPC COMMUNICATIONS, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
  
  
       Stock equivalents of stock options were excluded from the diluted earnings
       per share calculation as their effect would have been anti-dilutive.
  
  13. Commitments and Contingencies:
  
      Operating Leases
      ----------------
      The Company has entered into various operating leases primarily for real
      estate and related lines and equipment.
  
      Rental expenses under operating leases were $20.8 million, $17.4 million and
      $13.7 million for the years ended September 30, 1999, 1998 and 1997,
      respectively.
  
      Future minimum annual rental payments required under noncancellable
      operating leases at September 30, 1999 are as follows (In thousands):
  
        2000                                                      $28,530
        2001                                                        9,665
        2002                                                        8,353
        2003                                                        7,436
        2004                                                        6,789
       Thereafter                                                   4,379
                                                                  -------
                                                                  $65,151
                                                                  =======
  
      Capital Leases
      --------------
  
      The Company has entered into capital lease agreements for certain network
      switching equipment and for certain computer equipment and software.  Total
      assets acquired under capital leases was approximately $31.1 million at
      September 30, 1999 and $22.4 million at September 30, 1998.  The accumulated
      depreciation and amortization at September 30, 1999 and 1998 was
      approximately $12.1 million and $6.1 million, respectively.
  
      Future minimum lease payments required under noncancellable capital leases
      at September 30, 1999 are as follows (In thousands):
  
        2000                                                      $13,189
        2001                                                       12,249
        2002                                                        7,854
        2003                                                        4,540
        2004                                                        1,525
                                                                  -------
                                                                   39,357
         Less, amount representing interest                        17,441
                                                                   ------
       Net present value of minimum lease payments under
         capital leases                                           $21,916
                                                                  =======
  
  14. Related Party Transactions:
  
      Services Provided
      -----------------
  
      Affiliated companies performed various services and provided certain
      equipment to the Company. Services and/or equipment provided by affiliates
      are billed to the Company and settled through a periodic cash transfer to
      the respective affiliate.
  
                                        56
  <PAGE>
  
                             IPC COMMUNICATIONS, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
  
  
  
      The Company has a written arrangement with KEC and KEC-NJ with respect to a
      pool of field technicians utilized by the Company.  KEC and KEC-NJ are
      responsible for administering the payroll and related benefits for these
      technical and clerical workers and the Company reimburses all compensation
      and benefits paid by KEC and KEC-NJ attributable to services performed for
      the Company plus a fee equal to 2.5% of such costs.  Effective for the
      fiscal year 1997, the parties amended these agreements to provide a fixed
      fee payment of $50 thousand per month in lieu of the fee payment of 2.5%.
      Approximately $53.0 million, $51.7 million and $52.7 million of technical
      labor, and $2.1 million, $2.0 million and $2.2 million of administrative
      labor was provided through agreements with KEC and KEC-NJ during the years
      ended September 30, 1999, 1998 and 1997, respectively.
  
      For the years ended September 30, 1999, 1998 and 1997, KEC and KEC-NJ billed
      the Company payroll administrative services of $0.6 million annually.
      Included in prepaid expenses and other current assets is a net related party
      receivable of $0.6 million at September 30, 1999.  $0.3 million of net
      related party payable is included in accrued expenses at September 30, 1998.
  
      A portion of the Company's New York branch operation was co-located with KEC
      through 1997 in a building owned by Knight Ventures, Inc., a company owned
      by Richard P. Kleinknecht and Peter J. Kleinknecht (the "Former Principal
      Stockholders").  For the year ended September 30, 1997 the Company was
      charged rent of approximately $0.2 million.
  
      Subcontracts and Other
  
      The Company and other companies controlled by the Former Principal
      Stockholders periodically subcontract certain work to one another.  Amounts
      charged to companies controlled by the Former Principal Stockholders under
      subcontracts with IPC for the years ended September 30, 1999, 1998 and 1997
      were approximately $3.1 million, $2.9 million and $0.1 million,
      respectively, while amounts charged to IPC under subcontracts with companies
      controlled by the Former Principal Stockholders were approximately $0.1
      million, $0.2 million and $0.3 million, respectively.
  
      In addition to the foregoing, the Company, KEC and KEC-NJ entered into a
      twenty-year agreement dated May 9, 1994, with respect to business
      opportunities regarding cabling of communication infrastructures.  KEC and
      KEC-NJ have agreed not to bid for or accept cabling jobs in competition with
      the Company, if the Company intends to bid or accept such work.  In
      addition, because the Company is not a licensed electrical contractor, it
      has agreed to refrain from bidding for or accepting without the consent of
      KEC or KEC-NJ, as the case may be, all opportunities that combine both
      electrical and cabling work.  The Company has also agreed to continue to
      refer to KEC and KEC-NJ certain electrical contracting bid opportunities
      identified from time to time.  Pursuant to such agreement, all estimates for
      cabling work shall be generated by the Company on behalf of KEC, and KEC
      will pay the Company a nominal amount for preparing such estimates.
  
      The Company and companies controlled by the Former Principal Stockholders
      also charge each other certain miscellaneous expenses, including, but not
      limited to, office equipment rentals and certain other administrative
      expenses.  Such amounts are not significant.
  
                                        57
  <PAGE>
  
                             IPC COMMUNICATIONS, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
  
  
  15. Income Taxes:
  
      Pretax (loss) earnings consisted of the following (In thousands):
  <TABLE>
  <CAPTION>
  
                                                               For the year ended September 30,
                                                  ---------------------------------------------------------
                                                        1999                 1998                 1997
                                                  --------------     ------------------     ---------------
  
  <S>                                               <C>                <C>                    <C>
          United States                                 $(31,955)              $(18,275)             $1,689
          Foreign                                          6,072                 26,744               6,425
                                                  --------------     ------------------     ---------------
          Total pretax (loss) earnings                  $(25,883)              $  8,469              $8,114
                                                  ==============     ==================     ===============
  </TABLE>
  
  
      The provision for income taxes consisted of the following:
  
  <TABLE>
  <CAPTION>
                                                                For the year ended September 30,
                                                  ---------------------------------------------------------
                                                         1999                1998                 1997
                                                  ----------------    ----------------     ----------------
  <S>                                               <C>                 <C>                  <C>
             Current:
               Federal                                      $    -             $   295               $ (182)
               State and local                                 687               1,545                2,037
               Foreign                                       3,561               9,120                2,342
                                                  ----------------    ----------------     ----------------
                                                            $4,248             $10,960               $4,197
                                                  ----------------    ----------------     ----------------
             Deferred:
               Federal                                      $2,549             $(3,737)              $  323
               State and local                                 750                (885)                   9
               Foreign                                         421                (147)                (249)
                                                  ----------------    ----------------     ----------------
                                                             3,720              (4,769)                  83
                                                  ----------------    ----------------     ----------------
             Income tax provision                           $7,968             $ 6,191               $4,280
                                                  ================    ================     ================
  </TABLE>
  
       The components of net deferred tax assets are as follows (In thousands):
  
  <TABLE>
  <CAPTION>
                                                                               September 30,
                                     ------------------------------------------------------------------------------------------------
                                                        1999                                                 1998
                                     ---------------------------------------------         ------------------------------------------
                                         US            Foreign             Total               US           Foreign           Total
                                     ---------       ----------          ---------         ---------       ---------        ---------
  Deferred tax assets:
  <S>                                <C>                <C>              <C>             <C>               <C>               <C>
  Excess of book over tax
   depreciation                      $    189           $   -            $    189           $   745            $ 91           $   836
  Amortization of intangibles           4,701               -               4,701               621               -               621
  Inventory and receivables             1,388               -               1,388             2,685             569             3,254
  Accrued expenses                      2,658              369              3,027             4,510              20             4,530
  Net operating loss carryforward      13,649              291             13,940                 -               -                 -
  AMT tax credit carryforward             334               -                 334               128               -               128
  Foreign tax credit carryforward       4,657               -               4,657             3,999               -             3,999
                                     --------         -------          ----------         ---------         -------         ---------
      Total                            27,576              660             28,236            12,688             680            13,368
      Less valuation allowance        (20,133)           (291)            (20,424)           (3,999)              -            (3,999)
                                     --------         -------          ----------         ---------         -------         ---------
  
  Total deferred tax assets          $  7,443           $ 369            $  7,812           $ 8,689            $680           $ 9,369
  </TABLE>
  
                                        58
  
  <PAGE>
  
                             IPC COMMUNICATIONS, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
  <TABLE>
  <CAPTION>
  <S>                                <C>                <C>              <C>             <C>               <C>               <C>
  Deferred tax liabilities:
  Excess of book over tax             (2,068)           (110)             (2,178)              (15)              -               (15)
   depreciation
                                 ------------         -------          ----------         ---------         -------         ---------
  
  Net deferred tax assets            $  5,375           $ 259            $  5,634           $ 8,674            $680           $ 9,354
                                 ============         =======          ==========         =========         =======         =========
  </TABLE>
  
      A valuation allowance is provided for foreign tax credit carryforwards, net
      operating loss carryforwards related to IXnet and certain foreign net
      operating loss carryforwards which expire at various times.  The U.S. net
      operating loss of $40.1 million as of September 30, 1999 expires in the year
      2019.
  
      A reconciliation between the statutory US federal income tax rate and the
      Company's effective tax rate, excluding minority interest, is as follows:
  
  <TABLE>
  <CAPTION>
  
                                                                      For the year ended September 30,
                                                         --------------------------------------------------------
                                                                1999                 1998                1997
                                                         --------------       -----------------     --------------
  
  <S>                                                      <C>                 <C>                   <C>
           Statutory US federal tax rate                     (35.0%)                 35.0%              35.0%
           State and local income taxes,
               net of federal benefit                          3.6                    7.8                16.4
           Incremental foreign tax effect                      7.2                    22.3                 -
           Losses with no benefit                              62.3                     -                  -
           Other, net                                         (7.3)                    8.0                1.4
                                                         --------------       -----------------     --------------
                                                             (30.8%)                  73.1%              52.8%
                                                         ==============       =================     ==============
  </TABLE>
  
  16. Business Segment and Geographic Information:
  
      Business Segments
      -----------------
      The Company has adopted SFAS No. 131, Disclosures about Segments of an
      Enterprise and Related Information, for reporting information about
      operating segments and related disclosures about products and services,
      geographic areas and major customers.
  
      The Company's operations include trading systems, ITS and IXnet. Trading
      systems reports sales of turret systems to distributors and direct sales and
      installations of turret systems as "Product sales and installation".  It
      reports revenue from turret system maintenance, including annual and multi-
      year service contracts, and from moves, additions and changes to existing
      turret system installations as "Service".  ITS reports revenue from the
      design, integration and implementation of cabling infrastructure projects
      including LAN's and WAN's, and from the sales of intelligent network
      products, such as hubs, bridges and routers as "Product sales and
      installation".  It reports revenue from on-site maintenance of customer
      cable infrastructure, including annual and multi-year contracts, and from
      the provision of outsourcing services for the support, expansion and
      upgrading of existing customer networks as "Service."  IXnet reports revenue
      from sales of premium voice, managed bandwidth and outsourcing services, and
      to a lesser extent, switched voice, shared internet protocol and other
      services (In thousands).
  
                                        59
  <PAGE>
  
                             IPC COMMUNICATIONS, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
  
  
  
  <TABLE>
  <CAPTION>
                                           Trading
                                           Systems           ITS              IXnet           Eliminations         Consolidated
                                       -------------    ------------    --------------     ----------------     -----------------
  Fiscal Year 1999:
  Revenue:
  <S>                                    <C>              <C>             <C>                <C>                  <C>
     Product sales and installation         $122,836         $55,365                 -                    -              $178,201
     Service                                  71,734          15,748          $ 73,509                    -               160,991
     Intersegment                                  -               -               106                $(106)                    -
                                       -------------    ------------    --------------     ----------------     -----------------
  Total Revenue                              194,570          71,113            73,615                 (106)              339,192
  Gross profit (excluding
       depreciation and amortization)         98,189           9,090               778                 (106)              107,951
  Research & development                       9,786               -                 -                    -                 9,786
  Selling, general & administrative (a)       22,975           4,458            21,627                 (106)               58,047
  Depreciation & amortization                  8,177             357            21,576                    -                30,110
  Stock compensation charge                        -               -             9,079                    -                 9,079
                                       -------------    ------------    --------------     ----------------     -----------------
  Income from operations                    $ 57,251         $ 4,275          $(51,504)                   -              $    929
                                       =============    ============    ==============     ================     =================
  EBITDA (b)                                $ 65,428         $ 4,632          $(20,849)                   -              $ 40,118
                                       =============    ============    ==============     ================     =================
  Total assets (c)                          $193,548         $23,806          $195,855                    -              $413,209
                                       =============    ============    ==============     ================     =================
  </TABLE>
  
  <TABLE>
  <CAPTION>
  Fiscal Year 1998:
  Revenue:
  <S>                                    <C>              <C>             <C>                <C>                  <C>
     Product sales and installation         $133,233         $40,117                 -                    -              $173,350
     Service                                  63,592          23,192          $ 35,683                    -               122,467
     Intersegment                                  -               -               170                $(170)                    -
                                       -------------    ------------    --------------     ----------------     -----------------
  Total Revenue                              196,825          63,309            35,853                 (170)              295,817
  Gross profit (excluding
       depreciation and amortization)         98,610           7,948               371                 (170)              106,759
  Research & development                       8,276               -                 -                    -                 8,276
  Selling, general & administrative (a)       22,018           5,146            13,626                 (170)               53,345
  Depreciation & amortization                  6,209             421             9,060                    -                15,690
  Change in control expense                    8,837             453             1,350                    -                10,640
                                       -------------    ------------    --------------     ----------------     -----------------
  Income from operations                    $ 53,270         $ 1,928          $(23,665)                   -              $ 18,808
                                       =============    ============    ==============     ================     =================
  EBITDA (b)                                $ 68,316         $ 2,802          $(13,255)                   -              $ 45,138
                                       =============    ============    ==============     ================     =================
  Total assets (c)                          $202,859         $24,280          $ 14,503                    -              $241,642
                                       =============    ============    ==============     ================     =================
  </TABLE>
  
                                        60
  <PAGE>
  
                             IPC COMMUNICATIONS, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
  
  
  
  <TABLE>
  <CAPTION>
  
  Fiscal Year 1997:
  Revenue:
  <S>                                    <C>              <C>             <C>                <C>                  <C>
     Product sales and installation         $122,493         $57,485                 -                    -              $179,978
     Service                                  55,146          17,261          $ 17,673                    -                90,080
     Intersegment                                  -               -               165                $(165)                    -
                                       -------------    ------------    --------------     ----------------     -----------------
  Total Revenue                              177,639          74,746            17,838                 (165)              270,058
  Gross profit (excluding
       depreciation and amortization)         71,602           5,344            (2,020)                (165)               74,761
  Research & development                       8,490               -                 -                    -                 8,490
  Selling, general & administrative (a)       24,632           4,904             7,576                 (165)               48,100
  Depreciation & amortization                  4,776             394             3,460                    -                 8,630
                                       -------------    ------------    --------------     ----------------     -----------------
  Income from operations                    $ 33,704         $    46          $(13,056)                   -              $  9,541
                                       =============    ============    ==============     ================     =================
  EBITDA (b)                                $ 38,480         $   440          $ (9,596)                   -              $ 18,171
                                       =============    ============    ==============     ================     =================
  Total assets (c)                          $135,779         $13,035          $ 10,083                    -              $158,897
                                       =============    ============    ==============     ================     =================
  </TABLE>
  
  (a)  Consolidated selling, general & administrative includes corporate general &
       administrative expenses of $9,093, $12,725 and $11,153 for the years ended
       September 30, 1999, 1998 and 1997 respectively.
  
  (b)  Earnings before interest, taxes, depreciation and amortization ("EBITDA")
       represents operating income plus depreciation and amortization.  EBITDA for
       the year ended September 30, 1999 excludes $9.1 million of deferred
       compensation expense and for the year ended September 30, 1998 excludes a
       $10.6 million non-recurring change in control expense.
  
  (c)  The Company's management reviews corporate assets combined with trading
       system's assets.
  
  
       Geographic sales information is based on the currency in which the customer
  is billed.  Information about the Company's operations by geographic area is as
  follows (In thousands):
  
  <TABLE>
  <CAPTION>
  
                                                             For the year ended September 30,
                                                   --------------------------------------------------
                                                         1999              1998              1997
                                                   --------------    --------------    --------------
  
  Revenues:
  <S>                                                <C>               <C>               <C>
  North America                                          $242,479          $211,237          $205,745
  Europe                                                   73,306            70,708            50,682
  Asia/Pacific and other                                   23,407            13,872            13,631
                                                   --------------    --------------    --------------
                                                         $339,192          $295,817          $270,058
                                                   ==============    ==============    ==============
  
  Long Lived Assets:
  United States                                          $ 97,252          $ 72,104          $ 36,232
  United Kingdom                                            1,813            12,636            11,042
  Rest of World                                                92               101                 -
                                                   --------------    --------------    --------------
                                                         $ 99,157          $ 84,841          $ 47,274
                                                   ==============    ==============    ==============
  </TABLE>
  
      No single customer accounted for 10% or more of total revenues for the years
      ended September 30, 1999, 1998 and 1997.
  
                                        61
  <PAGE>
  
                             IPC COMMUNICATIONS, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
  
  
  
     17.  Quarterly Financial Information (unaudited):
  
          The following tables set forth unaudited quarterly financial information
          for the years ended September 30, 1999 and 1998 (In thousands, except
          per share amounts):
  
  <TABLE>
  <CAPTION>
  
                                                                        Quarter Ended
                                                -------------------------------------------------------------
                                                 December 31,      March 31,     June 30,      September 30,
                                                 -----------       --------      --------      --------------
          Year ended
          September 30, 1999:
          -------------------
       <S>                                          <C>               <C>            <C>          <C>
          Revenue                                     $67,750        $80,933     $ 91,206           $ 99,303
          Gross profit (excluding                      27,769         31,424       19,847             28,911
             depreciation and amortization)
          Net income (loss)                            (3,659)        (3,291)     (11,610)           (13,896)
          Basic and diluted (loss) per share           ($0.45)        ($0.41)      ($1.44)            ($1.70)
  
          Year ended
          September 30, 1998:
          -------------------
  
          Revenue                                     $67,052        $61,145     $ 77,954           $ 89,666
          Gross profit (excluding                      26,627         23,713       31,536             24,883
             Depreciation and amortization)
          Net income                                    3,594          2,154       (3,839)               369
          Basic and diluted earnings (loss)
          per share                                   $  0.17        $  0.10       ($0.31)          $   0.05
  
  </TABLE>
  
      The quarterly earnings per share information is computed separately for each
      period.  Therefore, the sum of such quarterly per share amounts may differ
      from the total for the year.
  
      In connection with the Merger, the Company incurred a pre-tax non-recurring
      charge for change in control expenses of $10.6 million in the quarter ended
      June 30, 1998.  As a result of this charge, the Company incurred a net loss
      in the quarter and diluted earnings per share was not calculated as the
      common stock equivalents would have had an anti-dilutive effect.  For the
      year ended September 30, 1999, Common Stock equivalents of stock options
      were excluded from the diluted earnings per share calculation as their
      effect would have been anti-dilutive.
  
                                        62
  <PAGE>
  
                               GLOBAL CROSSING LTD.
                SELECTED UNAUDITED PRO FORMA FINANCIAL INFORMATION
  
          The following unaudited pro forma condensed combined financial
  information of Global Crossing, Global Marine Systems, Frontier, Racal Telecom,
  the Hutchison Global Crossing joint venture, IPC Communications and IXnet,
  which we refer to as "Pro Forma Global Crossing Ltd.", has been prepared to
  demonstrate how these companies or businesses might have looked if (1) the
  Global Marine Systems acquisition and related financing, (2) the Frontier
  acquisition, (3) the Racal Telecom acquisition and related financing, (4) the
  Hutchison Global Crossing joint venture, including the related issuance of 6
  3/8% cumulative convertible preferred stock, series B, of Global Crossing, (5)
  the IPC and IXnet acquisitions, (6) the offering of our 6 3/8% cumulative
  convertible preferred stock completed on November 5, 1999, (7) the offering of
  the 9 1/8% senior notes due 2006 and 9 1/2% senior notes due 2009 of Global
  Crossing Holdings completed on November 19, 1999, (8) the offering of our 7%
  cumulative convertible preferred stock completed on December 15, 1999 and (9)
  the offering of our 6 3/4% cumulative convertible preferred stock and
  21,673,706 shares of our common stock completed in April 2000 had been
  completed as of the date or at the beginning of the period presented.
  
          We have prepared the pro forma financial information using the purchase
  method of accounting. We expect that we will have reorganization and
  restructuring expenses and potential synergies relating to the acquisitions of
  Global Marine Systems, Racal Telecom, IPC and IXnet, the Hutchison Global
  Crossing joint venture and the acquisition of Frontier's long distance business
  and increased opportunities to earn more revenue as a result of those
  transactions. The unaudited pro forma information does not reflect these
  expenses and synergies.
  
          The pro forma information, while helpful in illustrating the financial
  characteristics of the combined company under one set of assumptions, does not
  attempt to predict or suggest future results. The pro forma information also
  does not attempt to show how the combined company would actually have performed
  had the companies been combined throughout these periods. If the companies had
  actually been combined in prior periods, these companies and businesses might
  have performed differently. You should not rely on pro forma financial
  information as an indication of the results that would have been achieved if the
  Global Marine Systems, Frontier, Racal Telecom, IPC and IXnet acquisitions and
  the Hutchison Global Crossing joint venture had taken place earlier or the
  future results that the companies will experience after completion of these
  transactions.
  
          You should read these unaudited pro forma condensed combined financial
  statements in conjunction with the historical financial statements of Global
  Crossing, Global Marine Systems, Frontier, Racal, Telecom HCL Holdings, IPC and
  IXnet.
  
  
                          PRO FORMA GLOBAL CROSSING LTD.
  
               Unaudited Pro Forma Condensed Combined Balance Sheet
                               As of March 31, 2000
                                  (in thousands)
  
  <TABLE>
  <CAPTION>
  
                                                           Global                                                          Global
                                                          Crossing      IPC/IXnet         Pro Forma       Financing        Crossing
                                                         Historical (1) Historical (2)  Adjustments (3)  Adjustments (4)  Pro Forma
                                                         --------------------------------------------------------------  ----------
  ASSETS
  Current Assets:
  <S>                                                      <C>          <C>             <C>              <C>            <C>
      Cash, restricted cash and investments............... $ 1,383,969  $ 34,621           $ -           $ 1,802,000    $ 3,220,590
      Accounts receivable, net............................     912,071    83,600             -                  -           995,671
      Other assets and prepaid costs......................     319,562    64,330             -                  -           383,892
                                                           ------------------------------------------------------------------------
  
      Total Current Assets................................   2,615,602   182,551             -             1,802,000      4,600,153
  
      Restricted cash and cash equivalents................      69,545         -             -                  -            69,545
      Accounts receivable.................................      42,419         -             -                  -            42,419
      Property and equipment, net.........................   7,985,651   117,382             -                  -         8,103,033
      Goodwill and other intangibles, net.................   9,436,715    88,097          (88,097)              -        12,649,272
                                                                                        3,212,557
      Investment in and advances to/from affiliates, net..     604,291         -             -                  -           604,291
      Other assets, net...................................     735,747    11,989          147,770                           895,506
                                                           ------------------------------------------------------------------------
  
      Total Assets........................................ $21,489,970  $400,019       $3,272,230        $ 1,802,000   $ 26,964,219
                                                           ========================================================================
  
  LIABILITIES AND SHAREHOLDERS' EQUITY
  Current Liabilities:
      Accrued construction costs.......................... $   570,461   $     -        $    -           $      -      $    570,461
      Accounts payable and accrued liabilities............     919,910    88,945           33,000               -         1,041,855
      Accrued interest and preferred dividends............     162,260         -             -                  -           162,260
      Deferred revenue....................................     216,234    41,368             -                  -           257,602
      Income taxes payable................................      88,325         -             -                  -            88,325
      Current portion of long term debt...................      11,649    50,316             -                  -            61,965
      Other current liabilities...........................     264,314     7,205             -                  -           271,519
                                                           ------------------------------------------------------------------------
  
      Total Current Liabilities...........................   2,233,153   187,834           33,000               -         2,453,987
  
      Long term debt......................................   6,031,662   226,150             -                  -         6,257,812
      Deferred revenue....................................     489,331         -             -                  -           489,331
      Deferred credits and other..........................     819,485    22,206             -                  -           841,691
                                                           ------------------------------------------------------------------------
  
      Total Liabilities...................................   9,573,631   436,190           33,000               -        10,042,821
                                                           ------------------------------------------------------------------------
  
  MINORITY INTEREST.......................................     478,030    14,627          (14,627)              -           478,030
                                                           ------------------------------------------------------------------------
  
  MANDATORILY REDEEMABLE AND CUMULATIVE CONVERTIBLE
      PREFERRED STOCK.....................................   2,485,267         -                -          1,113,000      3,598,267
                                                           ------------------------------------------------------------------------
  SHAREHOLDERS' EQUITY:
      Common stock, 3,000,000,000 shares authorized, par value
       $.01, 802,436,245 and 799,137,142 shares issued as of
       March 31, 2000 and December 31, 1999, respectively.       8,030        88              574                217          8,821
                                                                                              (88)
      Treasury stock, 22,033,758 shares...................    (209,415)        -                -               -          (209,415)
      Other shareholders' equity..........................   9,575,617   114,694         (114,694)           688,783     13,466,885
                                                                                        2,856,722
                                                                                          345,763
      Accumulated deficit.................................    (421,190) (165,580)         165,580                          (421,190)
                                                           -------------------------------------------------------------------------
  
                                                             8,953,042   (50,798)       3,253,857            689,000     12,845,101
                                                           -------------------------------------------------------------------------
  
        Total liabilities and shareholders' equity.......  $21,489,970  $400,019       $3,272,230         $1,802,000    $26,964,219
                                                           ========================================================================
  
  </TABLE>
  
                                        63
  <PAGE>
  
  
  
                         PRO FORMA GLOBAL CROSSING LTD.
         Unaudited Pro Forma Condensed Combined Statement of Operations
                   For the three months ended March 31, 2000
             (In thousands, except share and per share information)
  
  <TABLE>
  <CAPTION>
  
                                                       Global                                                            Global
                                                      Crossing        IPC/IXnet         Pro Forma        Financing      Crossing
                                                    Historical (5)   Historical (6)   Adjustments (3)  Adjustments (4)  Pro Forma
                                                  ------------------------------------------------------------------   -------------
  
  <S>                                                <C>                <C>                    <C>              <C>     <C>
  OPERATING REVENUES.............................    $ 1,119,516        $ 87,740               $ -              $ -     $ 1,207,256
                                                  ------------------------------------------------------------------   -------------
  
  OPERATING EXPENSES:
          Operations,selling, general
          and administrative.....................      1,014,763          93,517                 -                -       1,108,280
          Merger related expenses................              -          23,288                 -                -          23,288
          Depreciation and amortization..........        140,943           8,626                 -                -         149,569
          Goodwill and intangibles amortization..        131,634           4,006            (4,006)               -         211,948
                                                                                            80,314
                                                  ------------------------------------------------------------------   -------------
  
                                                       1,287,340         129,437            76,308                -       1,493,085
                                                  ------------------------------------------------------------------   -------------
  
  OPERATING LOSS.................................       (167,824)        (41,697)          (76,308)               -        (285,829)
  EQUITY IN LOSS OF AFFILIATES...................         (5,140)                                                            (5,140)
  MINORITY INTEREST..............................        (15,731)          7,634            (7,634)               -         (15,731)
  
  Other income (expense):
          Interest income........................         22,798                                                             22,798
          Interest expense.......................        (85,676)         (7,447)                -                -         (93,123)
          Other income (expense).................         (5,628)           (768)                -                -          (6,396)
                                                  ------------------------------------------------------------------   -------------
  
  Loss before provision of income taxes..........        (257,201)        (42,278)          (83,942)               -        (383,421)
          Provision for income taxes.............         (5,000)         (1,219)                -                 -          (6,219)
                                                  ------------------------------------------------------------------   -------------
  
  Net loss.......................................       (262,201)        (43,497)          (83,942)               -        (389,640)
          Preferred stock dividends..............        (45,258)              -                 -          (19,406)        (64,664)
                                                  ------------------------------------------------------------------   -------------
  
  Loss  applicable to common shareholders........     $ (307,459)      $ (43,497)        $ (83,942)       $ (19,406)     $ (454,304)
                                                  ==================================================================   =============
  
  Loss per common share:
          Loss applicable to common
          shareholders ..........................     $    (0.39)                                                        $    (0.53)
                                                  ===============                                                      =============
  
          Shares used in computing information
          applicable to common shareholders......    778,780,323                                                        857,864,029
                                                  ===============                                                      =============
  
  </TABLE>
  
                                        64
  <PAGE>
  
                          Pro Forma Global Crossing Ltd.
          Unaudited Pro Forma Condensed Combined Statements of Operations
  
                       For the Year Ended December 31, 1999
                (in thousands, except share and per share amounts)
  
  <TABLE>
  <CAPTION>
                                                                                       Global           Global Marine
                                                                                      Crossing              Systems       Frontier
                                                                                    Historical  (7)      Historical (8)  Historical(9)
                                                                                   ---------------------------------------------------
  <S>                                                                               <C>                  <C>             <C>
  Operating Revenues.............................................................    $ 1,664,824          $ 173,498       $ 1,995,556
  
  Operating Expenses:
       Operating, selling, general and administrative............................      1,420,370            127,165         1,561,646
       Merger expenses...........................................................              -                  -            74,519
       Depreciation and amortization.............................................        124,294             12,817           173,600
       Goodwill amortization.....................................................        127,621                812            25,749
                                                                                  ----------------------------------------------------
  
                                                                                       1,672,285            140,794         1,835,514
                                                                                  ----------------------------------------------------
  
       Operating income (loss)...................................................         (7,461)            32,704           160,042
       Equity in income (loss) of affiliates.....................................         15,708              4,539            17,235
  
       Minority interest.........................................................         (1,338)                 -                 -
  
  Other Income (Expenses):
       Interest expense..........................................................       (139,077)            (6,869)          (48,739)
  
  
       Interest income...........................................................         67,407                511             4,754
       Other income (expenses)...................................................        180,765                143            (2,346)
                                                                                  ----------------------------------------------------
  
  Income (loss) before extraordinary item, taxes and cumulative
       effect of changes in accounting principle.................................        116,004             31,028           130,946
       (Provision) benefit for income taxes......................................       (126,539)           (11,885)          (77,181)
                                                                                  ----------------------------------------------------
  
  Income (loss) before extraordinary item and cumulative effect
       of changes in accounting principle........................................        (10,535)            19,143            53,765
       Preferred stock dividends.................................................        (66,642)                 -              (510)
                                                                                  ----------------------------------------------------
  
  Income (loss) applicable to common shareholders before extraordinary item and
  cumulative effect of changes in accounting principle...........................        (77,177)            19,143            53,255
       Diluted earnings adjustment...............................................              -                  -               270
                                                                                  ----------------------------------------------------
  
  Income (loss) applicable to common shareholders before extraordinary item and
  cumulative effect of changes in accounting principle...........................      $ (77,177)          $ 19,143          $ 53,525
                                                                                  ====================================================
  
  Loss per common share:
       Loss applicable to common shareholders before extraordinary item
       and cumulative effect of changes in accounting principle
                    Basic and diluted............................................        $ (0.15)
                                                                                  ===============
  
       Shares used in computing information applicable to common shareholders
                    Basic and diluted............................................    502,400,851
                                                                                  ===============
  <CAPTION>
  
                                                                                                     Hutchison
                                                                                  Racal               Global
                                                                                 Telecom             Crossing           IPC/IXnet
                                                                             Historical (10)     Adjustments (11)     Historical (12)
                                                                             --------------------------------------------------------
  <S>                                                                           <C>                        <C>            <C>
  Operating Revenues........................................................    $ 306,019                  $ -            $ 354,922
  
  Operating Expenses:
       Operating, selling, general and administrative.......................      286,442                    -              334,365
       Merger expenses......................................................       24,600                    -                    -
       Depreciation and amortization........................................       52,716                    -               23,363
       Goodwill amortization................................................            -                    -               11,869
                                                                             -------------------------------------------------------
  
                                                                                  363,758                    -              369,597
                                                                             -------------------------------------------------------
  
       Operating income (loss)..............................................      (57,739)                   -              (14,675)
       Equity in income (loss) of affiliates................................         (560)             (15,825)                   -
                                                                                                       (21,240)
       Minority interest....................................................            -                    -                4,962
  
  Other Income (Expenses):
       Interest expense.....................................................      (30,908)                   -              (27,863)
  
  
       Interest income......................................................        3,856                    -                    -
       Other income (expenses)..............................................          369                    -                  569
                                                                             -------------------------------------------------------
  
  Income (loss) before extraordinary item, taxes and cumulative
       effect of changes in accounting principle............................      (84,982)             (37,065)             (37,007)
       (Provision) benefit for income taxes.................................       30,116                    -               (8,279)
                                                                             -------------------------------------------------------
  
  Income (loss) before extraordinary item and cumulative effect
       of changes in accounting principle...................................      (54,866)             (37,065)             (45,286)
       Preferred stock dividends............................................            -              (25,529)                   -
                                                                             -------------------------------------------------------
  
  Income (loss) applicable to common shareholders...........................      (54,866)             (62,594)             (45,286)
       Diluted earnings adjustment..........................................            -                    -                    -
                                                                             -------------------------------------------------------
  
  Income (loss) applicable to common shareholders...........................    $ (54,866)           $ (62,594)           $ (45,286)
                                                                             =======================================================
  
  Loss per common share:
       Loss applicable to common shareholders before extraordinary item
       and cumulative effect of changes in accounting principle
                    Basic and diluted
  
       Shares used in computing information applicable to common shareholders
                    Basic and diluted
  
  <CAPTION>
  
                                                                                                                         Global
                                                                                  Financing        Pro Forma            Crossing
                                                                                 Adjustments      Adjustments          Pro Forma
                                                                                -------------------------------------------------
  <S>                                                                           <C>               <C>               <C>
  Operating Revenues..........................................................         $ -               $ -         $ 4,494,819
  
  Operating Expenses:
       Operating, selling, general and administrative.........................           -                 -           3,729,988
       Merger expenses........................................................           -                 -              99,119
       Depreciation and amortization..........................................           -                 -             386,790
       Goodwill amortization..................................................           -              (812) (13)       830,317
                                                                                                      19,690  (13)
                                                                                                     (25,749) (14)
                                                                                                     305,907  (14)
                                                                                                      55,843  (15)
                                                                                                     (11,869) (3)
                                                                                                     321,256  (3)
                                                                                --------------------------------------------------
  
                                                                                         -           664,266             5,046,214
                                                                                --------------------------------------------------
  
       Operating income (loss)................................................           -          (664,266)             (551,395)
       Equity in income (loss) of affiliates..................................           -                 -                  (143)
  
       Minority interest......................................................           -            (4,962)  (3)         (1,338)
  
  Other Income (Expenses):
       Interest expense.......................................................      93,577  (17)     (24,000) (16)       (523,558)
                                                                                  (243,316) (17)     (96,363) (18)
  
  
       Interest income........................................................           -                 -               76,528
       Other income (expenses)................................................           -                 -              179,500
                                                                                --------------------------------------------------
  
  Income (loss) before extraordinary item, taxes and cumulative
       effect of changes in accounting principle..............................    (149,739)         (789,591)            (820,406)
       (Provision) benefit for income taxes...................................      (7,200) (17)      23,115  (19)       (170,653)
                                                                                                       7,200  (20)
                                                                                --------------------------------------------------
  
  Income (loss) before extraordinary item and cumulative effect
       of changes in accounting principle.....................................    (156,939)         (759,276)            (991,059)
       Preferred stock dividends..............................................    (108,936) (17)         510  (21)       (278,732)
                                                                                   (77,625) (4)
                                                                                --------------------------------------------------
  
  Income (loss) applicable to common shareholders.............................    (343,500)         (758,766)          (1,269,791)
       Diluted earnings adjustment............................................          -               (270) (22)             -
                                                                                --------------------------------------------------
  
  Income (loss) applicable to common shareholders.............................  $ (343,500)       $ (759,036)        $ (1,269,791)
                                                                                ==================================================
  Loss per common share:
       Loss applicable to common shareholders before extraordinary item
       and cumulative effect of changes in accounting principle
                    Basic and diluted.........................................                                       $      (1.50)
                                                                                                                    ==============
  
       Shares used in computing information applicable to common shareholders
                    Basic and diluted.........................................                                        846,438,857 (23)
                                                                                                                    ==============
  
  </TABLE>
  
                                        65
  
  <PAGE>
  
                          Pro Forma Global Crossing Ltd.
  
             Notes to Unaudited Pro Forma Condensed Combined Financial
                                    Statements
  
  (1)   This column represents the historical financial position of Global
        Crossing as of March 31, 2000, including the assets acquired in the
        Frontier merger, the Global Marine Systems and Racal Telecom acquisitions
        and the Hutchison Global Crossing joint venture.
  
  (2)   This column represents the historical financial position of IPC
        Communications, Inc. (IPC) as of March 31, 2000, including its subsidiary
        IXnet, Inc (IXnet).
  
  (3)   These adjustments reflect the elimination of IPC's shareholders' equity
        accounts, the minority interest related to the shares of IXnet not owned
        by IPC and the excess consideration over the net liabilities assumed
        (goodwill). The preliminary goodwill is calculated as follows (in
        thousands, except exchange ratios and share prices):
  
  <TABLE>
  <CAPTION>
  
        Shares of IXnet common stock outstanding at
  <S>                                                                                   <C>              <C>
        March 31, 2000.......................................................              51,148
        Less shares held by IPC..............................................             (43,100)
                                                                                          -------
        Shares of IXnet to be exchanged......................................               8,048
        IXnet exchange ratio.................................................               1.184
                                                                                           ------
        Shares of Global Crossing to be issued to IXnet shareholders.........                              9,529
        Shares of IPC common stock outstanding at
        March 31, 2000.......................................................               8,839
        IPC exchange ratio...................................................               5.417
                                                                                           ------
        Shares of Global Crossing to be issued to IPC shareholders...........                             47,881
                                                                                                       ---------
        Total shares of Global Crossing to be issued.........................                             57,410
        Global Crossing market price at agreement date.......................                            $ 49.77
                                                                                                       ---------
                                                                                                       2,857,296
        Acceleration of stock option vesting.................................                            345,763
        Tax benefit related to the vesting of
          Stock options......................................................                           (147,770)
        Estimated Global Crossing transaction costs..........................                             30,000
                                                                                                       ---------
        Estimated total consideration........................................                          3,085,289
  
        Historical net book value of IPC:
        Historical IPC net liabilities at
            March 31, 2000...................................................             $36,171
        Historic goodwill and other intangibles..............................              88,097
        Estimated IPC and IXnet transaction costs............................               3,000
                                                                                          -------
                                                                                                         127,268
                                                                                                      ----------
        Preliminary goodwill.................................................                         $3,212,557
                                                                                                      ==========
  </TABLE>
        Global Crossing will issue approximately 57,410,000 shares of its common
        stock at a ratio of 1.184 shares of Global Crossing common stock for each
        share of IXnet common stock not owned by IPC, and 5.417 shares of Global
        Crossing common stock for each share of IPC common stock. Global Crossing
        has tentatively considered the carrying value of the acquired assets to
        approximate their fair value, with all of the excess of such acquisition
        costs being attributable to goodwill. Global Crossing is in the process of
        fully evaluating the assets to be acquired and, as a result, the purchase
        price allocation among the tangible and intangible assets acquired (and
        their related useful lives) may change. Goodwill associated with the
        transaction is currently anticipated to be amortized over a 10-year life.
  
  (4)   These adjustments represent the issuance of 4,600,000 shares of Global
        Crossing 6 3/4% cumulative convertible preferred stock and related
        dividends and 21,673,706 shares of Global Crossing common stock in April
        2000.
  
  (5)   This column represents the results of operations of Global Crossing Ltd.
        for the three months ended March 31, 2000 including the results of Global
        Marine Systems, Frontier and Racal operations for the three months ended
        March 31, 2000 and the Hutchison joint venture for the period from
        January 12, 2000 to March 31, 2000.
  
  (6)   This column represents the results of operations of IPC, including the
        results of its subsidiary, IXnet, for the three months ended March 31,
        2000.
  
  (7)   This column represents the historical results of operations for the year
        ended December 31, 1999, including the results of Global Marine Systems
        operations for the six months ended December 31, 1999, the results of
        Frontier operations for the three months ended December 31, 1999 and the
        results of Racal Telecom operations for the period from November 24,
        1999 to December 31, 1999.
  
  (8)   This column represents the historical results of operations of Global
        Marine Systems for the six months ended June 30, 1999.
  
  (9)  This column represents Frontier's historical results of operations for the
       nine months ended September 30, 1999.
  
  (10) This column represents Racal Telecom's results from operations from
       January 1, 1999 to November 23, 1999, after giving effect to pro forma
       adjustments to present these statements in accordance with United States
       GAAP, to reflect the disposal of the Racal Translink and Racal Fieldforce
       divisions of Racal Telecommunications Limited (which Global Crossing did
       not acquire) and to reflect the likely effect of the trading among Racal
       Translink, Racal Fieldforce and Racal Telecom based on contractual
       obligations among the divisions. Global Crossing summarizes these
       adjustments in the table below:
  
                              Racal Telecom Pro Forma
          Unaudited Pro Forma Condensed Combined Statements of Operations
  
             For the period from January 1, 1999 to November 23, 1999
                                  (in thousands)
  
  <TABLE>
  <CAPTION>
                                                                                              US GAAP and       Racal
                                                                             BV Acquisition    Accounting      Telecom       Racal
                                                                             and Carve-Out       Policy        Interim      Telecom
                                                           Historical(a)      Adjustments    Adjustments(d)    Period(e)   Pro Forma
                                                           ------------     ---------------  --------------    ---------   ---------
       <S>                                                 <C>              <C>              <C>               <C>         <C>
       Operating Revenues.................................   $ 390,578      $ (110,354)(c)       $ (22,447)     $ 47,937   $ 306,019
                                                                                   305 (b)
                                                             ---------      ----------           ---------      --------   ---------
       Operating Expenses:
            Operating, selling, general and
              administrative..............................     355,110         (99,595)(c)           1,737        53,544     311,042
                                                                                   246 (b)
            Depreciation and amortization.................      61,774         (11,978)(c)          (3,340)        6,265      52,716
                                                                                    (5)(b)
                                                             ---------      ----------           ---------      --------   ---------
                                                               416,884        (111,332)             (1,603)       59,809     363,758
                                                             ---------      ----------           ---------      --------   ---------
       Operating income (loss)............................     (26,306)          1,283             (20,844)      (11,872)    (57,739)
       Equity in income (loss) of affiliates..............        (560)             --                  --            --        (560)
       Other income (expense):
            Interest expense..............................     (30,905)             (3)(b)              --            --     (30,908)
            Interest income...............................          --           3,089 (c)              --           767       3,856
            Other income (expense)........................      76,390         (76,021)(c)              --            --         369
                                                             ---------      ----------           ---------      --------   ---------
       Income (loss) before extraordinary item, taxes and
         cumulative effect of changes in accounting
         principle........................................      18,619         (71,652)            (20,844)      (11,105)    (84,982)
            (Provision) benefit for income taxes..........       3,563             (70)(b)          18,918         7,705      30,116
                                                             ---------      ----------           ---------      --------   ---------
       Income (loss) before extraordinary item and
         cumulative effect of changes in accounting
         principle........................................   $  22,182      $  (71,722)          $  (1,926)     $ (3,400)  $ (54,866)
                                                             =========      ==========           =========      ========   =========
  </TABLE>
  
       (a)  This column represents the combined historical results of operations
            of Racal Telecommunications Limited, Racal Telecommunications Networks
            Limited, Racal Internet Services Limited and Racal Telecommunications
            Inc., which we refer to as "Racal Telecom", in accordance with United
            Kingdom GAAP translated into United States dollars for the 41 weeks
            ended October 15, 1999.
  
       (b)  Global Crossing is treated as having acquired the business and assets
            of Racal Network Services BV as that company was in the process of
            being reorganized into Racal Telecommunications Networks Limited in
            the course of 1999. These adjustments reflect the financial position
            and results of operations of Racal Network Services BV as if this
            transaction had been completed as of the dates or at the beginning of
            the periods presented.
  
       (c)  In July 1999, the Racal Telecom business was separated into three
            divisions: Racal Telecom, Racal Translink and Racal Fieldforce. On
            October 1, 1999, the Racal Translink and Racal Fieldforce businesses
            were sold to another company within the Racal Electronics plc group.
            This adjustment eliminates the results of operations of Racal
            Translink and Racal Fieldforce, reflects the likely effect of the
            trading among Racal Translink, Racal Fieldforce and Racal Telecom
            based on contractual obligations among the divisions and adjusts the
            profit on disposal of these operations. No taxation liabilities were
            incurred on the disposal as this disposal was to another Racal
            Electronics plc group company.
  
       (d)  The Racal Telecom combined financial statements are prepared in
            accordance with United Kingdom GAAP which differ in certain material
            respects from United States GAAP. The differences that are material
            are disclosed in the notes to the combined financial statements,
            incorporated by reference. In addition, an adjustment has been made to
            treat sales of dark fiber made by Racal Telecom after July 1, 1999 as
            operating leases, recognizing income over the period of the service
            provision in accordance with the provision of FASB Interpretation No.
            43.
  
       (e)  This column represents Racal Telecom's historical results from October
            16, 1999 to November 23, 1999.
  
  (11)  On January 12, 2000, Global Crossing and Hutchison Whampoa Limited formed
        a joint venture called Hutchison Global Crossing. This joint venture is
        owned in equal parts by Global Crossing and Hutchison Whampoa. In exchange
        for its 50% interest, Hutchison Whampoa contributed to the joint venture
        its existing building-to-building fixed-line telecommunications network in
        Hong Kong and certain Internet-related assets previously held by Hutchison
        Telecommunications Limited. In exchange for its 50% interest, Global
        Crossing contributed to the joint venture international telecommunications
        capacity rights on its network and know-how related to Internet data
        centers valued at $350 million and $50 million in cash. In addition,
        Global Crossing issued to Hutchison Whampoa $400 million aggregate
        liquidation preference of Global Crossing's 6 3/8% cumulative convertible
        preferred stock, series B, convertible into Global Crossing common stock.
        The Hutchison Global Crossing joint venture is anticipated to be accounted
        for as an unconsolidated joint venture under the equity method of
        accounting.
  
  
  <TABLE>
  <CAPTION>
                                                                                  (In thousands)
                                                                                  --------------
  <S>                                                                         <C>           <C>
  Total Consideration
       Cash contributed...................................................                  $ 50,000
       6 3/8% Cumulative Convertible Preferred Stock, Series B............                   400,000
       Estimated cost of capacity contributed.............................                    83,800
       Global Crossing transaction costs..................................                     5,000
                                                                                            --------
  Total consideration.....................................................                   538,800
  
  Less: Historical net tangible book value of HCL Holdings:
       Historical HCL Holdings net liabilities at December 31, 1999.......   $(149,393)
       Cash contributed...................................................      50,000
       Estimated cost of capacity contributed.............................      83,800
                                                                             ---------
       Adjusted net tangible book value...................................     (15,593)
       50% ownership interest.............................................       7,797
                                                                             ---------
                                                                                              (7,796)
                                                                                            --------
  Total Goodwill..........................................................                  $546,596
                                                                                            ========
  
  </TABLE>
  
       Global Crossing has tentatively considered the carrying value of the
       acquired assets to approximate their fair value, with all of the excess of
       those acquisition costs being attributable to goodwill. Global Crossing is
       in the process of fully evaluating the assets acquired and, as a result,
       the purchase price allocation among the tangible and intangible assets
       acquired and their useful lives may change. Global Crossing currently
       anticipates that goodwill associated with the transaction will be amortized
       over a 25-year life.
  
       These adjustments also include the assumed equity in the results of
       operations of Hutchison Global Crossing for the year ended December 31,
       1999.
  
  (12) This column represents the results of operations of IPC, including the
  results of its subsidiary, IXnet, for the year ended December 31, 1999.
  
  
  
                                        66
  <PAGE>
  
  (13) These adjustments reflect the reversal of historic goodwill amortization
       and goodwill amortization expense of the excess consideration over the net
       assets acquired (goodwill) in connection with the Global Marine Systems
       acquisition, which Global Crossing has estimated to be approximately $693
       million. Global Crossing is amortizing goodwill and other intangible assets
       on the straight-line method over 3-25 years. The initial purchase price
       allocation is based on current estimates. Global Crossing will make the
       final purchase price allocation based upon final values for certain assets
       and liabilities. As a result, the final purchase price allocation may
       differ from the presented estimate.
  
  (14) These adjustments reflect the reversal of historic goodwill amortization
       and the goodwill amortization expense of the excess consideration over the
       net assets acquired (goodwill) in connection with the Frontier merger,
       which Global Crossing has estimated to be approximately $7.7 billion.
       Global Crossing is amortizing goodwill and other intangible assets on a
       straight-line method over 6-25 years. The initial purchase price allocation
       is based on current estimates. Global Crossing will make the final purchase
       price allocation based upon final values for certain assets and
       liabilities. As a result, the final purchase price allocation may differ
       from the presented estimate.
  
  (15) This adjustment reflects the amortization expense of the excess
       consideration over the net assets acquired (goodwill) in connection with
       the Racal acquisition, which Global Crossing has estimated to be
       approximately $1.6 billion. Global Crossing has tentatively considered the
       carrying value of the acquired assets to approximate fair value, with all
       excess of those acquisition costs being attributable to goodwill. Global
       Crossing is in the process of fully evaluating the assets acquired and, as
       a result, the purchase price allocation among the tangible and intangible
       assets acquired, and their related useful lives, may change. Global
       Crossing currently anticipates that goodwill associated with the
       transaction will be amortized over a 25 year life.
  
  (16) This amount reflects the assumed interest expense, at an 8% interest rate,
       incurred on the $600 million debt assumed issued as of the earliest date
       presented in connection with the acquisition of Global Marine Systems.
  
  (17) These adjustments represent the assumed interest expense, including
       amortization of deferred financing fees and the resulting tax adjustment,
       in connection with the issuance and assumed repayment of existing debt
       related to the 9 1/8% senior notes due 2006 and 9 1/2% senior notes due
       2009 of Global Crossing Holdings, Global Crossing's 6 3/8% cumulative
       convertible preferred stock and Global Crossing's 7% cumulative convertible
       preferred stock. In connection with the issuance of the 9 1/8% senior notes
       due 2006 and 9 1/2% senior notes due 2009 of Global Crossing Holdings,
       Global Crossing incurred approximately $29.7 million in financing fees. The
       financing fees will be amortized over the life of the debt.
  
  (18) This amount reflects the assumed interest expense, at a 9% interest rate,
       including the amortization of deferred financing fees, incurred on the $1.1
       billion debt issued to finance the acquisition of Racal Telecom assumed
       issued as of the earliest date presented.
  
  (19) This adjustment represents the tax benefit resulting from the interest
       expense assumed in connection with the debt issued for the acquisition of
       Global Marine Systems.
  
  (20) This adjustment represents the tax benefit resulting from the interest
       expense assumed in connection with the debt issued for the acquisition of
       Racal Telecom.
  
  (21) This adjustment assumes that Frontier's preferred stock dividends would not
       have been incurred, as Frontier's preferred stock would have been redeemed
       as of the earliest date presented.
  
  (22) To eliminate diluted earnings adjustment due to the combined net loss
       position.
  
  (23) Pro forma per share data are based on the number of shares of Global
       Crossing common stock that would have been outstanding had the Frontier
       merger, the IPC acquisition and the April 2000 issuance of common stock
       occurred at the earliest date presented. Global Crossing issued
       355,181,000 shares in connection with the Frontier merger, 21,673,706
       shares in connection with the April 2000 common stock issuance, and
       approximately 57,410,000 shares in connection with the IPC and IXnet
       acquisitions.
  
                                        67
  <PAGE>
  
                                     SIGNATURE
  
       Pursuant to the requirements of the Securities Exchange Act of 1934, as
  amended, the registrant has duly caused this report to be signed on its behalf
  by the undersigned hereunto duly authorized.
  
                                          GLOBAL CROSSING LTD.
  
  
  Dated: June 15, 2000                    By: /s/ Dan J. Cohrs
                                              ---------------------------------
                                              Name:  Dan J. Cohrs
                                              Title: Senior Vice President and
                                                     Chief Financial Officer
  
                                        68
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text: ================================================================================
  
                        SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549-1004
  
                                  --------------
  
                                     FORM 8-K
  
                                  --------------
  
                                  CURRENT REPORT
  
                      Pursuant to Section 13 or 15(d) of the
                          Securities Exchange Act of 1934
  
         Date of Report (Date of earliest event reported) June 14, 2000
  
                             -------------------
  
                               Global Crossing Ltd.
              (Exact name of registrant as specified in its charter)
  
                              -------------------
  
            Bermuda                     000-24565               98-0189783
  (State or other jurisdiction of      (Commission          (I.R.S. Employer
  incorporation or organization)       File Number)         Identification No.)
  
      Wessex House, 45 Reid Street
           Hamilton, Bermuda                               HM12
  (Address of principal executive offices)              (Zip Code)
  
         Registrant's telephone number, including area code (441) 296-8600
  
  ================================================================================
  Item 2. Acquisition or Disposition of Assets.
  
       On June 14, 2000, Global Crossing Ltd., a Bermuda company ("Global
  Crossing"), completed its acquisition of IPC Communications, Inc. and Ixnet,
  Inc. A copy of the Agreement and Plan of Merger among Global Crossing, Georgia
  Merger Sub Corporation, IPC Communications, Inc., IPC Information Systems,
  Inc., Idaho Merger Sub Corporation and IXnet, Inc. is incorporated by
  reference herein to Annex A of the information statement contained in Global
  Crossing's Registration Statement on Form S-4 (File No. 333-34592) filed on
  May 12, 2000.
  
  Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
  
       (a)  Financial Statements of Businesses Acquired.
  
            Consolidated and combined financial statements of IXnet, Inc. for the
            six months ended March 31, 2000;
  
            Consolidated and combined financial statements of IXnet, Inc. for each
            of the three years ended September 30, 1999;
  
            Consolidated financial statements of IPC Communications, Inc. for the
            six months ended March 31, 2000; and
  
            Consolidated financial statements of IPC Communications, Inc. for each
            of the three years ended September 30, 1999.
  
       (b)  Pro Forma Financial Information.
  
            Pro forma Global Crossing financial information as of and for the
            three months ended March 31, 2000; and
  
            Pro forma Global Crossing financial information for the year ended
            December 31, 1999.
  
                                         2
  IXNET, INC.
  
                            CONSOLIDATED BALANCE SHEETS
                                    (UNAUDITED)
  
                      (In thousands, except per share amount)
  March 31,    September 30,
                                                                     2000          1999
                                                                     ----          ----
  ASSETS
  Current assets:
   Cash and cash equivalents..................................   $  6,583       $ 39,020
    Marketable securities.....................................         --         28,357
    Marketable securities, restricted.........................      3,000         20,435
    Accounts receivable, net..................................     26,374         17,824
   Prepaids and other current assets..........................      6,946          5,505
                                                                 --------       --------
     Total current assets.....................................     42,903        111,141
  
  Long term marketable securities, restricted.................         --          6,065
  Property and equipment, net.................................    100,316         80,170
  Goodwill, net...............................................     73,809         49,773
  Other assets................................................        768            889
                                                                 --------       --------
     Total assets.............................................   $217,796       $248,038
                                                                 ========       ========
  
                        LIABILITIES AND STOCKHOLDERS' EQUITY
  Current liabilities:
   Accounts payable...........................................  $  28,599      $  10,198
   Accrued liabilities........................................     30,938         22,445
   Current portion of capital leases..........................      6,727          5,636
   Current portion of notes payable...........................      8,744         14,502
                                                                ---------      ---------
     Total current liabilities................................     75,008         52,781
  
  Note payable to parent......................................     65,851         52,122
  Lease obligations, less current portion.....................     18,504         15,412
  Notes payable, less current portion.........................      2,403          4,854
                                                                ---------      ---------
     Total liabilities........................................    161,766        125,169
                                                                ---------      ---------
  
  Commitments and contingencies
  
  Stockholders' equity:
   Common stock--$0.01 par value, authorized 100,000 shares;
     51,149 and 51,075 shares issued and outstanding at
      March 31, 2000 and September 30, 1999, respectively.....        511            511
   Paid-in capital............................................    256,337        249,080
   Accumulated deficit........................................   (180,524)      (109,176)
        Deferred compensation.................................    (18,548)       (16,797)
   Accumulated other comprehensive loss.......................     (1,746)          (749)
                                                                ---------      ---------
     Total stockholders' equity...............................     56,030        122,869
                                                                ---------      ---------
     Total liabilities and stockholders' equity...............  $ 217,796      $ 248,038
                                                                =========      =========
  See Notes to Consolidated and Combined Financial Statements
  
                                         3
  IXNET, INC.
  
                 CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
                                    (UNAUDITED)
  
                      (In thousands, except per share amounts)
  Three Months Ended March 31,          Six Months Ended March 31,
                                                     -----------    -----------          -----------    -----------
                                                         2000           1999                 2000          1999
                                                     -----------    -----------          -----------    -----------
  Revenue                                            $    29,017    $    19,859          $    52,142    $   32,611
  Cost of revenue (exclusive of depreciation and
     amortization shown separately below)                 30,950         18,476               55,695        30,934
  Sales and marketing expense                              7,931          2,786               13,736         4,878
  General and administrative expense                       5,881          1,600               10,357         2,815
  Depreciation and amortization                           10,157          5,586               18,368         9,508
  Stock compensation charge                                1,236              -                2,599             -
  Merger related costs                                    18,539              -               18,539             -
                                                     -----------    -----------          -----------    ----------
             Loss from operations                        (45,677)        (8,589)             (67,152)      (15,524)
  Interest expense, net                                   (1,693)        (2,493)              (2,853)       (4,318)
  Other income, net                                         (543)           (64)                (444)          (18)
                                                     -----------    -----------          -----------    ----------
             Loss before provision for income taxes      (47,913)       (11,146)             (70,449)      (19,860)
  Provision for income taxes                                 587            134                  899           257
                                                     -----------    -----------          -----------    ----------
             Net loss                                $   (48,500)   $   (11,280)         $   (71,348)   $  (20,117)
                                                     ===========    ===========          ===========    ==========
  
  Basic and diluted loss per share                   $     (0.95)   $     (0.26)         $     (1.40)   $    (0.47)
                                                     ===========    ===========          ===========    ==========
  Basic and diluted weighted average number of
            shares outstanding                            51,128         43,100               51,101        43,100
                                                     ===========    ===========          ===========    ==========
  See Notes to Consolidated and Combined Financial Statements.
  
                                         4
  IXNET, INC.
  
                 CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
                                    (UNAUDITED)
  
                                   (In thousands)
  Six Months ended March 31,
                                                                                 --------------------------
  
                                                                                      2000        1999
                                                                                      ----        ----
  Cash flows from operating activities:
   Net loss.....................................................................   $(71,348)   $(20,117)
   Adjustments to reconcile net loss to net cash used in operating activities:
    Depreciation and amortization...............................................     13,830       6,226
    Amortization of goodwill....................................................      4,538       3,282
    Bad debt and sales credit provision.........................................      3,671         529
    Stock compensation charges..................................................      2,599          --
  
    Changes in operating assets and liabilities:
     Trade receivables..........................................................    (11,707)     (2,016)
     Prepaids and other assets..................................................       (851)        701
     Accounts payable and accrued liabilities...................................     24,331        (212)
                                                                                   --------    --------
    Net cash used in operating activities.......................................    (34,937)    (11,607)
                                                                                   --------    --------
  Cash flows from investing activities:
    Capital expenditures........................................................    (26,208)     (7,683)
    Acquisition of Saturn, net of cash acquired.................................         --     (34,713)
    Acquisition of Business Networks of New York (BNNY), net of cash
     acquired...................................................................    (23,571)         --
    Acquisition of Systems Programming & Network Computing, Inc. (SPNC), net of
     cash acquired .............................................................       (293)         --
    Net change in investment of marketable securities...........................     52,453          --
                                                                                   --------    --------
     Net cash provided (used by) investing activities...........................      2,381     (42,396)
                                                                                   --------    --------
  Cash flows from financing activities:
    Cash financing from parent, net.............................................     11,956      54,893
    Principal payments on capital leases........................................     (3,024)     (2,152)
    Issuance of note in connection with SPNC
     acquisition................................................................        100          --
    Capital transactions with parent............................................        587       5,254
    Repayment of notes payable..................................................     (8,503)       (555)
                                                                                   --------    --------
    Net cash provided by financing activities...................................      1,116      57,440
                                                                                   --------    --------
  Effect of exchange rate changes on cash.......................................       (997)       (631)
                                                                                   --------    --------
  Net (decrease)/increase in cash...............................................    (32,437)      2,806
  Cash and cash equivalents, beginning of period................................     39,020       1,255
                                                                                   --------    --------
  Cash and cash equivalents, end of period......................................   $  6,583    $  4,061
                                                                                   ========    ========
  
  Non-cash investing and financing activities-
    Capital lease obligations entered into during the period....................   $  7,207    $  5,345
    Deferred compensation in connection with grants of stock options............      4,416    --------
  See Notes to Consolidated and Combined Financial Statements.
  
                                         5
  IXNET, INC.
  
              NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
                                    (UNAUDITED)
  
  1.  Background and Basis of Presentation
  
  IXnet, Inc. ("IXnet" or the "Company") provides communications services tailored
  to the specialized needs of the worldwide financial services community. The
  Company has built and operates an Extranet, a global network connecting members
  of the financial services community as well as multiple offices within the same
  firm. The Company provides global services including managed voice and data
  services, switched voice communications and content hosting and distribution of
  news, research, analytics and market data.
  
  IXnet started its business as International Exchange Networks, Ltd. ("IEXN"),
  which was incorporated in Delaware on March 8, 1993.  On June 23, 1995, IPC
  Information Systems, Inc. ("IPC"), acquired 80% of the outstanding common stock
  of IEXN and acquired the remaining 20% on April 30, 1998.  On March 31, 1999,
  IPC contributed $73 million of IEXN's then outstanding note payable to IPC into
  IEXN's paid-in capital.
  
  MXNet, Inc. ("MXNet") was incorporated in Delaware on May 24, 1996, as a wholly
  owned subsidiary of National Discount Brokers Group, Inc.  On February 13, 1998,
  IPC acquired the outstanding common stock of MXNet, which was contributed to
  IEXN in May 1999.
  
  On May 4, 1999, IPC contributed 100% of the outstanding common stock of IEXN to
  the Company.  In addition, on May 4, 1999, the Company was incorporated in
  Delaware as a wholly owned subsidiary of IPC with 2,000 shares of common stock,
  par value $0.01 per share, authorized, and 1,000 shares issued to IPC.
  Effective July 1, 1999, the Company amended its certificate of incorporation to
  increase its authorized shares to 100,000,000.  On June 30, 1999, the Company
  declared a 43,100 for one stock split effective July 1, 1999, resulting in
  43,100,000 shares issued and outstanding.
  
  The Company completed an initial public offering (the "Offering") of 6,500,000
  shares of common stock at $15 per share on August 12, 1999.  On August 30, 1999,
  the underwriters exercised their over-allotment option and purchased an
  additional 975,000 shares of common stock at $15 per share.
  
  On February 22, 2000, the Company, IPC and IPC Communications, Inc. entered into
  a merger agreement with Global Crossing, Ltd. (the "Merger"). The Merger was
  approved by a majority of the Company's and IPC's stockholders. Under the terms
  of the Merger agreement, at the closing, Company stockholders will be entitled
  to receive 1.184 shares of Global Crossing common stock for each share of
  Company common stock and IPC stockholders will be entitled to receive 5.417
  shares of Global Crossing common stock for each share of IPC common stock. The
  Merger is expected to be completed by the end of the Company's third fiscal
  quarter. For the three and six months ended March 31, 2000, the Company recorded
  costs of $18.5 million related to the Merger. These costs primarily included
  investment banker fees, legal fees, other professional fees, and other direct
  costs.
  
  The financial statements as of and for the three and six months ended March 31,
  2000, and as of September 30, 1999, include the accounts of IXnet and its
  consolidated subsidiaries. The financial statements for the three and six months
  ended March 31, 1999, combine the historical financial information of IEXN and
  its consolidated subsidiaries with the historical financial information of
  MXNet. Intercompany balances and transactions between IEXN and MXNet have been
  eliminated. Additionally, the financial statements present the issued and
  outstanding shares of IXnet as if they had been in place for the quarter ended
  March 31, 1999. The financial statements include certain corporate expenses
  incurred by IPC that have been charged to the Company. Management believes these
  allocations are reasonable.
  
  In the opinion of management, the accompanying unaudited financial statements
  include all necessary adjustments (consisting of normal recurring accruals and
  appropriate inter-company elimination adjustments) for a fair presentation of
  the financial position of IXnet, Inc. as of March 31, 2000, and the results of
  its operations for the three and six months ended March 31, 2000 and 1999, in
  conformity with generally accepted accounting principles, commonly referred to
  as GAAP, for interim financial information applied on a consistent basis.  The
  results of operations for the three and six months ended March 31, 2000, are not
  necessarily indicative of the results to be expected for the full year.  Certain
  information and note disclosures normally included in financial statements
  prepared in accordance with GAAP have been omitted pursuant to the rules and
  regulations of the Securities and Exchange Commission.  These financial
  statements should be read in conjunction with IXnet's Annual Report on Form 10-K
  for the year ended September 30, 1999.
  
                                         6
  IXNET, INC.
  
        NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)
                                    (UNAUDITED)
  
  2.  Summary of Significant Accounting Policies
  
  Accounts Receivable
  
  Accounts receivable relate to the billing of communication services and are net
  of allowance for doubtful accounts and sales credit provision of $2.9 million
  and $2.1 million as of March 31, 2000 and September 30, 1999, respectively.
  
  Earnings Per Share
  
  Basic loss per share is computed using the weighted average number of common
  shares outstanding during the year.  Diluted loss per share is computed using
  the weighted average number of shares of common stock adjusted for the dilutive
  effect of common stock equivalent shares of common stock options.  Common stock
  equivalent shares are calculated using the treasury stock method.  All stock
  options outstanding have been excluded from the computation of diluted loss per
  share as their effect would be antidilutive.  Accordingly, there is no
  difference between basic and diluted EPS.
  
  3.  Comprehensive Loss
  
  Comprehensive loss includes the Company's net loss and foreign currency
  translation adjustments. The tax effect and reclassifications are not
  significant.   The Company's total comprehensive loss for the six months ended
  March 31, 2000 and 1999 was as follows (in thousands):
  Six Months Ended March 31,
                                                                            ------------------------------
                                                                            2000                      1999
                                                                            ----                      ----
  Net loss                                                  $(71,348)                 $(20,117)
                 Translation adjustment                                        (997)                     (923)
                                                                     ------------------      --------------------
                 Total comprehensive loss                                  $(72,345)                 $(21,040)
                                                                     ==================      ====================
  4.  Acquisitions and Strategic Agreement
  
  Saturn Global Network Services Holdings Ltd.
  
  On December 18, 1998, the Company acquired all of the issued and outstanding
  common shares of Saturn Global Network Services Holdings Limited ("Saturn") from
  Marshalls 106 Limited  ("Marshalls"). The purchase price included the payment of
  cash in the amount of $35.7 million (paid by the Company through borrowings from
  IPC) and the issuance by the Company of a promissory note, guaranteed by IPC, in
  the amount of $7.5 million bearing interest at the UK Sterling Base Rate, as
  defined, plus three percent and payable over three years (the "Marshalls Note").
  In addition, the Company assumed indebtedness of Saturn due to Marshalls in the
  amount of $5 million payable over 24 months with interest at 9.25% (the "Saturn
  Note").  Under this agreement, the Marshalls note is subject to a working
  capital adjustment and right of offset.  The working capital adjustment was
  settled in June 1999 resulting in a reduction  of $2 million.
  
  Saturn, a UK holding company, owns telecommunication network operating
  subsidiaries in the United Kingdom, USA, Hong Kong, Australia, Japan and
  Singapore which sell managed premium grade voice and data communication services
  to the financial community. The acquisition was accounted for using the purchase
  method of accounting and resulted in $49.2 million of goodwill.  Saturn goodwill
  is being amortized over 10 years from the date of the  acquisition.
  
                                         7
  IXNET, INC.
  
        NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)
                                    (UNAUDITED)
  
  Strategic Agreement
  
  On September 24, 1999, IXnet entered into a strategic agreement (the "Strategic
  Agreement"), including the licensing of certain software products to enhance
  the intelligence of its network for a purchase price of $20.0 million
  consisting of $10.0 million in cash financed from the proceeds from IXnet's IPO
  and 500,000 shares of IXnet restricted common stock valued at an average closing
  price prior to the agreement date. The Strategic Agreement is designed to
  enhance IXnet's network capabilities with embedded intelligence, delivering
  financial enterprise integration, subject-based addressing, trading turret
  integration and application management.
  
  Business Networks of New York, Inc.
  
  Effective January 1, 2000, IXnet acquired all of the issued and outstanding
  common shares of Business Networks of New York, Inc. ("BNNY"). BNNY is a leader
  in providing voice and data services to the financial community, primarily in
  the New York Metropolitan Area.  The $26.5 million purchase price consisted of
  $24.5 million in cash and 45,707 shares of IXnet common stock.  The acquisition
  was accounted for using the purchase method of accounting and resulted in $27.3
  million of goodwill, which will be amortized over a 10 year period from the date
  of the acquisition.
  
  Systems Programming & Network Computing, Inc.
  
  On January 25, 2000, IXnet acquired all of the issued and outstanding common
  shares of Systems Programming & Network Computing, Inc. ("SPNC"). SPNC is a
  leader in providing and integrating sophisticated multi-system, multi-platform
  applications for the financial services community.  The purchase price was
  approximately $1.5 million and consisted of $300,000 in cash, a $100,000
  promissory note issued by the Company and 6,080 shares of IXnet common stock.
  The acquisition was accounted for using the purchase method of accounting and
  resulted in $111,000 of goodwill, which will be amortized over a 5 year period
  from the date of the acquisition.
  
  5.  Stock Compensation Charge
  
  In May 1999, IXnet recorded $26.4 million in non-cash deferred stock
  compensation reflecting the issuance by the Company of options to purchase
  6,530,184 shares of common stock of IXnet at $13.96 per share.  The deferred
  stock compensation is based upon the deemed fair market value of IXnet's common
  stock and the exercise price of such options issued on the date of grant.  The
  Company recorded an additional $2.1 million of non-cash deferred stock
  compensation during the quarter and $4.4 during the six months ended March 31,
  2000, which represents the charge for the issuance of options in May 1999 that
  are treated as variable options for accounting purposes. Stock compensation
  expense for the three and six months ended March 31, 2000 is $1.2 million and
  $2.6 million respectively. The remaining deferred compensation will be amortized
  over the remaining vesting period of the options.  In addition, certain of these
  options may be treated as variable options and may result in additional
  compensation expense in future periods.
  
  6.  Property and Equipment
  
  Property and equipment is comprised of the following (in thousands):
  March 31,       September 30,
                                                       Useful Lives         2000             1999
                                                       ------------         ----             ----
  Network equipment.................................   2 to 5 years       $ 56,179         $39,700
  Network equipment under capital leases............        5 years         35,844          28,637
  Indefeasible rights of use........................       IRU term         10,760           6,571
  Network software..................................        3 years         24,546          21,485
  Office equipment and furniture....................        5 years          7,964           6,227
  Leasehold improvements............................     Lease term          3,827           2,524
                                                                          --------         -------
  
   Total depreciable property and equipment.........                       139,120         105,144
   Less accumulated depreciation and amortization...                       (38,804)        (24,974)
                                                                          --------         -------
  
                                                                          $100,316        $ 80,170
                                                                          ========        ========
  8
  IXNET, INC.
  
        NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)
                                    (UNAUDITED)
  
  Accumulated depreciation of network equipment under capital leases at March 31,
  2000 and September 30, 1999, was $13.9 million and $10.8 million,
  respectively.
  
  7.  Disclosures about Segments of an Enterprise and Related Information
  
  The Company is focused on providing a seamless global network providing a
  variety of voice, data, and content distribution services which has been
  specifically designed to meet the specialized requirements of the financial
  services industry.  All of our revenue is derived from our global network.  All
  operating expenses and assets of the Company are combined and reviewed by the
  chief operating decision makers on an enterprise wide-basis, resulting in no
  additional discrete reportable segment information.
  
  Our network connects customers in 38 countries around the world and we have
  major offices in New York, London and Sydney from which we coordinate our sales
  and marketing, finance and administrative functions in North America, Europe and
  the Asia Pacific countries.   We refer to these areas as regions.  All of our
  products and services are similar in each of the regions.  We specifically
  address the needs of the financial services industry and therefore the types and
  class of customers for all products and services in each of the regions are
  similar.  The methods of providing services on our global network are similar.
  
  Enterprise wide information is provided in accordance with SFAS 131
  "Disclosures about Segments of an Enterprise and Related Information".
  Geographic sales information is based on the currency in which the customer is
  billed. Long-lived asset information is based on the physical location of the
  assets. The following is revenue and long-lived asset information for geographic
  areas (in thousands):
  
                                           Six Months ended March 31,
                                          ----------------------------
  
                                          2000                   1999
                                          ----                   ----
  
                                             Long-Lived             Long-Lived
                                   Revenue     Assets     Revenue     Assets
                                   -------     ------     -------     ------
  North America...............     $29,736    $112,844    $18,046    $ 40,467
  Europe......................      12,628      57,652     10,011      59,909
  Asia/Pacific................       9,778       4,397      4,554       2,192
                                   -------    --------    -------    --------
                                   $52,142    $174,893    $32,611    $102,568
                                   =======    ========    =======    ========
  
  For the six months ended March 31, 2000, revenue from the United States, United
  Kingdom, and Australia represented 57.0%, 23.4%, and 9.8% of total revenue,
  respectively. For the six months ended March 31, 1999, revenue from the United
  States and the United Kingdom represented 54.0% and 28.0% of total revenue,
  respectively.
  
  As of March 31, 2000, long-lived assets located with the United States and the
  United Kingdom represented 64.5% and 31.8% of total long-lived assets,
  respectively.  As of March 31, 1999, long-lived assets located within the United
  States and the United Kingdom represented 39.5% and 58.3% of total long-lived
  assets, respectively.
  
  For the six months ended March 31, 2000, no individual customer  represented
  more than 10% of total revenue.  For the six months ended March 31, 1999, two
  customers accounted for 14.4% and 11.5% of total revenue.
  
  8.  Commitments and Contingencies:
  
    Intercompany Agreement
  
  As of July 1, 1999, the Company, IPC and IEXN entered into an intercompany
  agreement which provides, among other matters, for IPC to furnish up to $50.0
  million of credit, including the provision of letters of credit, guarantees and
  other forms of credit enhancements limited to $6.25 million per quarter,
  commencing July 1, 1999 and continuing through the quarter ending June 30, 2001.
  Outstanding notes payable on July 1, 1999 and additional amounts borrowed under
  the agreement bear interest at the Base Rate, as defined, plus 2%. Any and all
  amounts advanced by IPC which are outstanding on June 30, 2001 shall be
  immediately due and payable.
  
                                         9
  REPORT OF INDEPENDENT ACCOUNTANTS
  
  To the Stockholders of
  IXnet, Inc.:
  
     In our opinion, the accompanying consolidated and combined balance sheets and
  the related consolidated and combined statements of operations, stockholders'
  equity and cash flows present fairly, in all material respects, the financial
  position of IXnet, Inc. and its subsidiaries at September 30, 1999 and 1998, and
  the results of their operations and their cash flows for each of the three years
  in the period ended September 30, 1999 in conformity with accounting principles
  generally accepted in the United States. These financial statements are the
  responsibility of the company's management; our responsibility is to express an
  opinion on these financial statements based on our audits. We conducted our
  audits of these statements in accordance with auditing standards generally
  accepted in the United States, which 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, assessing
  the accounting principles used and significant estimates made by management, and
  evaluating the overall financial statement presentation. We believe that our
  audits provide a reasonable basis for the opinion expressed above.
  
  /S/ PricewaterhouseCoopers LLP
  
  PricewaterhouseCoopers LLP
  
  New York, New York
  November 30, 1999
  
                                        10
  IXNET, INC.
  
                      CONSOLIDATED AND COMBINED BALANCE SHEETS
                  (Amounts in thousands, except per share amount)
  September 30,
                                                             -------------------
                                                               1999       1998
                                                             ---------  --------
  ASSETS
  Current assets:
    Cash and cash equivalents............................... $  39,020  $  1,255
    Marketable securities...................................    28,357       --
    Marketable securities, restricted.......................    20,435       --
    Accounts receivable, net................................    17,824     9,844
    Prepaids and other current assets.......................     5,505     2,707
                                                             ---------  --------
      Total current assets..................................   111,141    13,806
  Property and equipment, net...............................    80,170    36,351
  Long term marketable securities, restricted...............     6,065       --
  Goodwill, net.............................................    49,773     9,023
  Other assets..............................................       889     1,152
                                                             ---------  --------
      Total assets.......................................... $ 248,038  $ 60,332
                                                             =========  ========
        LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
  
  Current liabilities:
    Accounts payable........................................ $  10,198  $  7,028
    Accrued liabilities.....................................    22,445     9,007
    Current portion of capital leases.......................     5,636     4,057
    Current portion of notes payable........................    14,502       --
                                                             ---------  --------
      Total current liabilities.............................    52,781    20,092
  Note payable to parent....................................    52,122    43,629
  Lease obligations, less current portion...................    15,412    11,570
  Notes payable, less current portion.......................     4,854       --
                                                             ---------  --------
      Total liabilities.....................................   125,169    75,291
                                                             ---------  --------
  Commitments and contingencies
  Stockholders' equity (deficit):
    Common stock--$0.01 par value, authorized 100,000
     shares;
     51,075 and 43,100 shares issued and outstanding at Sep-
     tember 30, 1999 and 1998, respectively.................       511       431
    Paid-in Capital.........................................   249,080    33,830
    Accumulated deficit.....................................  (109,176)  (49,709)
    Deferred compensation...................................   (16,797)      --
    Accumulated other comprehensive (loss) income...........      (749)      489
                                                             ---------  --------
      Total stockholders' equity (deficit)..................   122,869   (14,959)
                                                             ---------  --------
      Total liabilities and stockholders' equity (deficit).. $ 248,038  $ 60,332
                                                             =========  ========
  See Notes to Consolidated and Combined Financial Statements
  
                                        11
  IXNET, INC:
  
                 CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
                      (In thousands, except per share amounts)
  Year ended September 30,
                                                   ----------------------------
                                                     1999      1998      1997
                                                   --------  --------  --------
  Revenue......................................... $ 73,615  $ 35,853  $ 17,838
  Cost of revenue (exclusive of depreciation and
   amortization shown separately below)...........   73,097    35,652    19,823
  Sales and marketing expense.....................   13,063     8,455     4,172
  General and administrative expense..............    8,312     5,001     3,439
  Depreciation and amortization...................   21,575     9,060     3,460
  Special charge..................................      --      1,350       --
  Stock compensation charge.......................    9,079       --        --
                                                   --------  --------  --------
    Loss from operations..........................  (51,511)  (23,665)  (13,056)
  Interest expense, net...........................   (6,999)   (3,527)   (2,040)
  Other income (expense), net.....................      336        26       117
                                                   --------  --------  --------
    Loss before provision for income taxes........  (58,174)  (27,166)  (14,979)
  Provision for income taxes......................    1,293       473       229
                                                   --------  --------  --------
    Net loss...................................... $(59,467) $(27,639) $(15,208)
                                                   ========  ========  ========
  Basic and diluted loss per share................ $  (1.35) $  (0.64) $  (0.35)
                                                   ========  ========  ========
  Basic and diluted weighted average number of
   shares outstanding.............................   44,085    43,100    43,100
                                                   ========  ========  ========
  See Notes to Consolidated and Combined Financial Statements.
  
                                        12
  IXNET, INC.
  
                 CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
                           (Dollar amounts in thousands)
  Year ended September 30,
                                                    ----------------------------
                                                      1999      1998      1997
                                                    --------  --------  --------
  Cash flows from operating activities:
    Net loss....................................... $(59,467) $(27,639) $(15,208)
    Adjustments to reconcile net loss to net cash
     used in operating activities:
    Depreciation and amortization..................   15,656     6,865     3,279
    Amortization of goodwill.......................    5,919     2,195       181
    Provision for doubtful accounts................    1,693     1,674       325
    Deferred compensation charges..................    9,079       --        --
    Changes in operating assets and liabilities:
      Trade receivables............................   (6,190)   (5,957)   (3,178)
      Prepaids and other assets....................   (1,566)     (135)   (2,471)
      Accounts payable and accrued liabilities.....    5,762     7,904     2,403
                                                    --------  --------  --------
    Net cash used in operating activities..........  (29,114)  (15,093)  (14,669)
                                                    --------  --------  --------
  Cash flows from investing activities:
      Capital expenditures.........................  (24,208)  (12,930)   (3,495)
      Acquisition of Saturn, net of cash acquired..  (34,713)      --        --
      Investment in marketable securities..........  (28,357)     (842)      --
                                                    --------  --------  --------
      Net cash used in investing activities........  (87,278)  (13,772)   (3,495)
                                                    --------  --------  --------
  Cash flows from financing activities:
      Net proceeds from initial public offering....  102,775       --        --
      Financings from parent, net..................   82,792    23,476    12,887
      Capital transactions with parent.............    3,098     9,478     5,535
      Principal payments on capital leases.........   (5,214)   (3,125)   (1,818)
      Repayment of notes payable...................   (1,556)      --        --
                                                    --------  --------  --------
      Net cash provided by financing activities....  181,895    29,829    16,604
                                                    --------  --------  --------
  Effect of exchange rate changes on cash..........   (1,238)     (234)      469
                                                    --------  --------  --------
  Net increase (decrease) in cash..................   64,265       730    (1,091)
  Cash and cash equivalents, beginning of period...    1,255       525     1,616
                                                    --------  --------  --------
  Cash and cash equivalents, end of period......... $ 65,520  $  1,255  $    525
                                                    ========  ========  ========
  Cash paid during the period for interest......... $  6,118  $  3,527  $  2,040
  Non-cash investing and financing activities--
    Capital contributed by parent:
      Acquisition of remaining 20% of International
       Exchange
       Networks, Ltd............................... $    --   $  4,800  $    --
      Acquisition of MXNet Inc., net of cash
       acquired....................................      --      6,660       --
      Capitalization of note payable to parent.....   73,000       --        --
    Installment purchase of indefeasible rights of
     use...........................................      --      3,600       --
    Capital lease obligations entered into during
     the period....................................   10,284     6,414     9,685
    Deferred compensation in connection with grants
     of stock options..............................   26,382       --        --
    Purchase of software in connection with the
     strategic agreement...........................   20,000       --        --
  Acquisition of Saturn:
    Fair value of assets acquired.................. $ 58,456  $    --   $    --
    Less: Fair value of liabilities assumed and
     note issued...................................   23,743       --        --
                                                    --------  --------  --------
    Acquisition of Saturn, net of cash acquired.... $ 34,713  $    --   $    --
                                                    ========  ========  ========
  See Notes to Consolidated and Combined Financial Statements.
  
                                        13
  IXNET, INC.
  
                 CONSOLIDATED AND COMBINED STATEMENTS OF CHANGES IN
                         STOCKHOLDERS' EQUITY (DEFICIT)(1)
                                   (In thousands)
  Common Stock
                           -------------
                                         Paid-in   Accumulated   Deferred
                           Shares Amount Capital     Deficit   Compensation Subtotal(1)
                           ------ ------ --------  ----------- ------------ -----------
  Balance, September 30,
   1996................... 43,100  $431  $  7,357   $  (6,862)   $    --     $    926
    Paid-in capital.......    --    --      5,535         --          --        5,535
    Net loss..............    --    --        --      (15,208)        --      (15,208)
    Translation
     adjustment...........    --    --        --          --          --          --
                           ------  ----  --------   ---------    --------    --------
  Balance, September 30,
   1997................... 43,100   431    12,892     (22,070)        --       (8,747)
    Paid-in capital.......    --    --     20,938         --          --       20,938
    Net loss..............    --    --        --      (27,639)        --      (27,639)
    Translation
     adjustment...........    --    --        --          --          --          --
                           ------  ----  --------   ---------    --------    --------
  Balance, September 30,
   1998................... 43,100   431    33,830     (49,709)        --      (15,448)
    Issuance of common
     stock in initial
     public offering, net
     of expenses..........  7,475    75   102,775         --          --      102,850
    Issuance of common
     stock in connection
     with strategic
     agreement............    500     5     9,995         --          --       10,000
    Capitalization of note
     payable to Parent....    --    --     73,000         --          --       73,000
    Deferred stock option
     compensation.........    --    --     26,382         --      (26,382)        --
    Amortization of
     deferred
     compensation.........    --    --        --          --        9,079       9,079
    Other deferred
     compensation
     adjustments..........    --    --       (506)        --          506         --
    Capital contribution
     for IPC's utilization
     of tax benefits......    --    --      3,604         --          --        3,604
      Net loss............    --    --        --      (59,467)        --      (59,467)
      Translation
       adjustment.........    --    --        --          --          --          --
                           ------  ----  --------   ---------    --------    --------
  Balance, September 30,
   1999................... 51,075  $511  $249,080   $(109,176)   $(16,797)   $123,618
                           ======  ====  ========   =========    ========    ========
  --------
  (1) The Consolidated and Combined Statements of Changes in Stockholders' Equity
      (Deficit) continues on page 15.
  
             See Notes to Consolidated and Combined Financial Statements.
  
                                        14
  IXNET, INC.
  
                  CONSOLIDATED AND COMBINED STATEMENTS OF CHANGES
                         IN STOCKHOLDERS' EQUITY (DEFICIT)
                                   (In thousands)
  Accumulated
                                                 Other
                                             Comprehensive           Comprehensive
                                 Subtotal(1) Income (Loss)  Total        Loss
                                 ----------- ------------- --------  -------------
  Balance, September 30, 1996..   $    926      $   (36)   $    890         --
      Paid-in capital..........      5,535          --        5,535         --
      Net loss.................    (15,208)         --      (15,208)   $(15,208)
      Translation adjustment...        --           202         202         202
                                  --------      -------    --------    --------
        Total comprehensive
         loss..................                                        $(15,006)
                                                                       ========
  Balance, September 30, 1997..     (8,747)         166      (8,581)        --
      Paid-in capital..........     20,938          --       20,938         --
      Net loss.................    (27,639)         --      (27,639)   $(27,639)
      Translation adjustment...        --           323         323         323
                                  --------      -------    --------    --------
        Total comprehensive
         loss..................                                        $(27,316)
                                                                       ========
  Balance, September 30, 1998..    (15,448)         489     (14,959)
    Issuance of common stock in
     initial public offering,
     net of expenses...........    102,850          --      102,850         --
    Issuance of common stock in
     connection with strategic
     agreement.................     10,000          --       10,000         --
    Capitalization of note
     payable to Parent.........     73,000          --       73,000         --
    Deferred stock option
     compensation..............        --           --          --          --
    Amortization of deferred
     compensation..............      9,079          --        9,079         --
    Other deferred compensation
     adjustments...............        --           --          --          --
    Capital contribution for
     IPC's utilization of tax
     benefits..................      3,604          --        3,604         --
      Net loss.................    (59,467)         --      (59,467)   $(59,467)
      Translation adjustment...        --        (1,238)     (1,238)     (1,238)
                                  --------      -------    --------    --------
        Total comprehensive
         loss..................                                        $(60,705)
                                                                       ========
  Balance, September 30, 1999..   $123,618      $  (749)   $122,869
                                  ========      =======    ========
  --------
  (1) The Consolidated and Combined Statements of Changes in Stockholders' Equity
      (Deficit) is continued from page 14.
  
             See Notes to Consolidated and Combined Financial Statements.
  
                                        15
  IXNET, INC.
  
              NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
  
  1. Background and Basis of Presentation:
  
     IXnet, Inc. ("IXnet" or the "Company") provides communications services
  tailored to the specialized needs of the worldwide financial services
  community. The Company established and operates an extranet, a global network
  connecting members of the financial services community as well as multiple
  offices within the same firm. The Company's services include globally available
  services including managed voice and data services, switched voice
  communications and content hosting and distribution of news, research,
  analytics and market data.
  
     The Company completed an initial public offering (the "Offering") of
  6,500,000 shares of common stock at $15 per share on August 12, 1999. On August
  30, 1999, the underwriters exercised their over-allotment option and purchased
  an additional 975,000 shares of common stock at $15 per share. In connection
  with the Offering, IXnet was incorporated in Delaware on May 4, 1999, as a
  wholly owned subsidiary of IPC Information Systems, Inc. ("IPC") with 2,000
  shares of common stock, par value $0.01 per share, authorized, and 1,000 shares
  issued to IPC. Effective July 1, 1999 the Company amended its certificate of
  incorporation to increase its authorized shares to 100,000,000. On June 30,
  1999, the Company declared a 43,100 for one stock split effective July 1, 1999,
  resulting in 43,100,000 shares issued and outstanding.
  
     On May 4, 1999, IPC contributed 100% of the outstanding common stock of
  International Exchange Networks, Ltd. ("IEXN") to the Company.
  
     IEXN was incorporated in Delaware on March 8, 1993, with 10,000 shares of
  common stock, par value $0.01 per share, authorized. On June 23, 1995, IPC
  acquired 2,280 shares of IEXN (80% of the outstanding common stock after the
  acquisition) and acquired the remaining 560 shares outstanding on April 30,
  1998. On March 31, 1999, IPC contributed $73.0 million of IEXN's then
  outstanding note payable to IPC into IEXN's paid-in capital.
  
     MXNet Inc. ("MXNet") was incorporated in Delaware on May 24, 1996, as a
  wholly owned subsidiary of National Discount Brokers Group, Inc. with 3,000
  shares of common stock, par value $0.01 per share, authorized. On February 13,
  1998, IPC acquired the outstanding common stock of MXNet which was contributed
  to IEXN in May 1999.
  
     The financial statements present the consolidated financial position,
  results of operations, changes in stockholder's (deficit) equity and cash flows
  of IEXN and its subsidiaries combined with the financial position, results of
  operations, changes in stockholder's deficit and cash flows of MXNet as of and
  for the periods that they were under common control. Additionally, the
  financial statements present the issued and outstanding shares of IXnet as if
  they had been in place for all periods presented. The financial statements
  include certain corporate expenses (see Note 11) incurred by IPC that have been
  charged to the Company on a direct or allocated basis. Management believes
  these allocations are reasonable.
  
  2. Summary of Significant Accounting Policies:
  
   Principles of Consolidation and Combination
  
     The consolidated financial statements as of and for the year ended September
  30, 1999 include the accounts of IXnet and its consolidated subsidiaries. The
  financial statements as of September 30, 1998 combine the historical financial
  information of IEXN and its consolidated subsidiaries with the historical
  financial information of MXNet from the date of its acquisition. Intercompany
  balances and transactions within and between IEXN and MXNet have been
  eliminated. The financial statements for the year ended September 30, 1997,
  include the historical financial information of IEXN and its consolidated
  subsidiaries.
  
                                        16
  IXNET, INC.
  
        NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)
  
   Cash and Cash Equivalents
  
     The Company places cash with high-credit quality financial institutions.
  Temporary cash investments with original maturities of three months or less are
  considered cash equivalents. Temporary cash investments are stated at cost,
  which approximates fair value. These investments are not subject to significant
  market risk.
  
   Marketable Securities
  
     Marketable securities consist of investments in short term government grade
  commercial paper with maturities less than 1 year. Such securities are
  classified as available for sale and, accordingly, are carried at fair value,
  which approximates cost at September 30, 1999. The amortized cost of debt
  securities is adjusted for amortization of premium and accretion of discounts
  to maturity. Amortization of purchase premiums or accretion of discounts and
  realized gains and losses are included in interest income.
  
     On September 24, 1999, the Company entered into a strategic agreement
  including the licensing of certain software products to enhance the
  intelligence of the network. The purchase price included $10.0 million in cash
  to be paid in installments over six months beginning on October 30, 1999.
  Separately, the Company also entered into agreements to purchase indefeasible
  rights of use ("IRU's") over the next three years in an aggregate amount of
  $16.5 million. In accordance with an amendment to IPC's credit agreement
  revised in connection with the strategic agreement, these amounts are invested
  in marketable securities dedicated to satisfy these commitments.
  
   Accounts Receivable
  
     Accounts receivable relate to the billing of communication services and are
  net of allowance for doubtful accounts of $2.1 million and $0.6 million for the
  year ended September 30, 1999 and 1998, respectively.
  
   Revenue Recognition
  
     Revenues are billed and recognized monthly based on flat-rate monthly
  charges. Installation revenue is deferred and recognized ratably over the
  average contract term. Bandwidth and switched voice charges are billed and
  recognized monthly based on customer usage.
  
   Property and Equipment
  
     Property and equipment are stated at cost and depreciated or amortized on a
  straight-line basis over their estimated useful lives or related contract
  terms, beginning in the year the asset is placed into service. Direct costs
  related to the installation of network equipment are capitalized and
  depreciated over the life of the asset.
  
   Goodwill
  
     Goodwill represents the excess of the purchase price over the fair value of
  the identifiable net assets acquired in purchase acquisitions. Goodwill is
  amortized on a straight-line basis over the periods benefited. Goodwill
  includes the related amounts recorded in connection with IPC's acquisitions of
  IEXN and MXNet and IXnet's acquisition of Saturn. The Company assesses whether
  its goodwill is impaired as required by SFAS 121, "Accounting for the
  Impairment of Long Lived Assets and for Long Lived Assets to be Disposed of".
  
                                        17
  IXNET, INC.
  
        NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)
  
   Comprehensive Loss
  
     Effective October 1, 1998, the Company adopted SFAS No. 130, "Reporting
  Comprehensive Income." This statement requires the Company to include within
  its financial statements information on comprehensive income, which is defined
  as all activity impacting equity from non-owner sources. Comprehensive loss
  includes the Company's net loss and foreign currency translation adjustments.
  The tax effect and reclassifications were not significant.
  
   Income Taxes
  
     The Company recognizes deferred income taxes for the tax consequences in
  future years of differences between the tax bases of assets and liabilities and
  the financial reporting amounts at each year end, based on enacted tax laws and
  statutory tax rates applicable to the periods in which the differences are
  expected to affect taxable income. Valuation allowances are established when
  necessary to reduce deferred tax assets to the amount that is more likely than
  not to be realized. The provision for income taxes is the tax payable for the
  period and the change during the period in deferred tax assets and liabilities.
  
     The Company is included in the consolidated federal income tax return of IPC
  and computes its federal income tax provision on a separate return basis. Under
  the tax sharing arrangement with its parent, the Company is reimbursed for the
  benefit derived from inclusion of its tax losses in the consolidated federal
  income tax return. Any difference between the amount of the federal income tax
  provision or benefit determined on a separate return basis and the amount
  received under the tax sharing arrangement is treated as a contribution to
  paid-in capital.
  
   Use of Estimates
  
     The preparation of financial statements in conformity with generally
  accepted accounting principles requires management to make estimates and
  assumptions that affect the reported amounts of assets and liabilities and the
  disclosure of contingent assets and liabilities at the date of the financial
  statements and the amounts of revenues and expenses during the period reported.
  Actual results could differ from those estimates.
  
   Segment Information
  
     In 1999, the Company adopted Statement of Financial Accounting Standards
  (SFAS) 131, "Disclosures about Segments of an Enterprise and Related
  Information". SFAS 131 supersedes SFAS 14, "Financial Reporting for Segments of
  a Business Enterprise", replacing the "industry" segment approach with the
  "management" approach. The management approach designates the internal
  organization that is used by management for making operating decisions and
  assessing performance as the source of the Company's reportable segments. SFAS
  131 also requires disclosures about products and services, geographic areas and
  major customers. The adoption of SFAS 131 did not effect the Company's results
  of operations or financial position.
  
   Foreign Currency Translation Adjustment
  
     The balance sheets and statements of operations of the Company's foreign
  operations are recorded using the local currency as the functional currency.
  Assets and liabilities of these foreign operations are translated at the year-
  end exchange rates and revenue and expense amounts are translated at the
  average rates of exchange prevailing during the periods reported. Translation
  adjustments arising from the use of differing exchange rates from period to
  period are included in the cumulative translation adjustment account in
  stockholders' equity (deficit).
  
                                        18
  IXNET, INC.
  
        NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)
  
   Earnings Per Share
  
     Basic loss per share is computed using the weighted average number of common
  shares outstanding during the year. Diluted loss per share is computed using
  the weighted average number of shares of common stock adjusted for the dilutive
  effect of common stock equivalent shares of common stock options. Common stock
  equivalent shares are calculated using the treasury stock method. All stock
  options outstanding have been excluded from the computation of diluted loss per
  share as their effect would be antidilutive. Accordingly, there is no
  difference between basic and diluted EPS.
  
  3. Effects of Recently Issued Accounting Standards
  
     In June 1998, the Financial Accounting Standards Board issued SFAS 133,
  "Accounting for Derivatives and Hedging Activities," which establishes
  accounting and reporting standards for derivative instruments and hedging
  activities. The effective date of this standard was deferred to all fiscal
  quarters of fiscal years beginning after June 15, 2000 by SFAS 137, "Accounting
  for Derivative Instruments and Hedging Activities--Deferral of the Effective
  Date of FASB Statement No. 133", which was issued on June 30, 1999. Management
  does not believe the adoption of this standard will have a material impact on
  the Company's operations.
  
     In March 1998, the American Institute of Certified Public Accountants issued
  Statement of Position 98-1, "Accounting for the Cost of Computer Software
  Developed or Obtained for Internal Use." SOP 98-1 is effective for financial
  statements for fiscal years beginning after December 15, 1998. The Company does
  not anticipate the adoption of the standard to have a material effect on its
  financial position, results of operations or cash flows.
  
  4. Acquisitions and Strategic Agreement:
  
   IEXN
  
     During June 1995, IPC acquired an 80% interest in IEXN for $5.5 million in
  cash. The acquisition was accounted for using the purchase method of accounting
  and resulted in $1.3 million of goodwill. Under the initial acquisition
  agreement, the Company is obligated to pay additional consideration to former
  shareholders using a formula based upon operating results and market
  capitalization through fiscal 2000. Based upon data as of September 30, 1999,
  the Company's obligation calculated under this agreement is not material. On
  April 30, 1998, IPC acquired the remaining 20% interest in IEXN held by two
  management shareholders in exchange for 457,140 shares of IPC common stock,
  valued at $4.8 million based upon the IPC closing share price on that date. The
  acquisition of the remaining interest was accounted for using the purchase
  method of accounting and resulted in $4.8 million of goodwill is being
  amortized over seven years from the date of the original acquisition.
  
   MXNet
  
     In February 1998, IPC acquired, by the issuance of a promissory note in the
  amount of $6.7 million, all of the issued and outstanding common stock of
  MXNet, a wholly owned subsidiary of National Discount Brokers Group, Inc. The
  promissory note plus accrued interest was paid on April 8, 1998. This
  acquisition was accounted for using the purchase method of accounting and
  resulted in $5.5 million of goodwill. MXNet goodwill is being amortized over
  2.25 years from the date of acquisition.
  
                                        19
  IXNET, INC.
  
        NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)
  
     The following unaudited pro forma statement of operations data for the years
  ended September 30, 1998 and 1997, gives effect to the acquisition of MXNet as
  if it had occurred on October 1, 1997 and 1996, respectively (in thousands):
  Year ended
                                                                September 30,
                                                              ------------------
                                                                1998      1997
                                                              --------  --------
  Revenue.............................................. $ 36,386  $ 18,663
        Loss before provision for income taxes............... $(28,669) $(18,804)
  Pro forma adjustments include: (i) financial results of MXNet for the year
  ended September 30, 1997; (ii) financial results of MXNet from October 1, 1997
  to the date of acquisition; and (iii) amortization of goodwill over 2.25 years.
  The pro forma financial information presented above is not necessarily
  indicative of the operating results which would have been achieved had the
  acquisition occurred at October 1, 1996 or 1997, or of the results to be
  achieved thereafter.
  
  Saturn Global Network Services Holdings Ltd.
  
     On December 18, 1998, the Company acquired all of the issued and outstanding
  common shares of Saturn Global Network Services Holdings Limited ("Saturn")
  from Marshalls 106 Limited ("Marshalls"). The purchase price included the
  payment of cash in the amount of $35.7 million (paid by the Company through
  borrowings from IPC) and the issuance by the Company of a promissory note,
  guaranteed by IPC, in the amount of $7.5 million bearing interest at the UK
  Sterling Base Rate, as defined, plus three percent and payable over three years
  (the "Marshalls Note"). In addition, the Company assumed indebtedness of Saturn
  due to Marshalls in the amount of $5.0 million payable over 24 months with
  interest at 9.25% (the "Saturn Note"). Under this agreement, the Marshalls note
  is subject to a working capital adjustment and right of offset. The working
  capital adjustment was settled in June 1999 resulting in a reduction of our
  obligation by approximately $2.0 million. These notes, including interest, is
  payable in the amounts of $4.7 million, $3.2 million and $2.4 million in 2000,
  2001 and 2002, respectively.
  
     Saturn, a UK holding company, owns telecommunication network operating
  subsidiaries in the United Kingdom, USA, Hong Kong, Australia, Japan and
  Singapore. It has an established business of selling managed premium grade
  voice and data communication services to the financial community. The
  acquisition was accounted for using the purchase method of accounting and
  resulted in $49.2 million of goodwill. Saturn goodwill is being amortized over
  10 years from the date of the original acquisition.
  
     The following unaudited pro forma statement of operations data for the years
  ended September 30, 1999 and 1998 gives effect to the Saturn acquisition as if
  it had occurred on October 1, 1998 and 1997, respectively (in thousands):
  Year ended
                                                                September 30,
                                                              ------------------
                                                                1999      1998
                                                              --------  --------
  Revenue.............................................. $ 78,414  $ 61,171
        Loss before provision for income taxes............... $(60,686) $(37,834)
  Pro forma adjustments include: (i) amortization of goodwill over 10 years;
  (ii) interest expense on the Saturn Note and the Marshalls Note; and (iii)
  interest expense on borrowings from IPC at a US bank prime rate plus two
  percent. The pro forma financial information presented above is not necessarily
  indicative of the operating results which would have been achieved had the
  acquisition occurred at October 1, 1998 or 1997, or of the results to be
  achieved thereafter.
  
                                        20
  IXNET, INC.
  
        NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)
  
   Strategic Agreement
  
     On September 24, 1999, IXnet entered into a $20 million strategic agreement,
  including the licensing of certain software products to enhance the
  intelligence of the network, for a purchase price consisting of $10.0 million
  in cash, payable within the next twelve months, and 500,000 shares of
  restricted IXnet common stock valued at an average closing price prior to the
  agreement date. The strategic agreement is intended to create a unique network
  infrastructure with embedded intelligence, delivering financial enterprise
  integration, subject-based addressing, trading turret integration and
  application management capabilities.
  
  5. IPC Merger and Special Charge:
  
     On April 30, 1998, Arizona Acquisition Corp. was merged into IPC (the
  "Merger"). In connection with the Merger, IPC issued $247.4 million aggregate
  principal amount at maturity of 10 7/8% Senior Discount Notes due 2008 (the
  "Notes"). The Notes were issued under an indenture between IPC, as issuer, and
  United States Trust Company of New York, as trustee.
  
     The indenture contains various covenants and conditions which impose
  limitations on IPC and its subsidiaries (including IXnet), including, (i)
  indebtedness, (ii) restricted payments, (iii) dividends, (iv) issuance and sale
  of capital stock of subsidiaries, (v) issuance of guarantees by subsidiaries,
  (vi) certain transactions with shareholders and affiliates, (vii) liens, (viii)
  sale-leaseback transactions, (ix) asset sales, and (x) maintaining various
  financial ratios.
  
     In connection with the Merger, IEXN incurred a special charge for bonuses
  and the cancellation of IPC stock options of $1.4 million.
  
  6. Property and Equipment:
  
     Property and equipment is comprised of the following (in thousands):
  September 30,
                                                                 ----------------
                                                    Useful Lives   1999    1998
                                                    ------------ -------- -------
  Network equipment............................. 2 to 5 years $ 39,700 $15,907
     Network equipment under capital leases........      5 years   28,637  20,717
     Indefeasible rights of use....................     IRU term    6,571   4,448
     Network software..............................      3 years   21,485     --
     Office equipment and furniture................      5 years    6,227   3,871
     Leasehold improvements........................   Lease term    2,524   2,127
                                                                 -------- -------
       Total depreciable property and equipment....               105,144  47,070
       Less accumulated depreciation and
        amortization...............................                24,974  10,719
                                                                 -------- -------
                                                                 $ 80,170 $36,351
                                                                 ======== =======
  Included in accumulated depreciation and amortization at September 30, 1999
  and 1998, was $10.8 million and $5.8 million, respectively, representing
  accumulated depreciation of network equipment under capital leases.
  
                                        21
  IXNET, INC.
  
        NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)
  
  7. Benefit Plans:
  
   Pension Plans
  
     The Company participates in IPC's defined contribution plan covering all
  eligible US employees. According to plan provisions, IPC contributions are
  discretionary and are subject to approval by IPC's board of directors. Eligible
  employees may contribute 15% of their compensation up to $10,000 annually. The
  Company contributed $184,519, $103,000 and $48,000 to the plan on behalf of the
  Company's employees for the years ended September 30, 1999, 1998 and 1997.
  
   IPC's Stock Option and Incentive Plans
  
     Under IPC's 1994 Stock Option and Incentive Plan, 1998 Stock Option Plan,
  and 1999 Incentive Stock Option Plan certain employees of the Company received
  grants of stock options.
  
     A summary of IPC's stock option plan and changes related to employees of the
  Company as of September 30, 1999, 1998, and 1997, and for the years then ended
  is presented below.
  Weighted
                                                                          Average
                                                                 Option   Exercise
                                                                 Shares    Price
                                                                --------  --------
  Outstanding at September 30, 1996............................  231,000   $ 7.93
    Options granted............................................  186,000   $ 7.25
    Options forfeited..........................................  (53,334)  $ 7.53
    Options exercised..........................................  (26,666)  $ 6.83
                                                                --------   ------
  Outstanding at September 30, 1997............................  337,000   $ 7.71
    Options forfeited..........................................   (4,002)  $ 7.63
    Options exercised..........................................   (4,998)  $ 8.00
    Options exercised and retired at merger.................... (328,000)  $ 7.70
    Options granted (1998 Option Plan).........................  401,734   $10.50
                                                                --------   ------
  Outstanding at September 30, 1998............................  401,734   $10.50
    Options forfeited..........................................  (22,868)  $10.50
    Options exercised.......................................... (160,300)  $10.50
    Options granted............................................  195,146   $10.50
                                                                --------   ------
  Outstanding at September 30, 1999............................  413,712   $10.50
                                                                ========   ======
  There were 413,712, 0, and 53,445 options exercisable at September 30, 1999,
  1998 and 1997, respectively. The weighted average fair value per share of
  options granted was $10.50, $4.10, $3.31 for the years ended September 30,
  1999, 1998 and 1997, respectively. The weighted average contractual life of
  stock options outstanding at September 30, 1999 was 9.1 years.
  
     In connection with the Merger, IPC terminated the 1994 Option Plan and
  replaced it with the 1998 Option Plan. Under the 1998 Option Plan, employees
  generally vest in stock options over a five-year period, subject to certain
  accelerated vesting provisions based on IPC common stock achieving specified
  fair market levels for specified periods. Such fair market levels have been met
  and accordingly, all options are vested and exercisable.
  
                                        22
  IXNET, INC.
  
       NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)
  
   IXnet 1999 Stock Option Plan
  
     During May 1999, IXnet's Board of Directors and IPC approved the 1999 Stock
  Option Plan, authorizing the grant of options to purchase up to 7,053,409
  shares of the Company's common stock. At that time, options to purchase
  6,530,184 shares were granted to employees, directors and others at an
  exercise price of $13.96 per share. Except for 1,763,352 options granted to
  the Chief Executive Officer which vested immediately, such options vest over
  four years. Options become exercisable, to the extent then vested, 30 months
  from the date of grant.
  
     In connection with the issuance of stock options under the Plan, the
  Company recorded deferred compensation in the aggregate amount of
  approximately $26.4 million based upon the deemed fair market value for
  accounting purposes of IXnet's common stock at the date of grant. For the year
  ended September 30, 1999, $9.1 million of the deferred compensation was
  included as expense. The remaining balance will be amortized over the
  remaining vesting period of the options. In addition, certain of these options
  are treated as variable options for accounting purposes and may result in
  additional deferred compensation expense in future periods.
  
     A summary of IXnet's stock option plan from the initial issuance to
  September 30, 1999 is as follows:
  Option    Weighted Average
                                                        Shares     Exercise Price
                                                       ---------  ----------------
  Beginning Balance............................. 6,530,184       $13.96
        Options granted...............................   489,764       $16.04
        Options forfeited.............................  (193,919)      $13.98
                                                       ---------       ------
        Outstanding at September 30, 1999............. 6,826,029       $14.11
                                                       =========       ======
  Stock-Based Compensation
  
     IXnet applies Accounting Principles Board Opinion No. 25, "Accounting for
  Stock Issued to Employees" and related interpretations in accounting for its
  stock based compensation plans. Accordingly, no compensation expense has been
  recognized for the 1994 or 1998 IPC Option Plan. The Company has adopted the
  disclosure-only provisions of SFAS 123, "Accounting for Stock-Based
  Compensation". In connection with the IPC Merger, the Company recognized
  compensation expense in the amount of $875,000 in the year ended September 30,
  1998, representing payments to IXnet option holders upon cancellation of their
  IPC stock options. Had compensation expense for employees of the Company
  receiving stock options under IXnet's 1999 Stock Option Plan, IPC's 1998 Stock
  Option Plan and IPC's 1994 Option Plan been determined based on the fair value
  at the grant date for awards under these plans in the years ended September
  30, 1999, 1998, and 1997 respectively, consistent with the provisions of SFAS
  123, the Company's net loss would have been increased to the pro forma amounts
  indicated below (in thousands):
  Year ended September 30,
                                                   ----------------------------
                                                     1999      1998      1997
                                                   --------  --------  --------
  Net loss--as reported...................... $(59,467) $(27,639) $(15,208)
       Net loss--pro forma........................ $(63,076) $(28,114) $(15,859)
       Basic and diluted loss per share--as
        reported.................................. $  (1.35) $  (0.64) $  (0.35)
       Basic and diluted loss per share--pro
        forma..................................... $  (1.43) $  (0.65) $  (0.37)
  The fair value of each option grant is estimated on the date of the grant
  using the Black-Scholes Option-Pricing Model with the following weighted
  average assumptions used for grants for the years ended
  
                                        23
  IXNET, INC.
  
        NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)
  
  September 30, 1999, 1998 and 1997, respectively: zero dividend yield and
  expected volatility of 0.3%, 0.5% and 0.5%; weighted average risk-free interest
  rate of 6.0%, 5.61% and 6.01%; and expected lives of 4, 3 and 4 years.
  
  8. Supplemental Financial Data:
  
     Prepaids and other current assets include the following (in thousands):
  September 30,
                                                                    -------------
                                                                     1999   1998
                                                                    ------ ------
  Value added tax recoverable................................ $3,349 $1,211
        Prepaid telecommunication transport lines and circuits.....    --     376
        Deposits...................................................    --     750
        Other receivables..........................................    590    --
        Other......................................................  1,566    370
                                                                    ------ ------
                                                                    $5,505 $2,707
                                                                    ====== ======
  Accounts payable include the following (in thousands):
  September 30,
                                                                    --------------
                                                                     1999    1998
                                                                    ------- ------
  Installment purchase of IRU................................ $   --  $3,600
        Trade accounts payable.....................................  10,198  3,428
                                                                    ------- ------
                                                                    $10,198 $7,028
                                                                    ======= ======
  Accrued liabilities include the following (in thousands):
  September 30,
                                                                    --------------
                                                                     1999    1998
                                                                    ------- ------
  Carrier costs.............................................. $12,351 $3,815
        Compensation and benefits..................................   3,463  2,206
        Deferred revenue...........................................   2,695    615
        Other......................................................   3,936  2,371
                                                                    ------- ------
                                                                    $22,445 $9,007
                                                                    ======= ======
  9. IPC's Revolving Credit Facility:
  
     On June 21, 1999, IPC amended and restated its $55.0 million Revolving
  Credit Facility to provide for a Working Capital Facility of $45.0 million and
  a $20.0 million Term Loan. In addition, certain terms relating to eligibility
  of receivables used in determining the amount available under the Working
  Capital Facility were changed to increase the availability. The amendment and
  restatement also provided for a pledge by IPC Communications of IPC common
  stock and a pledge by IPC of IXnet common stock and certain additional
  financial covenants including a leverage ratio and fixed charge ratio. All of
  the Company's real and personal property will continue to be pledged as
  collateral and the Company and its subsidiaries will continue to be guarantors
  under IPC's revolving credit agreement. The $20.0 million Term Loan is
  repayable in quarterly installments of $1.3 million, commencing September 30,
  1999 and bears interest at LIBOR plus 2.75% or at the Base Rate plus 1.75% at
  IPC's option. IPC's credit agreement, which provides for both the Working
  Capital Facility and the Term Loan, matures on April 30, 2003.
  
                                        24
  IXNET, INC.
  
        NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)
  
  10. Commitments and Contingencies:
  
   Leases
  
     The Company has entered into various operating leases for real estate,
  equipment, and telecommunication transport lines and circuits and has entered
  into capital lease agreements for certain network equipment.
  
     Future minimum lease payments required under noncancellable capital and
  operating leases at September 30, 1999 are as follows (in thousands):
  Capital Operating
        Fiscal                                                 Leases   Leases
        ------                                                 ------- ---------
  2000.................................................. $ 7,608 $ 24,154
        2001..................................................   7,322    5,438
        2002..................................................   5,184    4,268
        2003..................................................   3,414    3,853
        2004..................................................   1,525    3,813
        Thereafter............................................     --     2,142
                                                               -------  -------
        Total................................................. $25,053  $43,668
                                                                        =======
        Less, amounts representing interest...................   4,005
                                                               -------
        Net present value of minimum lease payments under
         capital leases....................................... $21,048
                                                               =======
  Expenses under operating leases were $17.1 million, $13.3 million, and $8.3
  million for the years ended September 30, 1999, 1998, and 1997 respectively.
  
   Indefeasible Rights of Use
  
     The Company may enter into IRU agreements for participation in international
  cable systems. Commitments under these agreements are payable as follows (in
  thousands):
  Fiscal
           ------
  2000........................................... $10,435
           2001...........................................   5,202
           2002...........................................     863
                                                           -------
                                                           $16,500
                                                           =======
  Intercompany Agreement
  
     As of July 1, 1999, the Company, IPC and IEXN entered into an intercompany
  agreement which provides, among other matters, for IPC to furnish up to $50.0
  million of credit, including the provision of letters of credit, guarantees and
  other forms of credit enhancements limited to $6.25 million per quarter,
  commencing July 1, 1999 and continuing through the quarter ending June 30,
  2001. Outstanding notes payable on July 1, 1999 and additional amounts borrowed
  under the agreement bear interest at the Base Rate, as defined, plus 2%. Any
  and all amounts advanced by IPC which are outstanding on June 30, 2001 shall be
  immediately due and payable.
  
                                        25
  IXNET, INC.
  
        NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)
  
     The amount due IPC at September 30, 1999 and 1998, respectively, was $52.1
  million and $43.6 million. For the quarter ended September 30, 1999, the $6.25
  million limitation had been exceeded representing a delay in reimbursement of a
  fourth quarter funding by IPC, the transfer of a UK VAT receivable from IPC to
  the Company and interest expense on the outstanding amounts. The amounts were
  subsequently reimbursed and the balances are now consistent with the
  intercompany agreement.
  
   Employment Agreements
  
     The Company has executed employment contracts with certain senior executives
  for future services that vary in length up to 5 years, for which the Company
  has a minimum commitment aggregating $8.6 million at September 30, 1999.
  
  11. Transactions with IPC:
  
     IPC provided certain corporate functions on behalf of IXnet (relating to
  accounting, executive management, legal, administrative, human resources,
  information systems, insurance and other corporate functions). These expenses
  have been allocated to IXnet based on its direct and indirect utilization of
  specific services. Indirect expenses were allocated based on IXnet's headcount
  in proportion to combined IXnet and IPC headcount. Included in general and
  administrative expenses were corporate allocations of $1.8 million, $1.5
  million, and $0.9 million for the years ended September 30, 1999, 1998 and
  1997, respectively. Management believes these allocations are reasonable.
  Amounts due IPC for these expenses are included in note payable to parent.
  
     The note payable to parent includes net cash advances, payments of third-
  party liabilities on behalf of IXnet and amounts due for direct and indirect
  services performed by IPC, offset in part by tax benefits related to IXnet
  which were utilized by IPC in its consolidated tax return. Interest expense in
  the amounts of $5.1 million, $2.2 million, and $1.1 million for the years ended
  September 30, 1999, 1998 and 1997, respectively, was charged based on a U.S.
  bank prime rate plus two percent on the average net amount outstanding each
  month. In addition, the Company uses IPC technicians to install certain network
  equipment. Costs incurred for these technicians for the years ended September
  30, 1999, 1998 and 1997 were $1.9 million, $325,000 and $250,000, respectively.
  
     IXnet provides domestic and international long distance telecommunications
  services to IPC as well as private line services between IPC's domestic
  locations. Amounts charged to IPC were $155,000, $170,000 and $165,000 for the
  years ended September 30, 1999, 1998 and 1997, respectively.
  
  12. Income Taxes:
  
     Pre tax earnings consisted of the following (in thousands):
  Year ended September 30,
                                                     ----------------------------
                                                       1999      1998      1997
                                                     --------  --------  --------
  United States............................... $(55,768) $(28,218) $(15,425)
        Foreign.....................................   (2,406)    1,052       446
                                                     --------  --------  --------
        Total pretax earnings....................... $(58,174) $(27,166) $(14,979)
                                                     ========  ========  ========
  26
  IXNET, INC.
  
        NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)
  
     The provision for income taxes consisted of the following (in thousands):
  Year ended
                                                                  September 30,
                                                                ------------------
                                                                 1999  1998  1997
                                                                ------ ----- -----
  Current:
          Federal.............................................. $  --  $ --  $ --
          State and local......................................    --    --    --
          Foreign..............................................  1,149   358   --
                                                                ------ ----- -----
                                                                $1,149 $ 358 $ --
                                                                ====== ===== =====
        Deferred:
          Federal.............................................. $  --  $ --  $ --
          State and local......................................    --    --    --
          Foreign..............................................    144   115   229
                                                                ------ ----- -----
                                                                   144   115   229
                                                                ------ ----- -----
        Income tax provision................................... $1,293 $ 473 $ 229
                                                                ====== ===== =====
  The components of net deferred tax liabilities are as follows (in
  thousands):
  September 30,
                           ------------------------------------------------------------------------
                                         1999                                 1998
                           -----------------------------------  -----------------------------------
                           Federal    State   Foreign  Total    Federal    State   Foreign  Total
                           --------  -------  ------- --------  --------  -------  ------- --------
  Deferred tax assets:
   Amortization of
    intangibles........... $  3,343  $   544   $ --   $  3,887  $    481  $    80   $ --   $    561
   Accounts receivable....      --       --      --        --        217       36     --        253
   Accrued expenses.......      398       65     --        463       477       80     --        557
   Net operating loss.....   33,300    5,421     --     38,721    17,512    2,927     --     20,439
                           --------  -------   -----  --------  --------  -------   -----  --------
     Total deferred tax
      assets..............   37,041    6,030     --     43,071    18,687    3,123     --     21,810
  Deferred tax
   liabilities:
   Excess tax over book
    depreciation..........    1,701      367     550     2,618     1,402      234     406     2,042
                           --------  -------   -----  --------  --------  -------   -----  --------
   Net deferred tax
    (liability) asset.....   35,340    5,663    (550)   40,453    17,285    2,889    (406)   19,768
     Less valuation
      allowance...........  (35,340)  (5,663)    --    (41,003)  (17,285)  (2,889)    --    (20,174)
                           --------  -------   -----  --------  --------  -------   -----  --------
     Net deferred tax
      liability........... $    --   $   --    $(550) $   (550) $    --   $   --    $(406) $  (406)
                           ========  =======   =====  ========  ========  =======   =====  ========
  The Company is included in the IPC consolidated federal income tax return
  and the benefits of their net operating losses have been realized on such
  return. Amounts received from IPC related to these benefits have been recorded
  as capital contributions. Future income tax benefits from operating losses and
  temporary timing differences will be recognized to the extent they would be
  realized on a separate return basis.
  
     The following table summarizes the significant differences between the U.S.
  federal statutory income tax rate and the Company's effective tax rate for
  financial statement purposes.
  Year ended September 30,
                                                 ------------------------------
                                                   1999       1998       1997
                                                 --------   --------   --------
  U.S. federal statutory income tax rate..     (35.0)%    (35.0)%    (35.0)%
       State and local taxes, net of federal
        income tax effect......................      (5.9)      (5.9)      (5.9)
       Change in valuation allowance...........      35.8       41.2       41.3
       Other...................................       2.9        1.4        1.1
                                                 --------   --------   --------
                                                      2.2%       1.7%       1.5%
                                                 ========   ========   ========
  27
  IXNET, INC.
  
        NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)
  
  13. Disclosures about Segments of an Enterprise and Related Information
  
     The Company is focused on providing a seamless global network providing a
  variety of voice, data, and content distribution services which has been
  specifically designed to meet the specialized requirements of the financial
  services industry. All of our revenue is derived from our global network. All
  operating expenses and assets of the Company are combined and reviewed by the
  chief operating decision makers on an enterprise wide-basis, resulting in no
  additional discrete financial information or reportable segment information.
  
     Our network connects customers in 37 countries around the world and we have
  major offices in New York, London and Sydney from which we coordinate our sales
  and marketing, finance and administrative functions in North America, Europe
  and the Asia Pacific countries. We refer to these areas as regions. All of our
  products and services are similar in each of the regions. We specifically
  address the needs of the financial services industry and therefore the types
  and class of customers for all products and services in each of the regions are
  similar. The methods of providing services on our global network are similar.
  
     Enterprise wide information is provided in accordance with SFAS 131
  "Disclosures about Segments of an Enterprise and Related Information"
  Geographic sales information is based on the currency in which the customer is
  billed. Long-lived asset information is based on the physical location of the
  assets. The following is revenue and long-lived asset information for
  geographic areas (in thousands):
  Year ended September 30,
                                  ------------------------------------------------
                                        1999            1998            1997
                                  ---------------- --------------- ---------------
                                  Revenue  Assets  Revenue Assets  Revenue Assets
                                  ------- -------- ------- ------- ------- -------
  North America................ $38,764 $ 78,958 $21,892 $40,404  $7,757 $15,298
    Europe.......................  22,131   10,693  12,596   6,122   9,712   4,245
    Asia/Pacific.................  12,720   47,246   1,365     --      369     --
                                  ------- -------- ------- ------- ------- -------
                                  $73,615 $136,897 $35,853 $46,526 $17,838 $19,543
                                  ======= ======== ======= ======= ======= =======
  For the year ended September 30, 1999, revenue from the United States,
  United Kingdom, and Australia represented 51.6%, 27.7%, and 10.7% of total
  revenue, respectively. For the years ended September 30, 1998 and 1997, revenue
  was generated primarily from the United States and the United Kingdom.
  
     Long-lived assets primarily located within the United States, represent
  31.8%, 67.0%, and 55.3% of total assets, as of September 30, 1999.
  
     For the year ended September 30, 1999, two customers accounted for 14.0% and
  10.0% of total revenue. For the year ended September 30, 1998, two customers
  accounted for 23% and 14% of total revenue For the year ended September 30,
  1997, one customer accounted for 45% of the total revenue.
  
                                        28
  IPC COMMUNICATIONS, INC.
                            CONSOLIDATED BALANCE SHEETS
                                    (Unaudited)
                 (In thousands, except share and per share amounts)
  March 31,   September 30,
                                                                                    ----------  --------------
                                                                                       2000         1999
                                                                                    ----------  --------------
  ASSETS
  Current assets:
   Cash and cash equivalents....................................................    $  31,621       $  43,946
   Marketable securities........................................................            -          28,357
   Marketable securities, restricted............................................        3,000          20,435
   Trade receivables............................................................       83,600          80,309
   Inventories..................................................................       39,022          31,903
   Prepaids and other current assets............................................       25,308          24,807
                                                                                    ---------       ---------
       Total current assets.....................................................      182,551         229,757
  
  Property, plant and equipment, net............................................      117,382          98,682
  Long term marketable securities, restricted...................................            -           6,065
  Debt issuance costs, net......................................................       10,264          10,675
  Goodwill and intangible assets, net...........................................       88,097          66,203
  Other assets..................................................................        1,725           1,827
                                                                                    ---------       ---------
       Total assets.............................................................    $ 400,019       $ 413,209
                                                                                    =========       =========
  
                 LIABILITIES AND STOCKHOLDERS' DEFICIT
  Current liabilities:
   Accounts payable.............................................................    $  40,625       $  23,485
   Accrued liabilities..........................................................       48,320          46,343
   Customer advances and deferred revenue.......................................       41,368          30,432
   Current portion of notes payable.............................................       50,316          34,425
   Current portion of capital leases............................................        7,205           6,265
                                                                                    ---------       ---------
       Total current liabilities................................................      187,834         140,950
  
  Senior unsecured notes........................................................      220,647         209,230
  Notes payable, less current portion...........................................        5,503          18,354
  Lease obligations, less current portion.......................................       18,648          15,651
  Other liabilities.............................................................        3,558           3,575
                                                                                    ---------       ---------
       Total liabilities........................................................      436,190         387,760
                                                                                    ---------       ---------
  
  Minority interest.............................................................       14,627          25,828
  
  Commitments and contingencies
  
  Stockholders' deficit:
   Common stock - $0.01 par value, authorized 25,000,000 shares;
      8,838,855 shares issued and outstanding at March 31, 2000; 8,577,480
      shares issued and outstanding at September 30, 1999.......................           88              86
   Paid-in capital..............................................................      115,900         104,913
   Accumulated deficit..........................................................     (165,580)       (105,594)
   Accumulated other comprehensive income.......................................       (1,206)            216
                                                                                    ---------       ---------
       Total stockholders' deficit..............................................      (50,798)           (379)
                                                                                    ---------       ---------
       Total liabilities and stockholders' deficit..............................    $ 400,019       $ 413,209
                                                                                    =========       =========
  See Notes to Consolidated Financial Statements.
  
                                        29
  IPC COMMUNICATIONS, INC.
                       CONSOLIDATED STATEMENTS OF OPERATIONS
                                    (Unaudited)
                      (In thousands, except per share amounts)
  Three months ended               Six months ended
                                                                         March 31                        March 31
                                                                  --------------------------    -------------------------
                                                                    2000         1999             2000         1999
                                                                  -------      --------         -------      --------
  Revenue:
     Product sales and installation..........................    $ 35,013      $ 38,803         $ 73,766     $ 73,159
     Service.................................................      52,727        42,130           97,454       75,524
                                                                 --------      --------         --------     --------
                                                                   87,740        80,933          171,220      148,683
                                                                 --------      --------         --------     --------
  Cost of revenue (exclusive of depreciation and amortization
     shown separately below)
     Product sales and installation..........................      20,335        22,409           44,103       41,192
     Service.................................................      45,968        31,807           83,928       56,821
                                                                 --------      --------         --------     --------
                                                                   66,303        54,216          128,031       98,013
                                                                 --------      --------         --------     --------
          Gross profit.......................................      21,437        26,717           43,189       50,670
  
  Research and development expenses..........................       3,201         2,193            6,113        4,594
  Selling, general and administrative expenses...............      22,777        12,749           41,689       25,343
  Depreciation and amortization..............................      12,632         7,613           23,415       13,274
  Stock compensation charge..................................       1,236             -            2,599            -
  Merger related costs.......................................      23,288             -           23,288            -
                                                                 --------      --------         --------     --------
           (Loss) income from operations.....................     (41,697)        4,162          (53,915)       7,459
  
  Interest expense, net......................................      (7,447)       (6,953)         (14,240)     (13,144)
  Other (expense) income, net................................        (768)          (22)            (572)          54
                                                                 --------      --------         --------     --------
            Loss before provision for income taxes
              and minority interest..........................     (49,912)       (2,813)         (68,727)      (5,631)
  Provision for income taxes.................................       1,219           478            2,460        1,319
                                                                 --------      --------         --------     --------
           Loss before minority interest.....................     (51,131)       (3,291)         (71,187)      (6,950)
  Minority interest..........................................       7,634             -           11,201            -
                                                                 --------      --------         --------     --------
           Net loss..........................................    $(43,497)     $ (3,291)        $(59,986)    $ (6,950)
                                                                 ========      ========         ========     ========
  Basic and diluted loss per share...........................    $  (4.97)     $  (0.41)        $  (6.91)    $  (0.86)
                                                                 ========      ========         ========     ========
  Basic and diluted weighted average number of shares
       outstanding...........................................       8,748         8,076            8,681        8,076
                                                                 ========      ========         ========     ========
  See Notes to Consolidated Financial Statements
  
                                        30
  IPC COMMUNICATIONS, INC.
                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                    (Unaudited)
                                   (In thousands)
  
                                                      Six months ended
                                                          March 31,
                                                     -------------------
                                                       2000        1999
                                                     ---------   -------
  
  Cash flows from operating activities:
  Net loss......................................... $ (59,986) $  (6,950)
  Adjustments to reconcile net loss to net cash
       (used in) provided by (used in)
       operating activities
     Stock compensation charge.....................     2,599          -
     Minority interest.............................   (11,201)         -
     Depreciation and amortization.................    23,415     13,349
     Other interest amortization...................    12,241     11,217
     Bad debt and sales credit provision...........     1,632        672
  Changes in operating assets and liabilities:
     Trade receivables.............................    (4,409)    11,267
     Inventories...................................    (7,119)    (2,194)
     Prepaids and other current assets.............       (49)    (2,010)
     Other assets..................................    (1,654)       239
     Accounts payable..............................    16,153     (1,094)
     Accrued liabilities and other liabilities.....     2,122        938
     Customer advances and deferred revenue........    10,936     (4,783)
                                                     ---------   -------
       Net cash (used in) provided by operating
         activities................................   (15,320)    20,651
                                                     ---------   -------
  Cash flows from investing activities:
     Capital expenditures..........................   (27,666)    (9,410)
     Net change in marketable securities...........    52,453          -
     Acquisitions, net of cash acquired............   (23,863)   (40,418)
                                                     ---------   -------
       Net cash provided by (used in) investing
         activities................................       924    (49,828)
                                                     ---------   -------
  Cash flows from financing activities:
     Proceeds from revolving credit borrowings.....    15,150     22,082
     Repayments of revolving credit borrowings.....         -     (5,276)
     Principal payments on capital leases..........    (3,269)    (2,376)
     Principal payments on notes payable...........   (12,303)      (555)
     Debt issuance costs...........................      (413)      (384)
     Proceeds from the exercise of stock options...     4,328          -
     Other.........................................         -        (42)
                                                     ---------   -------
       Net cash provided by financing activities...     3,493     13,449
                                                     ---------   -------
  Effect of exchange rate changes on cash..........    (1,422)      (317)
                                                     ---------   -------
  Net decrease in cash.............................   (12,325)   (16,045)
  Cash and cash equivalents, beginning of period...    43,946     28,084
                                                     ---------   -------
  Cash and cash equivalents, end of period......... $  31,621    $12,039
                                                     =========   =======
  
  Non-cash investing and financing activities:
    the period
  
  Capital lease obligations entered
    into during the period......................... $   7,207    $ 5,318
  
  Deferred compensation in
    connection with grants of stock options........     2,599          -
  
                  See Notes to Consolidated Financial Statements
  
                                        31
  1.  Background and basis for presentation
  
     IPC Communications, Inc. ("IPC" or the "Company") is the world's leading
  supplier of voice trading systems to the financial services community with a
  sophisticated suite of globally integrated voice and data telecommunications
  products. IPC focuses on serving the financial trading environment by designing,
  manufacturing, installing, and servicing products that allow traders around the
  world to communicate with each other instantly and reliably. In addition,
  through its subsidiary, IXnet, Inc. ("IXnet"), the Company provides a high
  performance intelligent global extranet (the "IXnet Extranet") designed
  exclusively for the financial community. Through a single connection, IXnet
  delivers end-to-end managed data and voice communications solutions to the
  financial services community around the world. The Company's primary customers
  include securities and investment banking firms, merchant and commercial banks,
  interdealer brokers, foreign exchange and commodity brokers and dealers,
  securities and commodity exchanges, mutual and hedge fund companies, asset
  managers and insurance companies. The Company uses an integrated approach to
  marketing its products and services, leveraging its established customer base
  throughout the financial sector.
  
     IPC became the holding company for IPC Information Systems, Inc. ("IPC
  Information Systems") effective May 21, 1999 through a merger. Following the
  merger, IPC represented the same consolidated financial position as IPC
  Information Systems prior to the merger. Accordingly, the consolidated financial
  statements included in this Form 10-Q reflect the operations of IPC Information
  Systems and its subsidiaries through May 20, 1999 and of IPC thereafter.
  
       On February 22, 2000, the Company, IPC Information Systems and IXnet
  entered into a merger agreement with Global Crossing, Ltd. (the "Merger"). The
  Merger was approved by a majority of the Company's and IXnet's stockholders.
  Under the terms of the Merger agreement, at the closing, Company stockholders
  will be entitled to receive 5.417 shares of Global Crossing common stock for
  each share of Company common stock and IXnet stockholders will be entitled to
  receive 1.184 shares of Global Crossing common stock for each share of IXnet
  common stock. The Merger is expected to close by the end of the Company's third
  fiscal quarter. For the three and six months ended March 31, 2000, the Company
  recorded costs of $23.3 million related to the Merger. These costs primarily
  included investment banker fees, legal fees, other professional fees, and other
  direct costs.
  
       In the opinion of management, the accompanying unaudited financial
  statements include all necessary adjustments (consisting of normal recurring
  accruals and appropriate intercompany elimination adjustments) for a fair
  presentation of the financial position of IPC as of March 31, 2000, and the
  results of its operations for the three and six months ended March 31, 2000 and
  1999 and cash flows for the six months ended March 31, 2000 and 1999, in
  conformity with generally accepted accounting principles, commonly referred to
  as "GAAP", for interim financial information applied on a consistent basis. The
  results of operations for the three and six months ended March 31, 2000 are not
  necessarily indicative of the results to be expected for the full year. Certain
  information and note disclosures normally included in financial statements
  prepared in accordance with GAAP have been omitted pursuant to the rules and
  regulations of the Securities and Exchange Commission. These financial
  statements should be read in conjunction with IPC's Annual Report on Form 10-K
  for the fiscal year ended September 30, 1999.
  
  2. Summary of Significant Accounting Policies
  
  Trade Receivables
  
  Trade accounts receivable relate to Trading Systems and ITS sales and
  installations which are progress billed until the installation is complete.
  Turret sales to distributors are billed after the product is shipped and service
  contract invoices are billed in advance. Trade receivables are recorded net of
  allowance for doubtful accounts of $4.6 million and $2.3 million for the period
  ended March 31, 2000 and 1999, respectively.
  
  Reclassifications
  
  Certain reclassifications have been made to the 1999 financial statements in
  order to conform to the current period's presentation.
  
  Earnings Per Share:
  
  Basic loss per share is computed using the weighted average number of common
  shares outstanding during the year.  Diluted loss per share is computed using
  the weighted average number of shares of common stock adjusted for the dilutive
  effect of common stock equivalent shares of common stock options.  Common stock
  equivalent shares are calculated using the treasury stock method.  All stock
  options outstanding have been excluded from the computation of diluted loss per
  share as their effect would be antidilutive.  Accordingly, there is no
  difference between basic and diluted EPS.
  
  3.  Comprehensive loss
  
     Effective October 1, 1998, IPC adopted SFAS No. 130, "Reporting Comprehensive
  Income". This statement requires the Company to include within its financial
  statements information on comprehensive income/loss, which is defined as all
  activity impacting equity from non-owner sources. Comprehensive income/loss
  includes IPC's net income/loss and foreign currency translation adjustments.
  
     IPC's total comprehensive loss for the six months ended March 31, 2000 and
  1999 was as follows (in thousands):
  
                                                 Six Months Ended
                                                      March 31,
                                          ----------------------------------
                                            2000                       1999
                                          --------                   -------
     Net loss                             $(59,986)                  $(6,950)
     Translation adjustment                 (1,422)                   (1,045)
                                          --------                   -------
     Total comprehensive loss             $(61,408)                  $(7,995)
                                          ========                   =======
  
                                        32
  4.  Acquisitions and Strategic Agreement:
  
  Systems Programming & Network Computing, Inc. ("SPNC")
  
  On January 25, 2000, IXnet acquired all of the issued and outstanding common
  shares of SPNC which is a leader in providing and integrating sophisticated
  multi-system, multi-platform applications for the financial services community.
  The purchase price was approximately $1.5 million and consisted of $300,000 in
  cash, a $100,000 promissory note issued by the Company and 6,080 shares of IXnet
  common stock. The acquisition was accounted for using the purchase method of
  accounting and resulted in $111,000 of goodwill, which will be amortized over a
  5 year period from the date of the acquisition.
  
  Business Networks of New York, Inc. ("BNNY")
  
  Effective January 1, 2000, IXnet acquired all of the issued and outstanding
  common shares of BNNY which is a leader in providing voice and data services to
  the financial community, primarily in the New York Metropolitan Area.  The $26.5
  million purchase price consisted of $24.5 million in cash and 45,707 shares of
  IXnet common stock.  The acquisition was accounted for using the purchase method
  of accounting and resulted in $27.3 million of goodwill, which will be amortized
  over a 10 year period from the date of the acquisition.
  
  Strategic Agreement
  
    On September 24, 1999, IXnet entered into a strategic agreement (the
  "Strategic Agreement"), including the licensing of certain software products to
  enhance the intelligence of its network for a purchase price of $20.0 million
  consisting of $10.0 million in cash financed from the proceeds from IXnet's IPO
  and 500,000 shares of IXnet restricted common stock valued at an average closing
  price prior to the agreement date. The Strategic Agreement is designed to
  enhance IXnet's network capabilities with embedded intelligence, delivering
  financial enterprise integration, subject-based addressing trading turret
  integration and application management.
  
  V-Band Corporation ("V-Band")
  
    On June 21, 1999, the Company acquired V-Band for approximately $1.5 million
  in cash. The purchase was financed through a combination of cash from operations
  and borrowings under the Revolving Credit Facility.
  
  Reuters Voice Systems ("RVS")
  
    On December 31, 1998, the Company purchased the assets of RVS, a business unit
  of Reuters Group PLC, for approximately $5.7 million in cash. The purchase was
  financed through a combination of cash from operations and borrowings under the
  Revolving Credit Facility.
  
  Saturn Global Network Service Holdings Ltd. ("Saturn")
  
    On December 18, 1998, International Exchange Networks, Ltd. ("IENL") acquired
  all of the issued and outstanding common shares of Saturn from Marshalls 106
  Limited ("Marshalls"). The acquisition was accounted for using the purchase
  method of accounting.
  
    The purchase price for Saturn included a cash payment in the amount of $35.7
  million and the issuance of a promissory note in the amount of $7.5 million
  bearing interest at the UK Sterling Base Rate, as defined, plus three percent
  and payable over three years. In addition, IENL assumed indebtedness of Saturn
  due to Marshalls in the amount of $5.0 million payable over 24 months with
  interest at 9.25%. Under this agreement, the Marshalls Note is subject to a
  working capital adjustment and right of offset. The working capital adjustment
  was settled in June 1999 resulting in a reduction of the obligation by
  approximately $2.0 million.
  
                                        33
  5.  Property, Plant and Equipment (In thousands):
  
                                                        March 31,   September 30,
                                                        ----------  -------------
                                                           2000         1999
                                                        ----------  -------------
    Building                                             $  2,463        $  2,463
    Machinery and equipment                                39,247          36,300
    Furniture and fixtures                                  3,004           2,812
    Leasehold improvements                                 10,576           9,092
    Network equipment                                      49,586          39,865
    Network equipment under capital leases                 43,444          28,649
    Network software                                       24,547          21,561
    IRU's                                                  10,759           6,692
                                                         --------        --------
      Total depreciable property, plant and equipment     183,626         147,434
      Less accumulated depreciation and amortization      (66,595)        (49,761)
                                                         --------        --------
                                                          117,031          97,673
       Land and other                                         351           1,009
                                                         --------        --------
                                                         $117,382        $ 98,682
                                                         ========        ========
  
                                        34
  6.  Business Segments:
  
     The Company's operations include Trading Systems, Information Transport
  Systems ("ITS") and IXnet. Trading Systems reports sales of turret systems as
  "Product sales and installation." It reports revenue from turret system
  maintenance, including annual and multi-year service contracts, and from moves,
  additions and changes to existing turret system installations as "Service." ITS
  reports revenue from the design, integration and implementation of cabling
  infrastructure projects, including Local and Wide Area Networks, and from the
  sales of intelligent network products, such as hubs, bridges and routers, as
  "Product sales and installation." It reports revenue from on-site maintenance of
  customer cable infrastructure, including annual and multi-year contracts, and
  from the provision of outsourcing services for the support, expansion and
  upgrading of existing customer networks as "Service." IXnet reports revenue from
  sales of premium voice, managed bandwidth and outsourcing services, switched
  voice, shared internet protocol and other services (In thousands):
  Trading
                                                        Systems       I T S         IXnet     Consolidated
                                                        -------    ----------- -------------  ------------
  For the Six Months ended March 31, 2000
  Revenue:
     Product sales and installation................... $ 54,433    $ 19,333        $      -     $  73,766
     Service..........................................   38,250       7,097          52,107        97,454
                                                       --------    --------        --------      --------
  Total revenue....................................... $ 92,683    $ 26,430        $ 52,107     $ 171,220
                                                       ========    ========        ========     =========
  Gross profit (loss).................................   43,824       2,953          (3,588)       43,189
  Research & development expenses.....................    6,113           -               -         6,113
  Selling, general & administrative expenses (a)......   12,146       2,014          24,060        41,689
  Depreciation and amortization.......................    4,884         195          18,336        23,415
  Merger related costs................................    4,750                      18,538        23,288
  Stock compensation charge...........................        -           -           2,599         2,599
                                                       --------    ---------      ---------       -------
  Income (loss) from operations....................... $ 15,931    $    744       $ (67,121)    $ (53,915)
                                                       ========    ========       =========     =========
  
  EBITDA (b).......................................... $ 17,346    $    939       $ (46,186)    $ (27,901)
                                                       ========    ========       =========     =========
  
  Total assets........................................ $222,093    $ 26,206       $ 151,720     $ 400,019
                                                       ========    ========       =========     =========
  (a) Consolidated selling, general & administrative expenses include corporate
  general & administrative expenses of $3,469 for the six months ended
  March 31, 2000
  
  (b) EBITDA represents operating income before net interest, other expenses,
  income taxes, depreciation and amortization and non-cash stock compensation
  charges. EBITDA is not a measurement of financial performance under generally
  accepted accounting principles. It is not intended to represent cash flow from
  operations and should not be considered as an alternative to net loss as an
  indicator of our operating performance or to cash flows as a measure of
  liquidity. We believe that EBITDA is widely used by analysts, investors and
  others in the telecommunications industry. EBITDA is not necessarily comparable
  with similarly titled measures used by other companies.
  
                                        35
  Trading
                                                       Systems     I T S        IXnet   Consolidated
                                                      --------   --------    ---------  ------------
  For the Six Months ended March 31, 1999
  Revenue:
     Product sales and installation                  $ 56,933    $ 16,226    $       -    $ 73,159
     Service                                           34,332       8,680       32,512      75,524
                                                     --------    --------    ---------    --------
  Total revenue                                      $ 91,265    $ 24,906    $  32,512    $148,683
                                                     ========    ========    =========    ========
  Gross profit (loss)                                  45,762       3,330        1,578      50,670
  Research & development expenses                       4,594                        -       4,594
  Selling, general & administrative expenses (a)       11,373       2,095        7,693      25,343
  Depreciation and amortization                         3,598         168        9,508      13,274
                                                     --------    --------    ---------    --------
  Income (loss) from operations                      $ 26,197     $ 1,067    $ (15,623)   $  7,459
                                                     ========    ========    =========    ========
  
  EBITDA (b)                                         $ 29,795     $ 1,235    $  (6,115)   $ 20,733
                                                     ========    ========    =========    ========
  
  Total assets                                       $125,578    $ 31,465    $ 125,440    $282,483
                                                     ========    ========    =========    ========
  (a) Consolidated selling, general & administrative expenses include corporate
  general & administrative expense of $4,182 for the six months ended March 31,
  1999
  
  (b) EBITDA represents operating income before net interest, other expenses,
  income taxes, depreciation and amortization and non-cash stock compensation
  charges. EBITDA is not a measurement of financial performance under generally
  accepted accounting principles. It is not intended to represent cash flow from
  operations and should not be considered as an alternative to net loss as an
  indicator of our operating performance or to cash flows as a measure of
  liquidity. We believe that EBITDA is widely used by analysts, investors and
  others in the telecommunications industry. EBITDA is not necessarily comparable
  with similarly titled measures used by other companies.
  
  7.  Stock Compensation Charge:
  
       In May 1999, IXnet recorded $26.4 million in non-cash deferred stock
  compensation reflecting the issuance by the Company of options to purchase
  6,530,184 shares of common stock of IXnet at $13.96 per share. The deferred
  stock compensation is based upon the deemed fair market value of IXnet's common
  stock and the exercise price of such options issued on the date of grant. The
  Company recorded an additional $2.1 million of non-cash deferred stock
  compensation during the quarter and $4.4 million during the six months ended
  March 31, 2000, which represents the charge for the issuance of options in May
  1999 that are treated as variable options for accounting purposes. Stock
  compensation expense for the three and six months ended March 31, 2000 is $1.2
  million and $2.6 million respectively. The remaining deferred compensation will
  be amortized over the remaining vesting period of the options.
  
                                        36
  REPORT OF INDEPENDENT ACCOUNTANTS
  
  To the Stockholders
  of IPC Communications, Inc.:
  
       In our opinion, the accompanying consolidated financial statements
  present fairly, in all material respects, the consolidated financial position
  of IPC Communications, Inc. and its subsidiaries at September 30, 1999 and
  1998, and the results of their operations and cash flows for each of the three
  years in the period ended September 30, 1999, in conformity with accounting
  principles generally accepted in the United States. These financial statements
  are the responsibility of the Company's management; our responsibility is to
  express an opinion on these financial statements based on our audits. We
  conducted our audits in accordance with auditing standards generally accepted
  in the United States, which 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, assessing
  the accounting principles used and significant estimates made by management,
  and evaluating the overall financial statement presentation. We believe that
  our audits provide a reasonable basis for the opinion expressed above.
  
  /S/ PricewaterhouseCoopers LLP
  
  PricewaterhouseCoopers LLP
  
  New York, New York
  November 30, 1999
  
                                        37
  IPC COMMUNICATIONS, INC.
                             CONSOLIDATED BALANCE SHEETS
          (Dollar amounts in thousands, except share and per share amounts)
  September 30,
                                                                                              ---------------------------
                                                                                                   1999          1998
                                                                                              ------------  -------------
                                                  ASSETS
  Current assets:
  Cash and cash equivalents............................................................      $  43,946       $  28,084
     Marketable securities................................................................         28,357               -
     Marketable securities, restricted....................................................         20,435               -
     Trade receivables....................................................................         80,309          71,521
     Inventories..........................................................................         31,903          40,046
     Prepaids and other current assets....................................................         24,807          15,214
                                                                                                ---------       ---------
               Total current assets.......................................................        229,757         154,865
  
  Property, plant and equipment, net......................................................         98,682          57,113
  Long term marketable securities, restricted.............................................          6,065               -
  Debt issuance costs, net................................................................         10,675          10,707
  Goodwill and intangible assets, net.....................................................         66,203          15,639
  Other assets............................................................................          1,827           3,318
                                                                                                ---------       ---------
               Total assets...............................................................      $ 413,209       $ 241,642
                                                                                                =========       =========
  
                                   LIABILITIES AND STOCKHOLDERS' DEFICIT
  Current liabilities:
    Accounts payable......................................................................      $  23,485       $  20,094
    Accrued liabilities...................................................................         46,343          40,704
    Customer advances and deferred revenue................................................         30,432          38,469
    Current portion of notes payable......................................................         34,425               -
    Current portion of capital leases.....................................................          6,265           4,462
                                                                                                ---------       ---------
               Total current liabilities..................................................        140,950         103,729
   Senior unsecured notes.................................................................        209,230         188,223
   Notes payable, less current portion....................................................         18,354               -
   Lease obligations, less current portion................................................         15,651          12,490
   Other liabilities......................................................................          3,575           3,741
                                                                                                ---------       ---------
               Total liabilities..........................................................        387,760         308,183
                                                                                                ---------       ---------
  
  Minority Interest.......................................................................         25,828               -
  
  Commitments and contingencies
  
  Stockholders' deficit:
    Common stock - $0.01 par value, authorized 25,000,000 shares; 8,577,480 shares
       issued and outstanding at September 30, 1999; 8,076,188
       shares issued and outstanding at September 30, 1998................................             86              81
    Paid-in capital.......................................................................        104,913           5,855
    Accumulated deficit...................................................................       (105,594)        (73,049)
    Accumulated other comprehensive income................................................            216             572
                                                                                                ---------       ---------
               Total stockholders' deficit................................................           (379)        (66,541)
                                                                                                ---------       ---------
               Total liabilities and stockholders' deficit................................      $ 413,209       $ 241,642
                                                                                                =========       =========
  See Notes to Consolidated Financial Statements.
  
                                        38
  IPC COMMUNICATIONS, INC.
                        CONSOLIDATED STATEMENTS OF OPERATIONS
              (Dollar amounts in thousands, except per share amounts)
  For the year ended September 30,
                                                                                        ------------------------------------------
                                                                                            1999           1998          1997
                                                                                        -------------  ------------- -------------
  Revenue:
  Product sales and installation.................................................. $ 178,201          $ 173,350          $ 179,978
     Service.........................................................................   160,991            122,467             90,080
                                                                                      ---------          ---------          ---------
                                                                                        339,192            295,817            270,058
                                                                                      ---------          ---------          ---------
  Cost of revenue (excluding depreciation and amortization
    shown separately below)
     Product sales and installation..................................................   103,837             99,974            126,623
     Service.........................................................................   127,404             89,084             68,674
                                                                                      ---------          ---------          ---------
                                                                                        231,241            189,058            195,297
                                                                                      ---------          ---------          ---------
          Gross profit...............................................................   107,951            106,759             74,761
  
  Research and development expenses..................................................     9,786              8,276              8,490
  Selling, general and administrative expenses.......................................    58,047             53,345             48,100
  Depreciation and amortization......................................................    30,110             15,690              8,630
  Stock compensation charge..........................................................     9,079               --                 --
  Change in control expense..........................................................      --               10,640               --
                                                                                      ---------          ---------          ---------
           Income from operations....................................................       929             18,808              9,541
  
  Interest expense, net..............................................................   (27,263)           (10,337)            (1,844)
  Other income (expense), net........................................................       451                 (2)               417
                                                                                      ---------          ---------          ---------
           (Loss) income before provision for income taxes
              and minority interest..................................................   (25,883)             8,469              8,114
  Provision for income taxes.........................................................     7,968              6,191              4,280
                                                                                      ---------          ---------          ---------
           (Loss) income before minority interest....................................   (33,851)             2,278              3,834
  Minority interest..................................................................     1,395               --                 --
                                                                                      =========          =========          =========
           Net (loss) income......................................................... $ (32,456)         $   2,278          $   3,834
                                                                                      =========          =========          =========
  
  Basic (loss) earnings per share.................................................... $   (3.97)         $    0.14          $    0.18
                                                                                      =========          =========          =========
  
  Basic weighted average number of shares outstanding................................     8,172             15,774             21,328
                                                                                      =========          =========          =========
  
  Diluted (loss) earnings per share.................................................. $   (3.97)         $    0.14          $    0.18
                                                                                      =========          =========          =========
  
  Diluted weighted average number of shares outstanding..............................     8,172             15,941             21,408
                                                                                      =========          =========          =========
  See Notes to consolidated Financial Statements
  
                                        39
  IPC COMMUNICATIONS, INC.
                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (Dollar amounts in thousands)
  For the year ended September 30,
                                                                                  -------------------------------------------
                                                                                      1999           1998           1997
                                                                                  -------------  ------------  --------------
  Cash flows from operating activities:
  Net (loss) income........................................................       $ (32,456)    $   2,278     $   3,834
  Adjustments to reconcile net (loss) income to net cash provided by
       (used in) operating activities:
     Stock compensation charge.............................................           9,079          --            --
     Minority Interest.....................................................           1,395          --            --
     Depreciation and amortization.........................................          30,110        15,158         8,416
     Non-cash interest on senior discount notes............................          21,007         8,212          --
     Other interest amortization...........................................           1,703           842           327
     Provision for doubtful accounts.......................................           3,236         2,786           338
     Deferred income taxes.................................................           3,720        (4,769)           83
  Changes in operating assets and liabilities:
     Trade receivables.....................................................          (7,061)      (11,126)        4,909
     Inventories...........................................................          11,043        (5,978)        3,240
     Prepaids and other current assets.....................................             841         3,218        (2,926)
     Other assets..........................................................           2,377        (2,077)          (45)
     Accounts payable......................................................          (1,708)       (2,690)        2,859
     Accrued liabilities and other liabilities.............................         (15,635)       20,569         5,099
     Customer advances and deferred revenue................................         (11,033)       20,339        (1,453)
                                                                                  ---------     ---------     ---------
  
              Net cash provided by operating activities....................          16,618        46,762        24,681
                                                                                  ---------     ---------     ---------
  Cash flows from investing activities:
     Capital expenditures..................................................         (26,645)      (18,293)      (13,509)
     Purchase of marketable securities.....................................         (54,857)         --            --
     Acquisitions, net of cash acquired....................................         (42,913)       (7,535)       (1,500)
                                                                                  ---------     ---------     ---------
              Net cash (used in) investing activities......................        (124,415)      (25,828)      (15,009)
                                                                                  ---------     ---------     ---------
  Cash flows from financing activities:
     Net proceeds from IXnet initial public offering.......................         102,775          --            --
     Proceeds from revolving credit borrowings.............................          66,817          --            --
     Repayments of revolving credit borrowings.............................         (52,095)         --            --
     Proceeds from notes payable...........................................            --            --           2,182
     Principal payments on notes payable...................................          (5,948)       (8,807)      (12,526)
     Proceeds from issuance of senior discount notes.......................            --         180,011          --
     Proceeds from equity investment.......................................            --          54,721          --
     Purchase of IPC common stock at Merger................................            --        (200,271)         --
     Costs, Obligations and equity charges at Merger.......................          (1,380)      (19,778)         --
     Proceeds from the exercise of stock options...........................          13,551           468           301
                                                                                  ---------     ---------     ---------
  
              Net cash provided by (used in) financing activities..........         123,720         6,344       (10,043)
                                                                                  ---------     ---------     ---------
     Effect of exchange rate changes on cash...............................             (61)         (659)         (470)
                                                                                  ---------     ---------     ---------
     Net increase (decrease) in cash.......................................          15,862        26,619          (841)
     Cash and cash equivalents, beginning of period........................          28,084         1,465         2,306
                                                                                  ---------     ---------     ---------
     Cash and cash equivalents, end of period..............................       $  43,946     $  28,084     $   1,465
                                                                                  =========     =========     =========
  Supplemental disclosures of cash flow information:
  Cash paid during the year for-
     Income taxes..........................................................       $   4,282     $   4,822     $   4,100
     Interest..............................................................       $   4,323     $   2,138     $   1,040
  Non-cash investing and financing activities-
     Issuance of stock to acquire remaining 20% interest in subsidiary.....       $    --       $   4,799     $    --
     Installment purchase for property, plant and equipment................       $    --       $   3,600     $    --
     Retirement of treasury stock..........................................       $    --       $     718     $    --
     Capital lease obligations entered into during the year................       $  10,284     $   7,092     $  10,776
     Purchase of software in connection with Strategic Agreement...........       $  20,000     $    --       $    --
     Working capital adjustment in connection with Saturn..................       $   1,952     $    --       $    --
     Additional amount payable in connection with the aquisition of
        Bridge Electronics, Inc............................................       $    --       $    --       $   3,500
  See Notes to Consolidated Financial Statements.
  
                                        40
  IPC COMMUNICATIONS, INC.
              CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
                       (Dollar and share amounts in thousands)
  Paid-      Accumulated
                                                                               Common Stock          in         (deficit)
                                                                            Shares     Amount      capital       earnings
                                                                            -------    --------    ---------     ---------
  Consolidated balance, September 30, 1996............................      10,618       $ 109     $ 47,889      $ 24,341
     Net income.......................................................           -           -            -         3,834
     Translation adjustment...........................................           -           -            -             -
          Total comprehensive income..................................           -           -            -             -
     Issuance of common stock under employment contracts..............          32           -          478             -
     Issuance of common stock under stock purchase plan...............          21           -          312             -
     Issuance of common stock under stock option plan.................          20           -          301             -
                                                                            -------    --------    ---------     ---------
  Consolidated balance, September 30, 1997............................      10,691         109       48,980        28,175
     Net income.......................................................           -           -            -         2,278
     Translation adjustment...........................................           -           -            -             -
          Total comprehensive income
     Issuance of common stock under stock purchase plan...............          18           -          262             -
     Issuance of common stock under stock option plan.................          32           1          467             -
     Repurchase and retirement of IPC common stock from...............           -           -            -             -
        Merger dated April 30, 1998...................................      (9,537)        (95)    (103,346)      (96,830)
     Retirement of treasury stock.....................................           -          (2)           -          (716)
     Issuance of Common Stock from Merger.............................       2,606          26       54,695             -
     Equity charges related to the Merger.............................           -           -            -        (5,916)
     Issuance of common stock to acquire remaining 20% interest
        in subsidiary.................................................         228           2        4,797             -
    Two-for-one stock split effected in the form of a 100% stock
       dividend, issued on June 10, 1998..............................       4,038          40            -           (40)
                                                                            -------    --------    ---------     ---------
  Consolidated balance, September 30, 1998............................       8,076          81        5,855       (73,049)
     Net loss.........................................................           -           -            -       (32,456)
     Translation adjustment...........................................           -           -            -             -
          Total comprehensive income..................................           -           -            -             -
     IXnet initial public offering....................................           -           -       93,799             -
     Equity charges related to the Merger.............................           -           -            -           (89)
     Issuance of common stock under stock option plan.................         491           5        5,259             -
                                                                            -------    --------    ---------     ---------
  Consolidated balance, September 30, 1999............................       8,567        $ 86     $ 104,913    $ (105,594)
                                                                            =======    ========    =========     =========
  Accumulated
                                                                         Other                            Total
                                                                     Comprehensive       Treasury     stockholders'    Comprehensive
                                                                         Income           stock     (deficit) equity    Income (loss)
                                                                      --------------      -------   ---------------------------------
  Consolidated balance, September 30, 1996............................         $ 94       $ (718)        $71,715
     Net income.......................................................            -            -           3,834          $ 3,834
     Translation adjustment...........................................          270            -             270              270
                                                                                                                          -------
          Total comprehensive income..................................            -            -               -          $ 4,104
                                                                                                                          =======
     Issuance of common stock under employment contracts..............            -            -             478
     Issuance of common stock under stock purchase plan...............            -            -             312
     Issuance of common stock under stock option plan.................            -            -             301
                                                                      --------------      -------       ---------
  Consolidated balance, September 30, 1997............................          364          (718)        76,910
     Net income.......................................................            -            -           2,278          $ 2,278
     Translation adjustment...........................................          208            -             208              208
                                                                                                                          -------
          Total comprehensive income..................................                                                    $ 2,486
                                                                                                                          =======
     Issuance of common stock under stock purchase plan...............            -            -             262
     Issuance of common stock under stock option plan.................            -            -             468
     Repurchase and retirement of IPC common stock from...............            -            -               -
        Merger dated April 30, 1998...................................            -            -        (200,271)
     Retirement of treasury stock.....................................            -          718               -
     Issuance of Common Stock from Merger.............................            -            -          54,721
     Equity charges related to the Merger.............................            -            -          (5,916)
     Issuance of common stock to acquire remaining 20% interest
        in subsidiary.................................................            -            -           4,799
    Two-for-one stock split effected in the form of a 100% stock
       dividend, issued on June 10, 1998..............................            -            -               -
                                                                      --------------      -------       ---------
  Consolidated balance, September 30, 1998............................          572            -         (66,541)
     Net loss.........................................................            -            -         (32,456)        $(32,456)
     Translation adjustment...........................................         (356)           -            (356)            (356)
                                                                                                                         --------
          Total comprehensive income..................................            -            -               -         $(32,812)
                                                                                                                         ========
     IXnet initial public offering....................................            -            -          93,799
     Equity charges related to the Merger.............................            -            -             (89)
     Issuance of common stock under stock option plan.................            -            -           5,264
                                                                      --------------      -------       ---------
  Consolidated balance, September 30, 1999............................       $ 216          $ -           $ (379)
                                                                      ==============      =======       =========
  See Notes to Consolidated Financial Statements.
  
                                        41
  IPC COMMUNICATIONS, INC.
                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  
  1.  Basis of Presentation:
  
       IPC Communications, Inc. ("IPC") is the leading provider of integrated
       telecommunications equipment and services that facilitate the execution of
       transactions by the worldwide financial services community.  These
       transactions involve the trading of equity and debt securities,
       commodities, currencies and other financial instruments.  The Company
       designs, manufactures, installs and services turret systems which provide
       desktop access to time-sensitive communications and data.  In addition,
       through its subsidiary, IXnet, Inc. ("IXnet"), the Company operates a
       global network (the "IXnet Extranet"), providing a variety of voice, data
       and content distribution services specifically designed to meet the
       specialized communications requirements of the financial services
       community.  The Company's primary customers include securities and
       investment banking firms, merchant and commercial banks, interdealer
       brokers, foreign exchange and commodity brokers and dealers, securities and
       commodity exchanges, mutual and hedge fund companies, asset managers and
       insurance companies.  The Company uses an integrated approach to marketing
       its products and services, leveraging its established customer base
       throughout the financial sector.
  
       IPC became the holding company for IPC Information Systems, Inc. ("IPC
       Information Systems") effective May 21, 1999 through a merger.  Following
       the merger, IPC represented the same consolidated financial position as IPC
       Information Systems prior to the merger.  Accordingly, the consolidated
       financial statements included in this Form 10-K reflect the operations of
       IPC Information Systems and its subsidiaries through May 20, 1999 and of
       IPC thereafter.
  
  2.  Summary of Significant Accounting Policies:
  
      Principles of Consolidation
  
      The consolidated financial statements include the accounts of the Company
      and its subsidiaries.  Intercompany balances and transactions have been
      eliminated.
  
      Revenue Recognition
  
      Revenue from product sales and related installation is recognized upon
      completion of the installation except for revenue from sales to
      distributors, which is recognized upon shipment. Under contract provisions,
      customers may be progress-billed prior to the completion of the
      installations. The revenue related to these advance payments is deferred
      until the system installations are completed. Contracts for maintenance are
      billed in advance, and are recorded as deferred revenue and recognized
      ratably over the contractual periods. Revenue from network services are
      recognized in the month the related service is provided and related
      installation revenue is deferred and recognized ratably over the average
      contract term. Bandwidth and switched voice charges are billed and
      recognized monthly based on customer usage. All other revenues are billed
      and recognized monthly based on flat-rate monthly charges.
  
      Cash and Cash Equivalents
  
      The Company places cash with high credit quality financial institutions.
      Temporary cash investments with original maturities of three months or less
      are considered cash equivalents. Temporary cash investments are stated at
      cost, which approximates fair value. These investments are not subject to
      significant market risk.
  
                                        42
  IPC COMMUNICATIONS, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
  
      Marketable Securities
  
      Marketable securities consist of investments in short-term government grade
      commercial paper with maturities of less than one year. Such securities are
      classified as available for sale and, accordingly, are carried at fair
      value, which approximates cost at September 30, 1999.  The amortized cost of
      debt securities is adjusted for amortization of premium and accretion of
      discounts to maturity.  Amortization of purchase premiums or accretion of
      discounts and realized gains and losses are included in interest income.
  
      On September 24, 1999, IXnet entered into a strategic agreement (the
      "Strategic Agreement"), including the license of certain software products
      to enhance the intelligence of its network. The purchase price included
      $10.0 million of cash to be paid in installments over six months beginning
      on October 30, 1999.  Separately, IXnet also entered into agreements to
      purchase indefeasible rights of use ("IRU's") over the next three years in
      an aggregate amount of $16.5 million.  In accordance with an amendment to
      the Revolving Credit Facility revised in connection with the Strategic
      Agreement, these amounts are invested in marketable securities dedicated to
      satisfy these commitments.
  
      Trade Receivables
  
      Trade accounts receivable potentially expose the Company to concentrations
      of credit risk, as a large volume of business is conducted with several
      major financial institutions, primarily companies in the brokerage, banking
      and financial services industries.  To help reduce this risk, customers may
      be progress-billed prior to the completion of the contract.  Trade
      receivables are recorded net of allowance for doubtful accounts of $3.6
      million and $2.4 million for the years ended September 30, 1999 and 1998,
      respectively.
  
      Inventories
  
      Inventories are stated at the lower of FIFO (first in, first out) cost or
      market.  Inventory costs include all direct manufacturing costs and applied
      overhead.
  
      Property, Plant and Equipment
  
      Property, plant and equipment are stated at cost and depreciated or
      amortized on a straight-line basis over their estimated useful lives or
      related contract terms beginning in the year the asset was placed into
      service.  Network switching equipment includes direct costs of installation.
      Amortization of network switching equipment under capital leases and IRUs is
      calculated using the straight-line method over the terms of the lease or
      IRU's and is included in depreciation and amortization expense.
  
                                        43
  IPC COMMUNICATIONS, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
  
      Debt Issuance Costs
  
      Debt issuance costs represent costs associated with the issuance of the
      Senior Discount Notes and in connection with the Revolving Credit Facility.
      These costs are amortized to interest expense utilizing the effective
      interest method over the life of the Senior Discount Notes and on a
      straight-line basis over the term of the Revolving Credit Facility.
  
      Intangible Assets
  
      Intangible assets, which are carried at cost less accumulated amortization,
      consist primarily of acquired technology and goodwill.  Goodwill represents
      the excess of the cost over the fair value of the identifiable tangible and
      intangible assets acquired in various acquisitions. Costs allocated to
      technology and goodwill are amortized on a straight-line basis over the
      periods benefited, principally 2.75 to 10 years.
  
      Research and Development
  
      Research and development expenditures are charged to expense as incurred.
  
      Stock Options
  
      Statement of Financial Accounting Standards ("SFAS") No. 123, Accounting for
      Stock-Based Compensation ("SFAS No. 123") requires the Company to choose
      between two different methods of accounting for stock options.  The
      Statement defines a fair-value-based method of accounting for stock options
      but allows an entity to continue to measure compensation cost for stock
      options using the accounting prescribed by Accounting Principles Board
      ("APB") Opinion No. 25, Accounting for Stock Issued to Employees ("APB No.
      25").  The Company has elected to continue using the accounting methods
      prescribed by APB No. 25 and to disclose the amount of the proforma
      compensation expense required to be disclosed under SFAS No. 123.
  
      Income Taxes
  
      In accordance with SFAS No. 109, Accounting for Income Taxes ("SFAS No.
      109"), the Company recognizes deferred income taxes for the tax consequences
      in future years of differences between the tax bases of assets and
      liabilities and their financial reporting amounts at each year end, based on
      enacted tax laws and statutory tax rates applicable to the periods in which
      the differences are expected to affect taxable income.  Valuation allowances
      are established when necessary to reduce deferred tax assets to the amount
      that is "more likely than not" to be realized.  The provision for income
      taxes is the tax payable for the period and the change during the period in
      deferred tax assets and liabilities.
  
      IXnet IPO and Minority Interest
  
      The Company recorded an increase to paid-in-capital representing the
      increase in its share of IXnet's net assets as a result of the proceeds from
      the offering.  The Company continues to consolidate the financial statements
      of IXnet, with an allocation of the net loss of IXnet to its minority
      shareholders.
  
      Foreign Currency Translation Adjustment
  
      The balance sheets and statements of operations of the Company's foreign
      operations are measured using the local currency as the functional currency.
      Assets and liabilities of these foreign operations are translated at the
      year-end exchange rate and revenue and expense amounts are translated at the
      average rate of exchange prevailing during the year.  Translation
      adjustments arising from the use of differing exchange rates from period to
      period are included in accumulated other comprehensive income account in
      stockholders' (deficit) equity.
  
                                        44
  IPC COMMUNICATIONS, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
  
      Earnings Per Share
  
      Basic earnings per share is computed based upon the weighted average number
      of common shares outstanding during the periods.  Diluted earnings per share
      is computed based upon the weighted average number of common shares
      outstanding plus the assumed issuance of common stock equivalents computed
      in accordance with the treasury stock method.
  
      Comprehensive Income
  
      Effective October 1, 1998, the Company adopted SFAS No. 130, Reporting
      Comprehensive Income.  This statement requires the Company to include within
      its financial statements information on comprehensive income/loss, which is
      defined as all activity impacting equity from non-owner sources.
      Comprehensive income/loss includes the Company's net income/loss and foreign
      currency translation adjustments.
  
      Use of Estimates
  
      The preparation of financial statements in conformity with generally
      accepted accounting principles requires management to make estimates and
      assumptions that affect the reported amounts of assets, and liabilities, and
      disclosure of contingent assets and liabilities at the date of the financial
      statements and the reported amounts of revenues and expenses during the
      reporting period.  Actual results could differ from those estimates.
  
      Reclassifications
  
      Certain reclassifications have been made to the 1998 and 1997 financial
      statements in order to conform to the current year's presentation.
  
      Effects of Recently Issued Accounting Standards
  
      In June 1998, the Financial Accounting Standards Board issued SFAS 133,
      Accounting for Derivatives and Hedging Activities, which establishes
      accounting and reporting standards for derivative instruments and hedging
      activities. The effective date of this standard was deferred to all fiscal
      quarters of fiscal years beginning after June 15, 2000 by SFAS 137,
      Accounting for Derivative Instruments and Hedging Activities - Deferral of
      the Effective Date of FASB Statement No. 133 which was issued on June 30,
      1999. Management does not believe the adoption of this standard will have a
      material impact on the Company's operations.
  
      In March 1998, the American Institute of Certified Public Accountants issued
      Statement of Position 98-1 ("SOP 98-1"), Accounting for the Cost of Computer
      Software Developed or Obtained for Internal Use.  SOP 98-1 is effective for
      financial statements for fiscal years beginning after December 15, 1998.
      The Company does not anticipate the adoption of this standard to have a
      material effect on its financial position, results of operations or cash
      flows.
  
  3.  Acquisitions and Strategic Agreement:
  
      Strategic Agreement
  
      On September 24, 1999, IXnet entered into a strategic agreement (the
      "Strategic Agreement"), including the licensing of certain software products
      to enhance the intelligence of its netowork for a purchase price of $20.0
      million consisting of $10.0 million in cash financed from the proceeds from
      IXnet's IPO and 500,000 shares of IXnet restricted common stock valued at an
      average closing price prior to the agreement date.  The Strategic Agreement
      is designed to enhance IXnet's
  
                                        45
  IPC COMMUNICATIONS, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
  
      network capabilities with embedded intelligence, delivering financial
      enterprise integration, subject-based addressing, trading turret integration
      and application management.
  
      V-Band Corporation ("V-Band")
  
      On June 21, 1999, IPC acquired V-Band Corporation for approximately $1.5
      million in cash.  The purchase was financed through a combination of cash
      from operations and borrowings under the Revolving Credit Facility.  The
      acquisition was accounted for using the purchase method of accounting and
      resulted in approximately $7.5 million of goodwill, of which approximately
      $7.0 million remains unamortized at September 30, 1999.
  
      Reuters Voice Systems ("RVS")
  
      On December 31, 1998, IPC purchased the assets of Reuters Voice Systems,  a
      business unit of Reuters Group PLC, for approximately $5.7 million in cash.
      The purchase was financed through a combination of cash from operations and
      borrowings under the Revolving Credit Facility.  The acquisition was
      accounted for using the purchase method of accounting and resulted in
      approximately $5.3 million in goodwill, of which approximately $3.8 million
      remains unamortized at September 30, 1999.
  
      Saturn Global Network Service Holdings Ltd. ("Saturn")
  
      On December 18, 1998, IENL acquired all of the issued and outstanding common
      shares of Saturn from Marshalls.  The acquisition was accounted for using
      the purchase method of accounting.  As a result of the acquisition, IENL
      recorded approximately $49.2 million of goodwill, which is being amortized
      on a straight-line basis over ten years.
  
        The purchase price for Saturn included a cash payment in the amount of
      $35.7 million and the issuance of a promissory note in the amount of $7.5
      million bearing interest at the UK Sterling Base Rate, as defined, plus
      three percent and payable over three years.  In addition, IXnet assumed
      indebtedness of Saturn due to Marshalls in the amount of $5.0 million
      payable over 24 months with interest at 9.25%. Under this agreement, the
      Marshalls Note is subject to a working capital adjustment and right of
      offset.  The working capital adjustment was settled in June 1999 resulting
      in a reduction of the obligation by approximately $2.0 million.
  
      The following unaudited pro forma statement of operations data for the years
      ended September 30, 1999 and 1998 gives effect to the Saturn acquisition as
      if it had occurred on October 1, 1999 and 1998 respectively (In thousands):
  September 30,
                                                                                    1999               1998
                                                                                  --------           --------
  Revenue                                                                        $ 343,991           $321,135
  Loss before provision for income taxes and minority interest                    ($35,065)           ($5,700)
  Pro forma adjustments include (i) amortization of goodwill over 10 years and
      (ii) interest expense on the Saturn Note and the Marshalls Note.  The pro
      forma financial information presented above does not purport to be
      indicative of the operating results which would have been achieved had the
      acquisition occurred at October 1, 1998 or 1997, or the results to be
      achieved thereafter.
  
                                        46
  IPC COMMUNICATIONS, INC.
                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
  
      MXNet Inc. ("MXNet")
  
      In February 1998, the Company acquired, by the issuance of a promissory note
      in the amount of $6.7 million, all of the issued and outstanding common
      stock of MXNet, a wholly owned subsidiary of National Discount Brokers
      Group, Inc.  The promissory note plus accrued interest was paid on April 8,
      1998. In addition, MXNet entered into employment agreements with four MXNet
      executives which included signing and retention bonuses in the aggregate
      amount of approximately $1.1 million payable over two years.  This
      acquisition was accounted for using the purchase method of accounting and
      resulted in $5.5 million of goodwill of which $1.5 million remains in
      intangible assets at September 30, 1999.
  
      IXnet
  
      During June 1995, the Company acquired an 80% interest in IXnet for $5.5
      million in cash.  The acquisition was accounted for using the purchase
      method of accounting.  Included in intangible assets is $0.7 million and
      $0.9 million at September 30, 1998 and 1997, respectively, representing
      acquired technology.
  
      In conjunction with the April 1998 Merger, the Company acquired the
      remaining 20% interest in IXnet (the "IXnet Exchange") through the issuance
      of 457,142 shares of Surviving Corporation Common Stock, valued at $4.8
      million. Included in intangible assets is $3.7 million at September 30,
      1999, representing acquired technology.
  
  4.  Merger and Recapitalization:
  
      On April 30, 1998, Arizona Acquisition Corp. ("AAC") was merged into IPC
      Information Systems (the "Merger"). Under the terms of the Merger, each
      share of common stock of IPC Information Systems was converted at the
      election of the holder thereof into either (i) the right to receive $10.50
      in cash (on a post split basis) or (ii) the right to retain one share of
      common stock of the surviving corporation.  In connection with the Merger,
      the Company issued $247.4 million aggregate principal amount at maturity
      ($180.0 million initial proceeds upon issuance) of 10 7/8% Senior Discount
      Notes due 2008 (the "Notes").  A portion of the proceeds from the Notes
      ($145.6 million), together with $54.7 million of capital provided by AAC
      were used to repurchase 19,073,330 shares (on a post split basis) of IPC
      Common Stock, at a price of $10.50 per share, from IPC shareholders who did
      not elect to retain stock of the surviving corporation upon the Merger.
      Prior to the Merger, AAC was owned by (i) Cable Systems Holdings LLC ("CSH
      LLC"), whose membership interests were owned by Citicorp Venture Capital,
      Ltd. and David Kirby and John O'Mara, private investors, (ii) CSH LLC's
      indirect subsidiary Cable Systems International, Inc. and (iii) the
      investment fund of Lawrence Smith & Horey III, L.P. (now known as Allegra
      Capital Partners III, L.P.).  The Merger was accounted for as a leveraged
      recapitalization. Accordingly, the historical basis of the Company's assets
      and liabilities has not been impacted by the Merger.
  
      In connection with the Merger, the Company incurred various non-recurring
      costs totaling approximately $27.8 million. These costs consist primarily of
      professional fees, printing costs, change of control costs and other
      expenses. Of this amount, $10.6 million was recorded in  fiscal 1998 as a
      non-recurring charge for change in control expenses, comprised of certain
      change in control bonuses and severance payments ($4.3 million), payments to
      option holders upon cancellation of their stock options ($5.9 million) and
      miscellaneous other expenses ($0.5 million).
  
                                        47
  IPC COMMUNICATIONS, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
  
      Unaudited pro forma statement of operations information for the years ended
      September 30, 1998 and 1997, as if the Merger occurred on October 1, 1996 is
      as follows (In thousands, except per share amounts):
  For the year ended
                                                                           September 30,
                                                                   -----------------------------
                                                                       1998              1997
                                                                      ------            ------
  Revenue                                                            $295,817          $270,058
  Operating Income (loss)                                            $ 18,129          $ (2,263)
  Net loss                                                           $ (6,447)         $(14,943)
  Basic loss per share                                               $  (0.80)         $  (1.85)
  Basic and diluted weighted average number of
       common shares outstanding (in thousands)                         8,076             8,076
  Pro forma adjustments include: (i) elimination of non-recurring charge for
      change in control expense; (ii) full year of interest expense on the Notes
      and related amortization of debt issuance costs and discount; and (iii)
      amortization of the acquired technology related to the IXnet Exchange.  All
      pro forma adjustments were tax effected at the Company's 44% incremental tax
      rate.  The pro forma financial information presented above is not
      necessarily indicative of the operating results which would have been
      achieved had the Merger occurred at October 1, 1996 or of the results to be
      achieved in the future.
  
  5.  Stock Split:
  
      On May 29, 1998 the Company declared a two-for-one stock split effected in
      the form of a 100% stock dividend (the "Stock Dividend").  The Stock
      Dividend was distributed on June 24, 1998 to holders of record on June 10,
      1998.  As a result, the number of shares increased from 4,038,094 shares
      (the number of shares issued and outstanding subsequent to the Merger and
      IXnet Exchange) to 8,076,188 shares.  Unless otherwise indicated, all share
      and per share data, including stock option information, is stated to reflect
      the Stock Dividend.
  
  6.  Inventories (In thousands):
  September 30,
                                                                              -----------------------------
                                                                                   1999            1998
                                                                              ------------    -------------
  Components and work in process                                                   $16,519          $13,639
  Inventory on customer sites awaiting installation                                 11,554           21,516
  Parts and maintenance supplies                                                     3,830            4,891
                                                                              ------------    -------------
                                                                                   $31,903          $40,046
                                                                              ============    =============
  48
  IPC COMMUNICATIONS, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
  
  7.  Property, Plant and Equipment (In thousands):
  September 30,
                                                                      ----------------------------------------
                                                                               1999                  1998
                                                                      -------------------    -----------------
  Building                                                                    $  2,463             $  2,462
     Machinery and Equipment                                                       36,300               36,230
     Furniture and Fixtures                                                         2,812                2,758
     Leasehold Improvements                                                         9,092                8,503
     Network Equipment                                                             39,865               13,638
     Network Equipment under capital leases                                        28,649               20,717
     Network Software                                                              21,561                    -
     IRU's                                                                          6,692                4,000
                                                                      -------------------    -----------------
       Total depreciable property, plant and equipment                            147,434               88,308
       Less accumulated depreciation and amortization                             (49,761)             (32,502)
                                                                      -------------------    -----------------
                                                                                   97,673               55,806
     Land and other                                                                 1,009                1,307
                                                                      -------------------    -----------------
                                                                                 $ 98,682             $ 57,113
                                                                      ===================    =================
  8.    Supplemental Financial Data:
  
       Prepaids and other current assets include the following (In thousands):
  
                                                       September 30,
                                                     1999         1998
                                                    -------      -------
  
               Deferred taxes                      $ 5,634      $ 9,354
               Prepaid expenses                      3,318        3,808
               ACT recoverable                       9,257            -
               Other current assets                  6,598        2,052
                                                    -------      -------
                   Total                            $24,807      $15,214
                                                    =======      =======
  
      Accrued liabilities includes the following (In thousands):
  
                                                      September 30,
                                                    1999         1998
                                                   -------      -------
  
               Compensation                        $14,051      $12,351
               Income taxes                          2,263        1,859
               Carrier costs                        12,351        3,815
               Other expenses                       17,678       22,679
                                                   -------      -------
                  Total                            $46,343      $40,704
                                                   =======      =======
  
      9.  Short-Term Credit Facilities:
  
      As a result of the Merger, the Company's short-term credit facilities with
      various banks of up to $35.0 million were terminated on April 30, 1998.
  
                                        49
  IPC COMMUNICATIONS, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
  
      In April 1998, IPC Information Systems entered into a five year $55.0
      million senior secured revolving credit agreement (the "Revolving Credit
      Facility"), with Morgan Stanley Senior Funding, Inc., as syndication agent,
      and other lenders , to be used for working capital and other general
      corporate purposes. The Revolving Credit Facility was subject to borrowing
      base limitations, which at September 30, 1998 approximated $33.6 million.
  
      Borrowings under the Revolving Credit Facility bore interest at a rate equal
      to, at the Company's option, the base rate plus 1.5% or the LIBOR rate plus
      a margin of 1.5% to 2.5% depending upon the Company's leverage ratio.  The
      base rate was a fluctuating interest rate equal to the higher of (i) the
      rate of interest announced publicly by Citibank, N.A. as its base rate and
      (ii) a rate equal to  1/2 of 1% per annum above the weighted average of the
      rates on overnight Federal funds transactions with members of the Federal
      Reserve System as published by the Federal Reserve Bank of New York.
  
      The Revolving Credit Facility contained various covenants and conditions,
      including restrictions on (i) asset dispositions, (ii) mergers and
      acquisitions, (iii) capital expenditures, (iv) restricted payments, (v) the
      incurrence of indebtedness, (vi) loans and investments, (vii) liens, (viii)
      certain transactions with affiliates and (ix) maintaining various financial
      ratios.
  
      On June 21, 1999, IPC Information Systems, IPC, General Electric Capital
      Corporation, as the Administrative Agent and Collateral Agent, First Union
      Capital Markets, Inc., as Documentation Agent, and the Lenders and the
      Issuing Bank named therein, amended the Revolving Credit Facility to provide
      for (1) a working capital facility of $45.0 million, based on eligible
      accounts receivable and inventory, and (2) a $20.0 million term loan.  In
      addition, certain terms relating to the eligibility of accounts receivable
      used in determining the amount available under the working capital facility
      were relaxed.  The amendment also provides for certain additional financial
      covenants including a leverage ratio and fixed charge ratio. The Revolving
      Credit Facility was further amended to permit the issuance of additional
      shares of IXnet common stock, to permit the incurrence of certain deferred
      payment obligations, and to modify certain financial ratios applicable
      through January 15, 2000, at which time the Company expects that such ratios
      will be reset in accordance with updated future projections.  The Company
      has segregated marketable securities to satisfy such deferred payment
      obligations.
  
      Under the Revolving Credit Facility, substantially all of the Company's real
      and personal property is pledged as collateral, including inventory,
      accounts receivable and substantially all of the common stock of its
      significant subsidiaries.
  
      The $20.0 million term loan is repayable in quarterly installments of $1.3
      million, which commenced on September 30, 1999 and initially bears interest
      at LIBOR plus 2.75% or at the base rate plus 1.75%, at the Company's option.
      The base rate is equal to the higher of (1) the rate of interest announced
      publicly by Citibank, N.A. at its head office in New York as the base rate
      of Citibank and (2)  1/2 of 1% per annum above the federal funds rate, as
      defined in the Revolving Credit Facility.  The proceeds of the term loan
      were used to repay borrowings outstanding under and for fees incurred in
      connection with the Revolving Credit Facility.
  
      Loans made under the working capital facility initially bear interest, at
      the Borrower's option, at the base rate plus 1.5% or LIBOR plus 2.5%.  At
      September 30, 1999, $14.7 million was outstanding.  The Revolving Credit
      Facility also provides a $10.0 million sub-limit for the issuance of letters
      of credit, of which $8.9 million was outstanding at September 30, 1999.
      Availability
  
                                        50
  IPC COMMUNICATIONS, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
  
      under the working capital facility at September 30, 1999, after giving
      effect to the outstanding borrowings and letters of credit, approximated
      $17.9 million.
  
      The base rate and LIBOR rate for the Revolving Credit Facility are subject
      to step-downs based on the Company's leverage ratio.
  
      The Revolving Credit Facility requires the Company to pay a commitment fee
      equal to 0.5% per annum on the unused commitment amount.  The Company
      incurred $0.1 million and $0.3 million in commitment fees and $0.4 million
      and $0.1 million of interest amortization, for the years ended September 30,
      1999 and 1998, respectively, associated with the Revolving Credit Facility.
  
  10. Long-Term Debt:
  
      Senior Discount Notes
  
      On April 30, 1998, the Company issued $247.4 million aggregate principal
      amount at maturity ($180.0 million proceeds at issuance) of 10 7/8% Senior
      Discount Notes due 2008.  The Notes were issued under an indenture between
      the Company, as issuer, and United States Trust Company of New York, as
      trustee. The indenture contains certain restrictive covenants which impose
      limitations on the Company and its subsidiaries, including, (i)
      indebtedness, (ii) restricted payments, (iii) dividends, (iv) issuance and
      sale of capital stock of subsidiaries, (v) issuance of guarantees by
      subsidiaries, (vi) certain transactions with shareholders and affiliates,
      (vii) liens, (viii) sale-leaseback transactions, and (ix) asset sales.
  
      The Notes were issued at a discount to their aggregate principal amount
      resulting in gross proceeds to the Company of $180.0 million.  Although
      interest on the Notes will not accrue until May 1, 2001 (the "Interest
      Accrual Date"), the Notes will accrete in value to the principal amount by
      the Interest Accrual Date.  The Notes will bear interest at 10 7/8% from the
      Interest Accrual Date through redemption and is payable semiannually on May
      1 and November 1.  There are no sinking fund payments related to the Notes.
  
      Up to 35% of the Notes may be redeemed by the Company at 110.875% of the
      accreted value plus accrued and unpaid interest with the proceeds of one or
      more equity offerings, as defined, prior to May 1, 2001.  In addition, the
      Company may redeem the Notes in whole or in part, at any time after May 1,
      2003 and prior to maturity at a premium of 105.428% decreasing to the
      principal amount on May 1, 2006.  The indenture also provides for a
      mandatory offer by the Company to repurchase the Notes in the event of a
      change of control at 101% of the accreted value plus accrued interest.
  
      The Notes are unsubordinated, unsecured indebtedness of IPC Information
      Systems, ranking pari passu in right of payment with all existing and future
      unsubordinated, unsecured indebtedness of IPC Information Systems and senior
      in right of payment to all existing and future subordinated indebtedness of
      IPC Information Systems.
  
      Interest expense, net includes $21.0 million and $8.2 million related to the
      amortization of the discount of the Notes and $0.3 million and $0.4 million
      related to issuance costs of the Notes, for the years ended September 30,
      1999 and 1998, respectively.
  
      The estimated fair value of the Notes, calculated using the quoted closing
      price of the bonds was $192.7 million and $178.1 million at September 30,
      1999 and 1998, respectively.
  
                                        51
  IPC COMMUNICATIONS, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
  
      Saturn Note
  
      In conjunction with the acquisition of Saturn, two notes were issued and
      assumed by the Company in the aggregate amount of $12.5 million.  The first
      is a 3 year $7.5 million note issued to Marshalls Finance Ltd. bearing
      interest at a rate of the UK Sterling plus 3%. The second note assigned to
      IXnet in accordance with the acquisition of Saturn amounting to $5.0
      million.  Under the agreement, the assumed Marshalls note is subject to a
      working capital adjustment and right of offset.  This working capital
      adjustment was settled in June 1999 resulting in a reduction of the
      obligation by approximately $2.0 million.
  
      Strategic Agreement
  
      In connection with the Strategic Agreement, IXnet agreed to pay $10.0
      million over a six-month period ending on April 1, 2000.
  
      Future debt payments required by the Saturn Note, the Marshalls Note, the
      Strategic Agreement and the Revolving Credit Facility (included as a $14.7
      million payment in fiscal 2000) at September 30, 1999 are as follows (In
      thousands):
  
                 Fiscal
                 ------
                  2000                      $29,402
                  2001                        3,189
                  2002                        2,445
                                            -------
                                            $35,036
                                            =======
  
      The future payments noted above exclude any payments in relation to the
      Senior Note Indenture.  The interest payments relating to the indenture
      begin paying semi-annually on November 1, 2001.
  
  11. Deferred Compensation and Other Benefit Plans:
  
      Deferred Compensation
  
      The Company has deferred compensation agreements with certain past key
      officers and employees. Payments began in 1992 and continue through 2019.
      The gross and discounted present value (using an interest rate of 7.5%), net
      of cash payments, of the amounts to be paid under these agreements,
      aggregated $6.6 million and $3.6 million at September 30, 1999 and $6.9
      million and $3.9 million at September 30, 1998, respectively.
  
                                        52
  IPC COMMUNICATIONS, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
  
      Approximate payments for subsequent annual periods related to the deferred
      compensation agreements, at September 30, 1999, are as follows (In
      thousands):
  
      2000                                                       $   320
      2001                                                           390
      2002                                                           471
      2003                                                           490
      2004                                                           434
      Thereafter                                                   4,503
                                                                  ------
                                                                  $6,608
                                                                  ======
  
      Pension Plans
  
      IPC maintains a 401(k) savings plan for all eligible US employees. According
      to plan provisions, IPC contributions are discretionary and are subject to
      approval by the Board of Directors.  Eligible employees may contribute up to
      15% of their annual compensation. IPC contributed $0.7 million, $0.6 million
      and $0.4 million to the plan for the years ended September 30, 1999, 1998
      and 1997, respectively.
  
      IPC-UK has a defined contribution plan covering all UK employees.  Employee
      contributions are limited by statute, generally not to exceed 17.5% of base
      salary.  IPC-UK contributions, net of forfeitures, were $0.2 million per
      year for the years ended September 30, 1999, 1998 and 1997.
  
      The Company paid to Kleinknecht Electric Company ("KEC") and Kleinknecht
      Electric Company - New Jersey ("KEC-NJ"), both affiliated companies, in
      accordance with labor pooling agreements, approximately $8.1 million, $7.6
      million, and $7.6 million for the years ended September 30, 1999, 1998 and
      1997, respectively, representing pass-through contributions to various union
      sponsored pension plans.
  
      IPC Employee Stock Option and Purchase Plan
  
      In connection with the Merger, the employee stock purchase plan was
      terminated April 30, 1998. On April 30, 1998 the Company terminated its
      existing plan and replaced it with a new stock option plan. Under the new
      plan, employees generally vest in stock options over a five-year period.
  
      In connection with the Reorganization, IPC Information Systems assigned, and
      IPC assumed, the obligations for the performance of the IPC Information
      Systems, Inc. 1998 Stock Incentive Plan, which, effective as of December 3,
      1998 had been amended to increase its share reserve from 1,108,224 to
      1,538,322 shares of the Company's Common Stock and which was renamed the
      "IPC Communications, Inc. 1999 Stock Incentive Plan." The Stock Incentive
      Plan provides for the grant of options to purchase Common Stock of the
      Company to certain officers, employees, consultants and directors of the
      Company and its subsidiaries.
  
      IXnet Stock Option Plan
  
      During May 1999, IXnet's Board of Directors and the Company approved the
      IXnet, Inc. 1999 Stock Option Plan authorizing the grant of options to
      purchase up to 7,053,409 shares of IXnet's common stock. At that time,
      options to purchase 6,530,184 shares were granted to employees, directors
      and others at an exercise price of $13.96 per share. Except for 1,763,352
      options granted
  
                                        53
  IPC COMMUNICATIONS, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
  
      to IXnet's chief executive officer which vested immediately, such options
      vest over four years. Such options become exercisable, to the extent then
      vested, 30 months from the date of grant.
  
      Stock Compensation Data
  
      A summary of the Company's stock option plan as of September 30, 1999, 1998
      and 1997 and changes during the years then ended is presented below (In
      thousands).
  IPC Stock Option Plan
                                                          ---------------------
                                            Consolidated                   IXnet Employee Options       IXnet 1999 Stock Option Plan
                                           --------------                  ------------------------     ----------------------------
                                                         Weighted                          Weighted                     Weighted
                                     Number of           Average            Number of       Average       Number of     Average
                                      Options         Exercise Price         Options    Exercise Price     Options   Exercise Price
                                     ---------           ---------          ---------      ---------      ---------   ------------
  Outstanding at September 30, 1996   1,652,402           $ 8.05            231,000         $ 7.93            -               -
  Granted                               791,000           $ 7.42            186,000         $ 7.25            -               -
  Exercised                             (39,730)          $ 7.00            (26,666)        $ 6.83            -               -
  Forfeited                            (356,472)          $ 8.18            (53,334)        $ 7.53            -               -
                                     ----------                            --------
  Outstanding at September 30, 1997   2,047,200           $ 7.81            337,000         $ 7.71            -               -
  Granted                               200,000           $12.50            401,734         $10.50            -               -
  Granted                             1,071,284           $10.50                  -              -            -               -
  Exercised                             (63,722)          $ 7.47             (4,998)        $ 8.00            -               -
  Exercised and retired at merger    (1,814,266)          $ 7.37           (328,000)        $ 7.70            -               -
  Forfeited                            (369,212)          $12.58             (4,002)        $ 7.63            -               -
                                     ----------                            --------
  Outstanding at September 30, 1998   1,071,284           $10.50            401,734         $10.50            -               -
  May 4, 1999 initial grant                   -                -                  -              -    6,530,184          $13.96
  Granted                               647,443           $20.13            195,146         $10.50      489,764          $16.04
  Exercised                            (490,576)          $10.50           (160,300)        $10.50            -               -
  Forfeited                            (120,220)          $10.50            (22,868)        $10.50      193,919          $13.98
                                     ----------                            --------                   ---------
  Outstanding at September 30, 1999   1,107,931           $16.13            413,712         $10.50    6,826,029          $14.11
                                     ==========                            ========                   =========
  
  Options exercisable
     At September 30, 1997              544,990           $ 7.44                  -              -            -               -
     At September 30, 1998                    -                -                  -              -            -               -
     At September 30, 1999            1,107,931           $10.50            413,712         $10.50            -               -
  The weighted average contractual life of stock options outstanding at
      September 30, 1999 was 9.1 years.
  
      In connection with the IPO of IXnet, the Company recognized $9.1 million of
      compensation expense during the year ended September 30, 1999.
      Additionally, in connection with the April 30, 1998 Merger, included in the
      $10.6 million non-recurring change in control expense, the Company
      recognized compensation expense in the amount of $5.9 million, representing
      payments to option holders upon cancellation of their stock options.  As a
      result of the charges mentioned above, under the provisions of SFAS No. 123,
      the Company's net income and earnings per share on a pro forma basis is the
      same as actual for the years ended September 30, 1999 and 1998.  Had
      compensation cost for the Company's stock option plan and employee stock
      purchase plan been determined based on the fair value at the grant date for
      awards in fiscal 1997, consistent with the provisions of
  
                                        54
  IPC COMMUNICATIONS, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
  
      SFAS No. 123, the Company's net income and earnings per share would have
      been reduced to the pro forma amounts indicated below (In thousands, except
      per share amounts).
  For the year ended
                                                                                 September 30,
                                                                  -----------------------------------------
                                                                    1999             1998            1997
                                                                  -------           -------         -------
  Net (loss) income - as reported..............................   $(32,456)          $2,278          $3,834
  Net (loss) income - pro forma................................   $(37,039)          $2,278          $2,934
  Basic (loss) earnings per share - as reported................   $  (3.97)          $ 0.14          $ 0.18
  Basic (loss) earnings per share - pro forma..................   $  (4.53)          $ 0.14          $ 0.14
  Diluted (loss) earnings per share - as reported..............   $  (3.97)          $ 0.14          $ 0.18
  Diluted (loss) earnings per share - pro forma................   $  (4.53)          $ 0.14          $ 0.14
  The fair value of each option grant is estimated on the date of the grant
      using the "Black-Scholes option-pricing model" with the following weighted
      average assumptions used for grants for the years ended September 30, 1999,
      1998 and 1997; zero dividend yield; expected volatility of 55%; weighted
      average risk-free interest rate of 6.5% in fiscal 1999, 6.19% in fiscal 1998
      and 6.03% in fiscal 1997; and expected lives of 5 years in fiscal 1999, 4.78
      years in 1998 and 4 years for fiscal 1997.
  
  12. Earnings Per Share:
  
      The following is a reconciliation of the computations of  basic and diluted
      earnings per share (In thousands, except per share amounts).
  Year Ended September 30,
                                                      --------------------------------------------
                                                            1999            1998           1997
                                                      ------------      -----------    -----------
  Basic earnings (loss) per share computation
  Net Income (loss)..................................      $(32,456)        $ 2,278        $ 3,834
                                                      -------------     -----------    -----------
  Weighted average common shares outstanding.........         8,172          15,774         21,328
  Total shares.......................................         8,172          15,774         21,328
                                                      =============     ===========    ===========
  Basic earnings (loss) per share....................      $  (3.97)        $  0.14        $  0.18
                                                      =============     ===========    ===========
  
                                                                 Year Ended September 30,
                                                      --------------------------------------------
                                                           1999            1998           1997
                                                      -------------     -----------    -----------
  Diluted earnings (loss) per share computation
  Net income (loss)..................................      $(32,456)        $ 2,278        $ 3,834
                                                      -------------     -----------    -----------
    Weighted average common shares outstanding.......         8,172          15,774         21,328
    Common stock equivalent of stock options.........             -             167             80
                                                      -------------     -----------    -----------
  Total shares.......................................         8,172          15,941         21,408
                                                      =============     ===========    ===========
  Diluted earnings (loss) per share..................      $  (3.97)        $  0.14        $  0.18
                                                      =============     ===========    ===========
  Approximately 1,071,284 and 318,000 stock options were outstanding for the
       years ended September 30, 1998 and 1997, respectively, which were not
       included in the computation of diluted earnings per share because the
       exercise prices exceeded the average market price of the Company's common
       stock for each period.  For the year ended September 30, 1999, Common
  
                                        55
  IPC COMMUNICATIONS, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
  
       Stock equivalents of stock options were excluded from the diluted earnings
       per share calculation as their effect would have been anti-dilutive.
  
  13. Commitments and Contingencies:
  
      Operating Leases
      ----------------
      The Company has entered into various operating leases primarily for real
      estate and related lines and equipment.
  
      Rental expenses under operating leases were $20.8 million, $17.4 million and
      $13.7 million for the years ended September 30, 1999, 1998 and 1997,
      respectively.
  
      Future minimum annual rental payments required under noncancellable
      operating leases at September 30, 1999 are as follows (In thousands):
  
        2000                                                      $28,530
        2001                                                        9,665
        2002                                                        8,353
        2003                                                        7,436
        2004                                                        6,789
       Thereafter                                                   4,379
                                                                  -------
                                                                  $65,151
                                                                  =======
  
      Capital Leases
      --------------
  
      The Company has entered into capital lease agreements for certain network
      switching equipment and for certain computer equipment and software.  Total
      assets acquired under capital leases was approximately $31.1 million at
      September 30, 1999 and $22.4 million at September 30, 1998.  The accumulated
      depreciation and amortization at September 30, 1999 and 1998 was
      approximately $12.1 million and $6.1 million, respectively.
  
      Future minimum lease payments required under noncancellable capital leases
      at September 30, 1999 are as follows (In thousands):
  
        2000                                                      $13,189
        2001                                                       12,249
        2002                                                        7,854
        2003                                                        4,540
        2004                                                        1,525
                                                                  -------
                                                                   39,357
         Less, amount representing interest                        17,441
                                                                   ------
       Net present value of minimum lease payments under
         capital leases                                           $21,916
                                                                  =======
  
  14. Related Party Transactions:
  
      Services Provided
      -----------------
  
      Affiliated companies performed various services and provided certain
      equipment to the Company. Services and/or equipment provided by affiliates
      are billed to the Company and settled through a periodic cash transfer to
      the respective affiliate.
  
                                        56
  IPC COMMUNICATIONS, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
  
      The Company has a written arrangement with KEC and KEC-NJ with respect to a
      pool of field technicians utilized by the Company.  KEC and KEC-NJ are
      responsible for administering the payroll and related benefits for these
      technical and clerical workers and the Company reimburses all compensation
      and benefits paid by KEC and KEC-NJ attributable to services performed for
      the Company plus a fee equal to 2.5% of such costs.  Effective for the
      fiscal year 1997, the parties amended these agreements to provide a fixed
      fee payment of $50 thousand per month in lieu of the fee payment of 2.5%.
      Approximately $53.0 million, $51.7 million and $52.7 million of technical
      labor, and $2.1 million, $2.0 million and $2.2 million of administrative
      labor was provided through agreements with KEC and KEC-NJ during the years
      ended September 30, 1999, 1998 and 1997, respectively.
  
      For the years ended September 30, 1999, 1998 and 1997, KEC and KEC-NJ billed
      the Company payroll administrative services of $0.6 million annually.
      Included in prepaid expenses and other current assets is a net related party
      receivable of $0.6 million at September 30, 1999.  $0.3 million of net
      related party payable is included in accrued expenses at September 30, 1998.
  
      A portion of the Company's New York branch operation was co-located with KEC
      through 1997 in a building owned by Knight Ventures, Inc., a company owned
      by Richard P. Kleinknecht and Peter J. Kleinknecht (the "Former Principal
      Stockholders").  For the year ended September 30, 1997 the Company was
      charged rent of approximately $0.2 million.
  
      Subcontracts and Other
  
      The Company and other companies controlled by the Former Principal
      Stockholders periodically subcontract certain work to one another.  Amounts
      charged to companies controlled by the Former Principal Stockholders under
      subcontracts with IPC for the years ended September 30, 1999, 1998 and 1997
      were approximately $3.1 million, $2.9 million and $0.1 million,
      respectively, while amounts charged to IPC under subcontracts with companies
      controlled by the Former Principal Stockholders were approximately $0.1
      million, $0.2 million and $0.3 million, respectively.
  
      In addition to the foregoing, the Company, KEC and KEC-NJ entered into a
      twenty-year agreement dated May 9, 1994, with respect to business
      opportunities regarding cabling of communication infrastructures.  KEC and
      KEC-NJ have agreed not to bid for or accept cabling jobs in competition with
      the Company, if the Company intends to bid or accept such work.  In
      addition, because the Company is not a licensed electrical contractor, it
      has agreed to refrain from bidding for or accepting without the consent of
      KEC or KEC-NJ, as the case may be, all opportunities that combine both
      electrical and cabling work.  The Company has also agreed to continue to
      refer to KEC and KEC-NJ certain electrical contracting bid opportunities
      identified from time to time.  Pursuant to such agreement, all estimates for
      cabling work shall be generated by the Company on behalf of KEC, and KEC
      will pay the Company a nominal amount for preparing such estimates.
  
      The Company and companies controlled by the Former Principal Stockholders
      also charge each other certain miscellaneous expenses, including, but not
      limited to, office equipment rentals and certain other administrative
      expenses.  Such amounts are not significant.
  
                                        57
  IPC COMMUNICATIONS, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
  
  15. Income Taxes:
  
      Pretax (loss) earnings consisted of the following (In thousands):
  For the year ended September 30,
                                                  ---------------------------------------------------------
                                                        1999                 1998                 1997
                                                  --------------     ------------------     ---------------
  United States                                 $(31,955)              $(18,275)             $1,689
          Foreign                                          6,072                 26,744               6,425
                                                  --------------     ------------------     ---------------
          Total pretax (loss) earnings                  $(25,883)              $  8,469              $8,114
                                                  ==============     ==================     ===============
  The provision for income taxes consisted of the following:
  For the year ended September 30,
                                                  ---------------------------------------------------------
                                                         1999                1998                 1997
                                                  ----------------    ----------------     ----------------
  Current:
               Federal                                      $    -             $   295               $ (182)
               State and local                                 687               1,545                2,037
               Foreign                                       3,561               9,120                2,342
                                                  ----------------    ----------------     ----------------
                                                            $4,248             $10,960               $4,197
                                                  ----------------    ----------------     ----------------
             Deferred:
               Federal                                      $2,549             $(3,737)              $  323
               State and local                                 750                (885)                   9
               Foreign                                         421                (147)                (249)
                                                  ----------------    ----------------     ----------------
                                                             3,720              (4,769)                  83
                                                  ----------------    ----------------     ----------------
             Income tax provision                           $7,968             $ 6,191               $4,280
                                                  ================    ================     ================
  The components of net deferred tax assets are as follows (In thousands):
  September 30,
                                     ------------------------------------------------------------------------------------------------
                                                        1999                                                 1998
                                     ---------------------------------------------         ------------------------------------------
                                         US            Foreign             Total               US           Foreign           Total
                                     ---------       ----------          ---------         ---------       ---------        ---------
  Deferred tax assets:
  Excess of book over tax
   depreciation                      $    189           $   -            $    189           $   745            $ 91           $   836
  Amortization of intangibles           4,701               -               4,701               621               -               621
  Inventory and receivables             1,388               -               1,388             2,685             569             3,254
  Accrued expenses                      2,658              369              3,027             4,510              20             4,530
  Net operating loss carryforward      13,649              291             13,940                 -               -                 -
  AMT tax credit carryforward             334               -                 334               128               -               128
  Foreign tax credit carryforward       4,657               -               4,657             3,999               -             3,999
                                     --------         -------          ----------         ---------         -------         ---------
      Total                            27,576              660             28,236            12,688             680            13,368
      Less valuation allowance        (20,133)           (291)            (20,424)           (3,999)              -            (3,999)
                                     --------         -------          ----------         ---------         -------         ---------
  
  Total deferred tax assets          $  7,443           $ 369            $  7,812           $ 8,689            $680           $ 9,369
  58
  IPC COMMUNICATIONS, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
  Deferred tax liabilities:
  Excess of book over tax             (2,068)           (110)             (2,178)              (15)              -               (15)
   depreciation
                                 ------------         -------          ----------         ---------         -------         ---------
  
  Net deferred tax assets            $  5,375           $ 259            $  5,634           $ 8,674            $680           $ 9,354
                                 ============         =======          ==========         =========         =======         =========
  A valuation allowance is provided for foreign tax credit carryforwards, net
      operating loss carryforwards related to IXnet and certain foreign net
      operating loss carryforwards which expire at various times.  The U.S. net
      operating loss of $40.1 million as of September 30, 1999 expires in the year
      2019.
  
      A reconciliation between the statutory US federal income tax rate and the
      Company's effective tax rate, excluding minority interest, is as follows:
  For the year ended September 30,
                                                         --------------------------------------------------------
                                                                1999                 1998                1997
                                                         --------------       -----------------     --------------
  Statutory US federal tax rate                     (35.0%)                 35.0%              35.0%
           State and local income taxes,
               net of federal benefit                          3.6                    7.8                16.4
           Incremental foreign tax effect                      7.2                    22.3                 -
           Losses with no benefit                              62.3                     -                  -
           Other, net                                         (7.3)                    8.0                1.4
                                                         --------------       -----------------     --------------
                                                             (30.8%)                  73.1%              52.8%
                                                         ==============       =================     ==============
  16. Business Segment and Geographic Information:
  
      Business Segments
      -----------------
      The Company has adopted SFAS No. 131, Disclosures about Segments of an
      Enterprise and Related Information, for reporting information about
      operating segments and related disclosures about products and services,
      geographic areas and major customers.
  
      The Company's operations include trading systems, ITS and IXnet. Trading
      systems reports sales of turret systems to distributors and direct sales and
      installations of turret systems as "Product sales and installation".  It
      reports revenue from turret system maintenance, including annual and multi-
      year service contracts, and from moves, additions and changes to existing
      turret system installations as "Service".  ITS reports revenue from the
      design, integration and implementation of cabling infrastructure projects
      including LAN's and WAN's, and from the sales of intelligent network
      products, such as hubs, bridges and routers as "Product sales and
      installation".  It reports revenue from on-site maintenance of customer
      cable infrastructure, including annual and multi-year contracts, and from
      the provision of outsourcing services for the support, expansion and
      upgrading of existing customer networks as "Service."  IXnet reports revenue
      from sales of premium voice, managed bandwidth and outsourcing services, and
      to a lesser extent, switched voice, shared internet protocol and other
      services (In thousands).
  
                                        59
  IPC COMMUNICATIONS, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
  Trading
                                           Systems           ITS              IXnet           Eliminations         Consolidated
                                       -------------    ------------    --------------     ----------------     -----------------
  Fiscal Year 1999:
  Revenue:
  Product sales and installation         $122,836         $55,365                 -                    -              $178,201
     Service                                  71,734          15,748          $ 73,509                    -               160,991
     Intersegment                                  -               -               106                $(106)                    -
                                       -------------    ------------    --------------     ----------------     -----------------
  Total Revenue                              194,570          71,113            73,615                 (106)              339,192
  Gross profit (excluding
       depreciation and amortization)         98,189           9,090               778                 (106)              107,951
  Research & development                       9,786               -                 -                    -                 9,786
  Selling, general & administrative (a)       22,975           4,458            21,627                 (106)               58,047
  Depreciation & amortization                  8,177             357            21,576                    -                30,110
  Stock compensation charge                        -               -             9,079                    -                 9,079
                                       -------------    ------------    --------------     ----------------     -----------------
  Income from operations                    $ 57,251         $ 4,275          $(51,504)                   -              $    929
                                       =============    ============    ==============     ================     =================
  EBITDA (b)                                $ 65,428         $ 4,632          $(20,849)                   -              $ 40,118
                                       =============    ============    ==============     ================     =================
  Total assets (c)                          $193,548         $23,806          $195,855                    -              $413,209
                                       =============    ============    ==============     ================     =================
  Fiscal Year 1998:
  Revenue:
  Product sales and installation         $133,233         $40,117                 -                    -              $173,350
     Service                                  63,592          23,192          $ 35,683                    -               122,467
     Intersegment                                  -               -               170                $(170)                    -
                                       -------------    ------------    --------------     ----------------     -----------------
  Total Revenue                              196,825          63,309            35,853                 (170)              295,817
  Gross profit (excluding
       depreciation and amortization)         98,610           7,948               371                 (170)              106,759
  Research & development                       8,276               -                 -                    -                 8,276
  Selling, general & administrative (a)       22,018           5,146            13,626                 (170)               53,345
  Depreciation & amortization                  6,209             421             9,060                    -                15,690
  Change in control expense                    8,837             453             1,350                    -                10,640
                                       -------------    ------------    --------------     ----------------     -----------------
  Income from operations                    $ 53,270         $ 1,928          $(23,665)                   -              $ 18,808
                                       =============    ============    ==============     ================     =================
  EBITDA (b)                                $ 68,316         $ 2,802          $(13,255)                   -              $ 45,138
                                       =============    ============    ==============     ================     =================
  Total assets (c)                          $202,859         $24,280          $ 14,503                    -              $241,642
                                       =============    ============    ==============     ================     =================
  60
  IPC COMMUNICATIONS, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
  Fiscal Year 1997:
  Revenue:
  Product sales and installation         $122,493         $57,485                 -                    -              $179,978
     Service                                  55,146          17,261          $ 17,673                    -                90,080
     Intersegment                                  -               -               165                $(165)                    -
                                       -------------    ------------    --------------     ----------------     -----------------
  Total Revenue                              177,639          74,746            17,838                 (165)              270,058
  Gross profit (excluding
       depreciation and amortization)         71,602           5,344            (2,020)                (165)               74,761
  Research & development                       8,490               -                 -                    -                 8,490
  Selling, general & administrative (a)       24,632           4,904             7,576                 (165)               48,100
  Depreciation & amortization                  4,776             394             3,460                    -                 8,630
                                       -------------    ------------    --------------     ----------------     -----------------
  Income from operations                    $ 33,704         $    46          $(13,056)                   -              $  9,541
                                       =============    ============    ==============     ================     =================
  EBITDA (b)                                $ 38,480         $   440          $ (9,596)                   -              $ 18,171
                                       =============    ============    ==============     ================     =================
  Total assets (c)                          $135,779         $13,035          $ 10,083                    -              $158,897
                                       =============    ============    ==============     ================     =================
  (a)  Consolidated selling, general & administrative includes corporate general &
       administrative expenses of $9,093, $12,725 and $11,153 for the years ended
       September 30, 1999, 1998 and 1997 respectively.
  
  (b)  Earnings before interest, taxes, depreciation and amortization ("EBITDA")
       represents operating income plus depreciation and amortization.  EBITDA for
       the year ended September 30, 1999 excludes $9.1 million of deferred
       compensation expense and for the year ended September 30, 1998 excludes a
       $10.6 million non-recurring change in control expense.
  
  (c)  The Company's management reviews corporate assets combined with trading
       system's assets.
  
       Geographic sales information is based on the currency in which the customer
  is billed.  Information about the Company's operations by geographic area is as
  follows (In thousands):
  For the year ended September 30,
                                                   --------------------------------------------------
                                                         1999              1998              1997
                                                   --------------    --------------    --------------
  
  Revenues:
  North America                                          $242,479          $211,237          $205,745
  Europe                                                   73,306            70,708            50,682
  Asia/Pacific and other                                   23,407            13,872            13,631
                                                   --------------    --------------    --------------
                                                         $339,192          $295,817          $270,058
                                                   ==============    ==============    ==============
  
  Long Lived Assets:
  United States                                          $ 97,252          $ 72,104          $ 36,232
  United Kingdom                                            1,813            12,636            11,042
  Rest of World                                                92               101                 -
                                                   --------------    --------------    --------------
                                                         $ 99,157          $ 84,841          $ 47,274
                                                   ==============    ==============    ==============
  No single customer accounted for 10% or more of total revenues for the years
      ended September 30, 1999, 1998 and 1997.
  
                                        61
  IPC COMMUNICATIONS, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
  
     17.  Quarterly Financial Information (unaudited):
  
          The following tables set forth unaudited quarterly financial information
          for the years ended September 30, 1999 and 1998 (In thousands, except
          per share amounts):
  Quarter Ended
                                                -------------------------------------------------------------
                                                 December 31,      March 31,     June 30,      September 30,
                                                 -----------       --------      --------      --------------
          Year ended
          September 30, 1999:
          -------------------
  Revenue                                     $67,750        $80,933     $ 91,206           $ 99,303
          Gross profit (excluding                      27,769         31,424       19,847             28,911
             depreciation and amortization)
          Net income (loss)                            (3,659)        (3,291)     (11,610)           (13,896)
          Basic and diluted (loss) per share           ($0.45)        ($0.41)      ($1.44)            ($1.70)
  
          Year ended
          September 30, 1998:
          -------------------
  
          Revenue                                     $67,052        $61,145     $ 77,954           $ 89,666
          Gross profit (excluding                      26,627         23,713       31,536             24,883
             Depreciation and amortization)
          Net income                                    3,594          2,154       (3,839)               369
          Basic and diluted earnings (loss)
          per share                                   $  0.17        $  0.10       ($0.31)          $   0.05
  The quarterly earnings per share information is computed separately for each
      period.  Therefore, the sum of such quarterly per share amounts may differ
      from the total for the year.
  
      In connection with the Merger, the Company incurred a pre-tax non-recurring
      charge for change in control expenses of $10.6 million in the quarter ended
      June 30, 1998.  As a result of this charge, the Company incurred a net loss
      in the quarter and diluted earnings per share was not calculated as the
      common stock equivalents would have had an anti-dilutive effect.  For the
      year ended September 30, 1999, Common Stock equivalents of stock options
      were excluded from the diluted earnings per share calculation as their
      effect would have been anti-dilutive.
  
                                        62
  GLOBAL CROSSING LTD.
                SELECTED UNAUDITED PRO FORMA FINANCIAL INFORMATION
  
          The following unaudited pro forma condensed combined financial
  information of Global Crossing, Global Marine Systems, Frontier, Racal Telecom,
  the Hutchison Global Crossing joint venture, IPC Communications and IXnet,
  which we refer to as "Pro Forma Global Crossing Ltd.", has been prepared to
  demonstrate how these companies or businesses might have looked if (1) the
  Global Marine Systems acquisition and related financing, (2) the Frontier
  acquisition, (3) the Racal Telecom acquisition and related financing, (4) the
  Hutchison Global Crossing joint venture, including the related issuance of 6
  3/8% cumulative convertible preferred stock, series B, of Global Crossing, (5)
  the IPC and IXnet acquisitions, (6) the offering of our 6 3/8% cumulative
  convertible preferred stock completed on November 5, 1999, (7) the offering of
  the 9 1/8% senior notes due 2006 and 9 1/2% senior notes due 2009 of Global
  Crossing Holdings completed on November 19, 1999, (8) the offering of our 7%
  cumulative convertible preferred stock completed on December 15, 1999 and (9)
  the offering of our 6 3/4% cumulative convertible preferred stock and
  21,673,706 shares of our common stock completed in April 2000 had been
  completed as of the date or at the beginning of the period presented.
  
          We have prepared the pro forma financial information using the purchase
  method of accounting. We expect that we will have reorganization and
  restructuring expenses and potential synergies relating to the acquisitions of
  Global Marine Systems, Racal Telecom, IPC and IXnet, the Hutchison Global
  Crossing joint venture and the acquisition of Frontier's long distance business
  and increased opportunities to earn more revenue as a result of those
  transactions. The unaudited pro forma information does not reflect these
  expenses and synergies.
  
          The pro forma information, while helpful in illustrating the financial
  characteristics of the combined company under one set of assumptions, does not
  attempt to predict or suggest future results. The pro forma information also
  does not attempt to show how the combined company would actually have performed
  had the companies been combined throughout these periods. If the companies had
  actually been combined in prior periods, these companies and businesses might
  have performed differently. You should not rely on pro forma financial
  information as an indication of the results that would have been achieved if the
  Global Marine Systems, Frontier, Racal Telecom, IPC and IXnet acquisitions and
  the Hutchison Global Crossing joint venture had taken place earlier or the
  future results that the companies will experience after completion of these
  transactions.
  
          You should read these unaudited pro forma condensed combined financial
  statements in conjunction with the historical financial statements of Global
  Crossing, Global Marine Systems, Frontier, Racal, Telecom HCL Holdings, IPC and
  IXnet.
  
                          PRO FORMA GLOBAL CROSSING LTD.
  
               Unaudited Pro Forma Condensed Combined Balance Sheet
                               As of March 31, 2000
                                  (in thousands)
  Global                                                          Global
                                                          Crossing      IPC/IXnet         Pro Forma       Financing        Crossing
                                                         Historical (1) Historical (2)  Adjustments (3)  Adjustments (4)  Pro Forma
                                                         --------------------------------------------------------------  ----------
  ASSETS
  Current Assets:
  Cash, restricted cash and investments............... $ 1,383,969  $ 34,621           $ -           $ 1,802,000    $ 3,220,590
      Accounts receivable, net............................     912,071    83,600             -                  -           995,671
      Other assets and prepaid costs......................     319,562    64,330             -                  -           383,892
                                                           ------------------------------------------------------------------------
  
      Total Current Assets................................   2,615,602   182,551             -             1,802,000      4,600,153
  
      Restricted cash and cash equivalents................      69,545         -             -                  -            69,545
      Accounts receivable.................................      42,419         -             -                  -            42,419
      Property and equipment, net.........................   7,985,651   117,382             -                  -         8,103,033
      Goodwill and other intangibles, net.................   9,436,715    88,097          (88,097)              -        12,649,272
                                                                                        3,212,557
      Investment in and advances to/from affiliates, net..     604,291         -             -                  -           604,291
      Other assets, net...................................     735,747    11,989          147,770                           895,506
                                                           ------------------------------------------------------------------------
  
      Total Assets........................................ $21,489,970  $400,019       $3,272,230        $ 1,802,000   $ 26,964,219
                                                           ========================================================================
  
  LIABILITIES AND SHAREHOLDERS' EQUITY
  Current Liabilities:
      Accrued construction costs.......................... $   570,461   $     -        $    -           $      -      $    570,461
      Accounts payable and accrued liabilities............     919,910    88,945           33,000               -         1,041,855
      Accrued interest and preferred dividends............     162,260         -             -                  -           162,260
      Deferred revenue....................................     216,234    41,368             -                  -           257,602
      Income taxes payable................................      88,325         -             -                  -            88,325
      Current portion of long term debt...................      11,649    50,316             -                  -            61,965
      Other current liabilities...........................     264,314     7,205             -                  -           271,519
                                                           ------------------------------------------------------------------------
  
      Total Current Liabilities...........................   2,233,153   187,834           33,000               -         2,453,987
  
      Long term debt......................................   6,031,662   226,150             -                  -         6,257,812
      Deferred revenue....................................     489,331         -             -                  -           489,331
      Deferred credits and other..........................     819,485    22,206             -                  -           841,691
                                                           ------------------------------------------------------------------------
  
      Total Liabilities...................................   9,573,631   436,190           33,000               -        10,042,821
                                                           ------------------------------------------------------------------------
  
  MINORITY INTEREST.......................................     478,030    14,627          (14,627)              -           478,030
                                                           ------------------------------------------------------------------------
  
  MANDATORILY REDEEMABLE AND CUMULATIVE CONVERTIBLE
      PREFERRED STOCK.....................................   2,485,267         -                -          1,113,000      3,598,267
                                                           ------------------------------------------------------------------------
  SHAREHOLDERS' EQUITY:
      Common stock, 3,000,000,000 shares authorized, par value
       $.01, 802,436,245 and 799,137,142 shares issued as of
       March 31, 2000 and December 31, 1999, respectively.       8,030        88              574                217          8,821
                                                                                              (88)
      Treasury stock, 22,033,758 shares...................    (209,415)        -                -               -          (209,415)
      Other shareholders' equity..........................   9,575,617   114,694         (114,694)           688,783     13,466,885
                                                                                        2,856,722
                                                                                          345,763
      Accumulated deficit.................................    (421,190) (165,580)         165,580                          (421,190)
                                                           -------------------------------------------------------------------------
  
                                                             8,953,042   (50,798)       3,253,857            689,000     12,845,101
                                                           -------------------------------------------------------------------------
  
        Total liabilities and shareholders' equity.......  $21,489,970  $400,019       $3,272,230         $1,802,000    $26,964,219
                                                           ========================================================================
  63
  PRO FORMA GLOBAL CROSSING LTD.
         Unaudited Pro Forma Condensed Combined Statement of Operations
                   For the three months ended March 31, 2000
             (In thousands, except share and per share information)
  Global                                                            Global
                                                      Crossing        IPC/IXnet         Pro Forma        Financing      Crossing
                                                    Historical (5)   Historical (6)   Adjustments (3)  Adjustments (4)  Pro Forma
                                                  ------------------------------------------------------------------   -------------
  OPERATING REVENUES.............................    $ 1,119,516        $ 87,740               $ -              $ -     $ 1,207,256
                                                  ------------------------------------------------------------------   -------------
  
  OPERATING EXPENSES:
          Operations,selling, general
          and administrative.....................      1,014,763          93,517                 -                -       1,108,280
          Merger related expenses................              -          23,288                 -                -          23,288
          Depreciation and amortization..........        140,943           8,626                 -                -         149,569
          Goodwill and intangibles amortization..        131,634           4,006            (4,006)               -         211,948
                                                                                            80,314
                                                  ------------------------------------------------------------------   -------------
  
                                                       1,287,340         129,437            76,308                -       1,493,085
                                                  ------------------------------------------------------------------   -------------
  
  OPERATING LOSS.................................       (167,824)        (41,697)          (76,308)               -        (285,829)
  EQUITY IN LOSS OF AFFILIATES...................         (5,140)                                                            (5,140)
  MINORITY INTEREST..............................        (15,731)          7,634            (7,634)               -         (15,731)
  
  Other income (expense):
          Interest income........................         22,798                                                             22,798
          Interest expense.......................        (85,676)         (7,447)                -                -         (93,123)
          Other income (expense).................         (5,628)           (768)                -                -          (6,396)
                                                  ------------------------------------------------------------------   -------------
  
  Loss before provision of income taxes..........        (257,201)        (42,278)          (83,942)               -        (383,421)
          Provision for income taxes.............         (5,000)         (1,219)                -                 -          (6,219)
                                                  ------------------------------------------------------------------   -------------
  
  Net loss.......................................       (262,201)        (43,497)          (83,942)               -        (389,640)
          Preferred stock dividends..............        (45,258)              -                 -          (19,406)        (64,664)
                                                  ------------------------------------------------------------------   -------------
  
  Loss  applicable to common shareholders........     $ (307,459)      $ (43,497)        $ (83,942)       $ (19,406)     $ (454,304)
                                                  ==================================================================   =============
  
  Loss per common share:
          Loss applicable to common
          shareholders ..........................     $    (0.39)                                                        $    (0.53)
                                                  ===============                                                      =============
  
          Shares used in computing information
          applicable to common shareholders......    778,780,323                                                        857,864,029
                                                  ===============                                                      =============
  64
  Pro Forma Global Crossing Ltd.
          Unaudited Pro Forma Condensed Combined Statements of Operations
  
                       For the Year Ended December 31, 1999
                (in thousands, except share and per share amounts)
  Global           Global Marine
                                                                                      Crossing              Systems       Frontier
                                                                                    Historical  (7)      Historical (8)  Historical(9)
                                                                                   ---------------------------------------------------
  Operating Revenues.............................................................    $ 1,664,824          $ 173,498       $ 1,995,556
  
  Operating Expenses:
       Operating, selling, general and administrative............................      1,420,370            127,165         1,561,646
       Merger expenses...........................................................              -                  -            74,519
       Depreciation and amortization.............................................        124,294             12,817           173,600
       Goodwill amortization.....................................................        127,621                812            25,749
                                                                                  ----------------------------------------------------
  
                                                                                       1,672,285            140,794         1,835,514
                                                                                  ----------------------------------------------------
  
       Operating income (loss)...................................................         (7,461)            32,704           160,042
       Equity in income (loss) of affiliates.....................................         15,708              4,539            17,235
  
       Minority interest.........................................................         (1,338)                 -                 -
  
  Other Income (Expenses):
       Interest expense..........................................................       (139,077)            (6,869)          (48,739)
  
       Interest income...........................................................         67,407                511             4,754
       Other income (expenses)...................................................        180,765                143            (2,346)
                                                                                  ----------------------------------------------------
  
  Income (loss) before extraordinary item, taxes and cumulative
       effect of changes in accounting principle.................................        116,004             31,028           130,946
       (Provision) benefit for income taxes......................................       (126,539)           (11,885)          (77,181)
                                                                                  ----------------------------------------------------
  
  Income (loss) before extraordinary item and cumulative effect
       of changes in accounting principle........................................        (10,535)            19,143            53,765
       Preferred stock dividends.................................................        (66,642)                 -              (510)
                                                                                  ----------------------------------------------------
  
  Income (loss) applicable to common shareholders before extraordinary item and
  cumulative effect of changes in accounting principle...........................        (77,177)            19,143            53,255
       Diluted earnings adjustment...............................................              -                  -               270
                                                                                  ----------------------------------------------------
  
  Income (loss) applicable to common shareholders before extraordinary item and
  cumulative effect of changes in accounting principle...........................      $ (77,177)          $ 19,143          $ 53,525
                                                                                  ====================================================
  
  Loss per common share:
       Loss applicable to common shareholders before extraordinary item
       and cumulative effect of changes in accounting principle
                    Basic and diluted............................................        $ (0.15)
                                                                                  ===============
  
       Shares used in computing information applicable to common shareholders
                    Basic and diluted............................................    502,400,851
                                                                                  ===============
  Hutchison
                                                                                  Racal               Global
                                                                                 Telecom             Crossing           IPC/IXnet
                                                                             Historical (10)     Adjustments (11)     Historical (12)
                                                                             --------------------------------------------------------
  Operating Revenues........................................................    $ 306,019                  $ -            $ 354,922
  
  Operating Expenses:
       Operating, selling, general and administrative.......................      286,442                    -              334,365
       Merger expenses......................................................       24,600                    -                    -
       Depreciation and amortization........................................       52,716                    -               23,363
       Goodwill amortization................................................            -                    -               11,869
                                                                             -------------------------------------------------------
  
                                                                                  363,758                    -              369,597
                                                                             -------------------------------------------------------
  
       Operating income (loss)..............................................      (57,739)                   -              (14,675)
       Equity in income (loss) of affiliates................................         (560)             (15,825)                   -
                                                                                                       (21,240)
       Minority interest....................................................            -                    -                4,962
  
  Other Income (Expenses):
       Interest expense.....................................................      (30,908)                   -              (27,863)
  
       Interest income......................................................        3,856                    -                    -
       Other income (expenses)..............................................          369                    -                  569
                                                                             -------------------------------------------------------
  
  Income (loss) before extraordinary item, taxes and cumulative
       effect of changes in accounting principle............................      (84,982)             (37,065)             (37,007)
       (Provision) benefit for income taxes.................................       30,116                    -               (8,279)
                                                                             -------------------------------------------------------
  
  Income (loss) before extraordinary item and cumulative effect
       of changes in accounting principle...................................      (54,866)             (37,065)             (45,286)
       Preferred stock dividends............................................            -              (25,529)                   -
                                                                             -------------------------------------------------------
  
  Income (loss) applicable to common shareholders...........................      (54,866)             (62,594)             (45,286)
       Diluted earnings adjustment..........................................            -                    -                    -
                                                                             -------------------------------------------------------
  
  Income (loss) applicable to common shareholders...........................    $ (54,866)           $ (62,594)           $ (45,286)
                                                                             =======================================================
  
  Loss per common share:
       Loss applicable to common shareholders before extraordinary item
       and cumulative effect of changes in accounting principle
                    Basic and diluted
  
       Shares used in computing information applicable to common shareholders
                    Basic and diluted
  Global
                                                                                  Financing        Pro Forma            Crossing
                                                                                 Adjustments      Adjustments          Pro Forma
                                                                                -------------------------------------------------
  Operating Revenues..........................................................         $ -               $ -         $ 4,494,819
  
  Operating Expenses:
       Operating, selling, general and administrative.........................           -                 -           3,729,988
       Merger expenses........................................................           -                 -              99,119
       Depreciation and amortization..........................................           -                 -             386,790
       Goodwill amortization..................................................           -              (812) (13)       830,317
                                                                                                      19,690  (13)
                                                                                                     (25,749) (14)
                                                                                                     305,907  (14)
                                                                                                      55,843  (15)
                                                                                                     (11,869) (3)
                                                                                                     321,256  (3)
                                                                                --------------------------------------------------
  
                                                                                         -           664,266             5,046,214
                                                                                --------------------------------------------------
  
       Operating income (loss)................................................           -          (664,266)             (551,395)
       Equity in income (loss) of affiliates..................................           -                 -                  (143)
  
       Minority interest......................................................           -            (4,962)  (3)         (1,338)
  
  Other Income (Expenses):
       Interest expense.......................................................      93,577  (17)     (24,000) (16)       (523,558)
                                                                                  (243,316) (17)     (96,363) (18)
  
       Interest income........................................................           -                 -               76,528
       Other income (expenses)................................................           -                 -              179,500
                                                                                --------------------------------------------------
  
  Income (loss) before extraordinary item, taxes and cumulative
       effect of changes in accounting principle..............................    (149,739)         (789,591)            (820,406)
       (Provision) benefit for income taxes...................................      (7,200) (17)      23,115  (19)       (170,653)
                                                                                                       7,200  (20)
                                                                                --------------------------------------------------
  
  Income (loss) before extraordinary item and cumulative effect
       of changes in accounting principle.....................................    (156,939)         (759,276)            (991,059)
       Preferred stock dividends..............................................    (108,936) (17)         510  (21)       (278,732)
                                                                                   (77,625) (4)
                                                                                --------------------------------------------------
  
  Income (loss) applicable to common shareholders.............................    (343,500)         (758,766)          (1,269,791)
       Diluted earnings adjustment............................................          -               (270) (22)             -
                                                                                --------------------------------------------------
  
  Income (loss) applicable to common shareholders.............................  $ (343,500)       $ (759,036)        $ (1,269,791)
                                                                                ==================================================
  Loss per common share:
       Loss applicable to common shareholders before extraordinary item
       and cumulative effect of changes in accounting principle
                    Basic and diluted.........................................                                       $      (1.50)
                                                                                                                    ==============
  
       Shares used in computing information applicable to common shareholders
                    Basic and diluted.........................................                                        846,438,857 (23)
                                                                                                                    ==============
  65
  Pro Forma Global Crossing Ltd.
  
             Notes to Unaudited Pro Forma Condensed Combined Financial
                                    Statements
  
  (1)   This column represents the historical financial position of Global
        Crossing as of March 31, 2000, including the assets acquired in the
        Frontier merger, the Global Marine Systems and Racal Telecom acquisitions
        and the Hutchison Global Crossing joint venture.
  
  (2)   This column represents the historical financial position of IPC
        Communications, Inc. (IPC) as of March 31, 2000, including its subsidiary
        IXnet, Inc (IXnet).
  
  (3)   These adjustments reflect the elimination of IPC's shareholders' equity
        accounts, the minority interest related to the shares of IXnet not owned
        by IPC and the excess consideration over the net liabilities assumed
        (goodwill). The preliminary goodwill is calculated as follows (in
        thousands, except exchange ratios and share prices):
  Shares of IXnet common stock outstanding at
  March 31, 2000.......................................................              51,148
        Less shares held by IPC..............................................             (43,100)
                                                                                          -------
        Shares of IXnet to be exchanged......................................               8,048
        IXnet exchange ratio.................................................               1.184
                                                                                           ------
        Shares of Global Crossing to be issued to IXnet shareholders.........                              9,529
        Shares of IPC common stock outstanding at
        March 31, 2000.......................................................               8,839
        IPC exchange ratio...................................................               5.417
                                                                                           ------
        Shares of Global Crossing to be issued to IPC shareholders...........                             47,881
                                                                                                       ---------
        Total shares of Global Crossing to be issued.........................                             57,410
        Global Crossing market price at agreement date.......................                            $ 49.77
                                                                                                       ---------
                                                                                                       2,857,296
        Acceleration of stock option vesting.................................                            345,763
        Tax benefit related to the vesting of
          Stock options......................................................                           (147,770)
        Estimated Global Crossing transaction costs..........................                             30,000
                                                                                                       ---------
        Estimated total consideration........................................                          3,085,289
  
        Historical net book value of IPC:
        Historical IPC net liabilities at
            March 31, 2000...................................................             $36,171
        Historic goodwill and other intangibles..............................              88,097
        Estimated IPC and IXnet transaction costs............................               3,000
                                                                                          -------
                                                                                                         127,268
                                                                                                      ----------
        Preliminary goodwill.................................................                         $3,212,557
                                                                                                      ==========
  Global Crossing will issue approximately 57,410,000 shares of its common
        stock at a ratio of 1.184 shares of Global Crossing common stock for each
        share of IXnet common stock not owned by IPC, and 5.417 shares of Global
        Crossing common stock for each share of IPC common stock. Global Crossing
        has tentatively considered the carrying value of the acquired assets to
        approximate their fair value, with all of the excess of such acquisition
        costs being attributable to goodwill. Global Crossing is in the process of
        fully evaluating the assets to be acquired and, as a result, the purchase
        price allocation among the tangible and intangible assets acquired (and
        their related useful lives) may change. Goodwill associated with the
        transaction is currently anticipated to be amortized over a 10-year life.
  
  (4)   These adjustments represent the issuance of 4,600,000 shares of Global
        Crossing 6 3/4% cumulative convertible preferred stock and related
        dividends and 21,673,706 shares of Global Crossing common stock in April
        2000.
  
  (5)   This column represents the results of operations of Global Crossing Ltd.
        for the three months ended March 31, 2000 including the results of Global
        Marine Systems, Frontier and Racal operations for the three months ended
        March 31, 2000 and the Hutchison joint venture for the period from
        January 12, 2000 to March 31, 2000.
  
  (6)   This column represents the results of operations of IPC, including the
        results of its subsidiary, IXnet, for the three months ended March 31,
        2000.
  
  (7)   This column represents the historical results of operations for the year
        ended December 31, 1999, including the results of Global Marine Systems
        operations for the six months ended December 31, 1999, the results of
        Frontier operations for the three months ended December 31, 1999 and the
        results of Racal Telecom operations for the period from November 24,
        1999 to December 31, 1999.
  
  (8)   This column represents the historical results of operations of Global
        Marine Systems for the six months ended June 30, 1999.
  
  (9)  This column represents Frontier's historical results of operations for the
       nine months ended September 30, 1999.
  
  (10) This column represents Racal Telecom's results from operations from
       January 1, 1999 to November 23, 1999, after giving effect to pro forma
       adjustments to present these statements in accordance with United States
       GAAP, to reflect the disposal of the Racal Translink and Racal Fieldforce
       divisions of Racal Telecommunications Limited (which Global Crossing did
       not acquire) and to reflect the likely effect of the trading among Racal
       Translink, Racal Fieldforce and Racal Telecom based on contractual
       obligations among the divisions. Global Crossing summarizes these
       adjustments in the table below:
  
                              Racal Telecom Pro Forma
          Unaudited Pro Forma Condensed Combined Statements of Operations
  
             For the period from January 1, 1999 to November 23, 1999
                                  (in thousands)
  US GAAP and       Racal
                                                                             BV Acquisition    Accounting      Telecom       Racal
                                                                             and Carve-Out       Policy        Interim      Telecom
                                                           Historical(a)      Adjustments    Adjustments(d)    Period(e)   Pro Forma
                                                           ------------     ---------------  --------------    ---------   ---------
  Operating Revenues.................................   $ 390,578      $ (110,354)(c)       $ (22,447)     $ 47,937   $ 306,019
                                                                                   305 (b)
                                                             ---------      ----------           ---------      --------   ---------
       Operating Expenses:
            Operating, selling, general and
              administrative..............................     355,110         (99,595)(c)           1,737        53,544     311,042
                                                                                   246 (b)
            Depreciation and amortization.................      61,774         (11,978)(c)          (3,340)        6,265      52,716
                                                                                    (5)(b)
                                                             ---------      ----------           ---------      --------   ---------
                                                               416,884        (111,332)             (1,603)       59,809     363,758
                                                             ---------      ----------           ---------      --------   ---------
       Operating income (loss)............................     (26,306)          1,283             (20,844)      (11,872)    (57,739)
       Equity in income (loss) of affiliates..............        (560)             --                  --            --        (560)
       Other income (expense):
            Interest expense..............................     (30,905)             (3)(b)              --            --     (30,908)
            Interest income...............................          --           3,089 (c)              --           767       3,856
            Other income (expense)........................      76,390         (76,021)(c)              --            --         369
                                                             ---------      ----------           ---------      --------   ---------
       Income (loss) before extraordinary item, taxes and
         cumulative effect of changes in accounting
         principle........................................      18,619         (71,652)            (20,844)      (11,105)    (84,982)
            (Provision) benefit for income taxes..........       3,563             (70)(b)          18,918         7,705      30,116
                                                             ---------      ----------           ---------      --------   ---------
       Income (loss) before extraordinary item and
         cumulative effect of changes in accounting
         principle........................................   $  22,182      $  (71,722)          $  (1,926)     $ (3,400)  $ (54,866)
                                                             =========      ==========           =========      ========   =========
  (a)  This column represents the combined historical results of operations
            of Racal Telecommunications Limited, Racal Telecommunications Networks
            Limited, Racal Internet Services Limited and Racal Telecommunications
            Inc., which we refer to as "Racal Telecom", in accordance with United
            Kingdom GAAP translated into United States dollars for the 41 weeks
            ended October 15, 1999.
  
       (b)  Global Crossing is treated as having acquired the business and assets
            of Racal Network Services BV as that company was in the process of
            being reorganized into Racal Telecommunications Networks Limited in
            the course of 1999. These adjustments reflect the financial position
            and results of operations of Racal Network Services BV as if this
            transaction had been completed as of the dates or at the beginning of
            the periods presented.
  
       (c)  In July 1999, the Racal Telecom business was separated into three
            divisions: Racal Telecom, Racal Translink and Racal Fieldforce. On
            October 1, 1999, the Racal Translink and Racal Fieldforce businesses
            were sold to another company within the Racal Electronics plc group.
            This adjustment eliminates the results of operations of Racal
            Translink and Racal Fieldforce, reflects the likely effect of the
            trading among Racal Translink, Racal Fieldforce and Racal Telecom
            based on contractual obligations among the divisions and adjusts the
            profit on disposal of these operations. No taxation liabilities were
            incurred on the disposal as this disposal was to another Racal
            Electronics plc group company.
  
       (d)  The Racal Telecom combined financial statements are prepared in
            accordance with United Kingdom GAAP which differ in certain material
            respects from United States GAAP. The differences that are material
            are disclosed in the notes to the combined financial statements,
            incorporated by reference. In addition, an adjustment has been made to
            treat sales of dark fiber made by Racal Telecom after July 1, 1999 as
            operating leases, recognizing income over the period of the service
            provision in accordance with the provision of FASB Interpretation No.
            43.
  
       (e)  This column represents Racal Telecom's historical results from October
            16, 1999 to November 23, 1999.
  
  (11)  On January 12, 2000, Global Crossing and Hutchison Whampoa Limited formed
        a joint venture called Hutchison Global Crossing. This joint venture is
        owned in equal parts by Global Crossing and Hutchison Whampoa. In exchange
        for its 50% interest, Hutchison Whampoa contributed to the joint venture
        its existing building-to-building fixed-line telecommunications network in
        Hong Kong and certain Internet-related assets previously held by Hutchison
        Telecommunications Limited. In exchange for its 50% interest, Global
        Crossing contributed to the joint venture international telecommunications
        capacity rights on its network and know-how related to Internet data
        centers valued at $350 million and $50 million in cash. In addition,
        Global Crossing issued to Hutchison Whampoa $400 million aggregate
        liquidation preference of Global Crossing's 6 3/8% cumulative convertible
        preferred stock, series B, convertible into Global Crossing common stock.
        The Hutchison Global Crossing joint venture is anticipated to be accounted
        for as an unconsolidated joint venture under the equity method of
        accounting.
  (In thousands)
                                                                                  --------------
  Total Consideration
       Cash contributed...................................................                  $ 50,000
       6 3/8% Cumulative Convertible Preferred Stock, Series B............                   400,000
       Estimated cost of capacity contributed.............................                    83,800
       Global Crossing transaction costs..................................                     5,000
                                                                                            --------
  Total consideration.....................................................                   538,800
  
  Less: Historical net tangible book value of HCL Holdings:
       Historical HCL Holdings net liabilities at December 31, 1999.......   $(149,393)
       Cash contributed...................................................      50,000
       Estimated cost of capacity contributed.............................      83,800
                                                                             ---------
       Adjusted net tangible book value...................................     (15,593)
       50% ownership interest.............................................       7,797
                                                                             ---------
                                                                                              (7,796)
                                                                                            --------
  Total Goodwill..........................................................                  $546,596
                                                                                            ========
  Global Crossing has tentatively considered the carrying value of the
       acquired assets to approximate their fair value, with all of the excess of
       those acquisition costs being attributable to goodwill. Global Crossing is
       in the process of fully evaluating the assets acquired and, as a result,
       the purchase price allocation among the tangible and intangible assets
       acquired and their useful lives may change. Global Crossing currently
       anticipates that goodwill associated with the transaction will be amortized
       over a 25-year life.
  
       These adjustments also include the assumed equity in the results of
       operations of Hutchison Global Crossing for the year ended December 31,
       1999.
  
  (12) This column represents the results of operations of IPC, including the
  results of its subsidiary, IXnet, for the year ended December 31, 1999.
  
                                        66
  (13) These adjustments reflect the reversal of historic goodwill amortization
       and goodwill amortization expense of the excess consideration over the net
       assets acquired (goodwill) in connection with the Global Marine Systems
       acquisition, which Global Crossing has estimated to be approximately $693
       million. Global Crossing is amortizing goodwill and other intangible assets
       on the straight-line method over 3-25 years. The initial purchase price
       allocation is based on current estimates. Global Crossing will make the
       final purchase price allocation based upon final values for certain assets
       and liabilities. As a result, the final purchase price allocation may
       differ from the presented estimate.
  
  (14) These adjustments reflect the reversal of historic goodwill amortization
       and the goodwill amortization expense of the excess consideration over the
       net assets acquired (goodwill) in connection with the Frontier merger,
       which Global Crossing has estimated to be approximately $7.7 billion.
       Global Crossing is amortizing goodwill and other intangible assets on a
       straight-line method over 6-25 years. The initial purchase price allocation
       is based on current estimates. Global Crossing will make the final purchase
       price allocation based upon final values for certain assets and
       liabilities. As a result, the final purchase price allocation may differ
       from the presented estimate.
  
  (15) This adjustment reflects the amortization expense of the excess
       consideration over the net assets acquired (goodwill) in connection with
       the Racal acquisition, which Global Crossing has estimated to be
       approximately $1.6 billion. Global Crossing has tentatively considered the
       carrying value of the acquired assets to approximate fair value, with all
       excess of those acquisition costs being attributable to goodwill. Global
       Crossing is in the process of fully evaluating the assets acquired and, as
       a result, the purchase price allocation among the tangible and intangible
       assets acquired, and their related useful lives, may change. Global
       Crossing currently anticipates that goodwill associated with the
       transaction will be amortized over a 25 year life.
  
  (16) This amount reflects the assumed interest expense, at an 8% interest rate,
       incurred on the $600 million debt assumed issued as of the earliest date
       presented in connection with the acquisition of Global Marine Systems.
  
  (17) These adjustments represent the assumed interest expense, including
       amortization of deferred financing fees and the resulting tax adjustment,
       in connection with the issuance and assumed repayment of existing debt
       related to the 9 1/8% senior notes due 2006 and 9 1/2% senior notes due
       2009 of Global Crossing Holdings, Global Crossing's 6 3/8% cumulative
       convertible preferred stock and Global Crossing's 7% cumulative convertible
       preferred stock. In connection with the issuance of the 9 1/8% senior notes
       due 2006 and 9 1/2% senior notes due 2009 of Global Crossing Holdings,
       Global Crossing incurred approximately $29.7 million in financing fees. The
       financing fees will be amortized over the life of the debt.
  
  (18) This amount reflects the assumed interest expense, at a 9% interest rate,
       including the amortization of deferred financing fees, incurred on the $1.1
       billion debt issued to finance the acquisition of Racal Telecom assumed
       issued as of the earliest date presented.
  
  (19) This adjustment represents the tax benefit resulting from the interest
       expense assumed in connection with the debt issued for the acquisition of
       Global Marine Systems.
  
  (20) This adjustment represents the tax benefit resulting from the interest
       expense assumed in connection with the debt issued for the acquisition of
       Racal Telecom.
  
  (21) This adjustment assumes that Frontier's preferred stock dividends would not
       have been incurred, as Frontier's preferred stock would have been redeemed
       as of the earliest date presented.
  
  (22) To eliminate diluted earnings adjustment due to the combined net loss
       position.
  
  (23) Pro forma per share data are based on the number of shares of Global
       Crossing common stock that would have been outstanding had the Frontier
       merger, the IPC acquisition and the April 2000 issuance of common stock
       occurred at the earliest date presented. Global Crossing issued
       355,181,000 shares in connection with the Frontier merger, 21,673,706
       shares in connection with the April 2000 common stock issuance, and
       approximately 57,410,000 shares in connection with the IPC and IXnet
       acquisitions.
  
                                        67
  SIGNATURE
  
       Pursuant to the requirements of the Securities Exchange Act of 1934, as
  amended, the registrant has duly caused this report to be signed on its behalf
  by the undersigned hereunto duly authorized.
  
                                          GLOBAL CROSSING LTD.
  
  Dated: June 15, 2000                    By: /s/ Dan J. Cohrs
                                              ---------------------------------
                                              Name:  Dan J. Cohrs
                                              Title: Senior Vice President and
                                                     Chief Financial Officer
  
                                        68