Man Group plc - Annual Report 2007

The financial statements have been prepared under the historical cost convention and in accordance with applicable accounting standards in the United Kingdom issued by the Accounting Standards Board and with the requirements of the Companies Act 1985 (‘the Act’).

The Company reviews and updates its accounting policies, in accordance with the requirements of Financial Reporting Standard (‘FRS’) 18 'Accounting Policies' on a regular basis.

During the year the Company adopted the amendment to FRS 26 and measured its financial guarantees at fair value. The adoption of this amendment had no material impact on the results or the financial position of the Company.

Profits of the Company
The profit for the financial year dealt with in the Company was $2,123 million (2006: $116 million). In accordance with Section 230 of the Companies Act 1985, a separate profit and loss account has not been presented for the Company.

There are no recognised gains and losses other than the result for the year and hence no statement of recognised gains and losses for the Company has been presented.

Foreign currencies
Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the date of the transactions, or where it is more practical an average rate for the week or month for all transactions in each foreign currency occurring during that week or month (as long as the relevant exchange rates do not fluctuate significantly). Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in other operating income and losses in the profit and loss account.

Subsidiary and associate undertakings
The Company’s shares in subsidiary and associate undertakings are stated in the balance sheet of the Company at cost less provision for any impairment incurred.

Exchangeable bonds
The Company has a contract with Forester Limited, a special purpose vehicle, which issued exchangeable bonds for the Company's own shares. Under the terms of the contract between the Company and Forester Limited, the Company will issue a fixed number of shares for a fixed amount of consideration when bondholders exercise their conversion options. In the Company's balance sheet, this contract is classified as an equity instrument and included in equity, net of income tax effects.

Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost. Any difference between proceeds (net of transaction costs) and the redemption value is recognised as interest expense in the income statement over the period of the borrowings using the effective interest method.

Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

Share-based payments
Although the Company does not incur a charge, the issuance by the Company to its subsidiaries of an award over the Company’s shares represents additional capital contributions by the Company in its subsidiaries. An additional investment in subsidiaries results with a corresponding increase in shareholders’ equity. The additional capital contribution is based on the fair value of the awards issued spread over the underlying awards’ vesting periods.

Dividends
Dividend distribution to the Company’s shareholders is recognised as a liability in the financial statements, and directly in equity, in the period in which the dividend is paid or approved by the Company’s shareholders, if required. Dividends received from subsidiary undertakings are recognised in the period in which they are received.

Cash flow statement
The Company need not present a cash flow statement in accordance with FRS 1 (revised) as it has taken the exemption from publishing its profit and loss account and related notes under section 230 of the Companies Act 1985.

Deferred taxation
Deferred tax is recognised on all timing differences where the transactions or events that give rise to an obligation to pay more tax in the future, or a right to pay less tax in the future, have occurred by the balance sheet date. A deferred tax asset is only recognised to the extent that it is more likely than not that it can be recovered. The Company does not discount its deferred tax position as the effect would not be material.

Segmental reporting
The Company, being an investment holding company, only has one segment.

Share capital
Contracts entered into with a third party to buyback the Company’s shares during a close period gives rise to an obligation for the Company. This obligation is included in other creditors and deducted from equity on the balance sheet for the value of the maximum number of shares that may be purchased under the contract with the third party. If the number of shares repurchased by the third party is not the maximum then there is a reversal through equity for that amount. Any changes in the share price from the date of the contract are taken through the profit and loss account.

Financial instruments
The Company provides full financial instruments disclosures in accordance with IAS 32 in its consolidated financial statements. Details can be found in Note 11 to the consolidated financial statements. Consequently the Company has taken advantage of the exemption in FRS 25 from providing further financial instruments disclosures.

Related party transactions
The Company provides full related parties disclosures in its consolidated financial statements. Details can be found in Note 32 to the consolidated financial statements. Consequently the Company has taken advantage of the exemption in FRS 8 not to disclose related party transactions with other members of Man Group plc.

The authorised, allotted and fully paid share capital of the Company is detailed in Note 24 to the consolidated financial statements.

At 31 March 2007, the capital reserve comprises: a capital redemption reserve of $7 million; and the equity component of the exchangeable bonds of $135 million.

There are no employees of the Company (2006: nil). The directors of the Company were paid by another Group company in 2007 and 2006.

The fee for the audit of the Company is $20,000 (2006: $20,000).

Shares in the Company are awarded/granted to directors and employees through the Group’s share schemes. Details relating to these share awards/grants are given in Note 5(d) to the consolidated financial statements and in the Remuneration Report.