Notes 1-9

Basis of preparation and change in accounting policy

The separate financial statements of the Company are presented as required by the Companies Act 1985. They have been prepared under the historical cost convention and in accordance with applicable United Kingdom Accounting Standards and law.

The Directors' Report, Corporate Governance and Directors' Remuneration Report disclosures have been made in the front section of this report.

The principal accounting policies are summarised below. They have all been applied consistently throughout the year and the preceding year.

During the year, the Company has reconsidered the repayment terms of certain inter-company loans, and as a result reclassified these loans from short term to long term. The impact at 31 December 2006 was a reclassification of £8.4 million.

The Company has revisited the classification its revolving credit facility during the period and as a result, as at 31 December 2006 it has reclassified £158.1 million borrowings from debt due within one year to debt due after more than one year.

Cash flow statement

The Company has utilised the exemptions provided under FRS1 (Revised) and has not presented a cash flow statement. The cash flow statement has been presented in the Group financial statements.

Related party transaction

In accordance with Related Party Disclosures ('FRS8'), the Company is exempt from disclosing transactions with entities that are part of the Aegis Group, or investees of the Group qualifying as related parties, as it is a parent publishing consolidated financial statements.

Employee benefits

The retirement benefits for employees are principally provided by defined contribution schemes which are funded by contributions from the Company and employees. The amount charged to the income statement is the contribution payable in the year.

Share based payments

The Company applies the requirements of Share-based Payment ('FRS20'). In accordance with the transitional provisions, FRS20 has been applied to all grants of equity instruments after 7 November 2002 that were unvested at 1 January 2005.

Certain employees receive remuneration in the form of share-based payments, including shares or rights over shares. The cost of equity-settled transactions with employees is measured by reference to the fair value of the instruments concerned at the date at which they are granted. The fair value is determined by an external valuer using a stochastic model. In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of the Company.

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance conditions are fulfilled, ending on the vesting date on which the relevant employees become fully entitled to the award. The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the number of awards that, in the opinion of the directors at that date, will ultimately vest. No expense is recognised for awards that do not ultimately vest.

Interest income

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount.

Leased assets

Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease rentals are charged to the profit and loss account over the lease term on a straight-line basis.

Tangible assets

Tangible fixed assets are stated at historical cost less accumulated depreciation.

Depreciation is provided to write off the cost of all fixed assets to their residual value over their expected useful lives. It is calculated on the historic cost of the assets at the following rates:

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

Investments

Investments in subsidiaries, associates and joint ventures, are held in the Company balance sheet at cost less any provisions for impairment.

Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Loans

Interest-bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs. Direct issue costs are amortised over the period of the loans and overdrafts to which they relate. Finance charges, including premiums payable on settlement or redemption are charged to the income statement as incurred using the effective interest method and are added to the carrying value of the instrument to the extent that they are not settled in the period in which they arise.

As permitted by section 230 of the Companies Act 1985 the Company has elected not to present its own profit and loss account for the year.

Aegis Group plc reported a loss, before the payment of dividends, for the financial year ended 31 December 2007 of £23.1 million (2006: a loss of £5.7 million).

The auditors' remuneration for audit services to the Company amounted to £0.5 million (2006: £0.3 million) and for non-audit services amounted to £0.1 million (2006: £0.6 million).

Details of executive and non-executive directors' emoluments and their interest in shares and options of the Company are shown within the directors' remuneration report.

The monthly average number of persons employed by the Company (excluding directors) during the year was 43 (2006: 44).

Their aggregate remuneration comprised:

Directors' remuneration is disclosed in the front section of this report, refer to the Remuneration Report.

The net book value of other tangible assets includes trademarks of £0.8 million (2006: £0.7 million).

Joint Venture

The Company has a 44.65% shareholding in eVerger Limited, an investment company incorporated in Guernsey. The period-end reporting date for eVerger is 30 September. During the year £2.3 million of capital was returned to the Company by eVerger. The current year return of capital resulted in the reversal of the impairment loss of £0.6 million recognised in prior years.

The Company's associated undertaking is:

Included within accruals and deferred income is provision for National Insurance Contributions on share options of:

Private Placement Debt – November 2000

On 20 November 2000, the Company issued US$160 million of unsecured loan notes, repayable between 2006 and 2008. These loan notes were guaranteed by the Company and certain of its subsidiaries. US$118.5 million was settled during the year.

Private Placement Debt – July 2005

On 28 July 2005, the Company issued US$342 million of unsecured loan notes, repayable between 2012 and 2017. On 9 November 2005 cross currency swaps were entered into for US$142 million of the loan notes due in 2012 and US$50 million of the loan notes due in 2015 to convert this US$ fixed rate borrowing into EUR fixed rate borrowing. These loan notes are guaranteed by the Company and certain of its subsidiaries.

Private Placement Debt – September 2007

On 17 September 2007, the Company issued US$125 million of unsecured loan notes, repayable between 2014 and 2017. These loan notes are guaranteed by the Company and certain of its subsidiaries.

Revolving Credit Facility – June 2006

On 9 June 2006, the Company raised a five-year £450 million Multicurrency Credit Facility with a group of international financial institutions. The facility is of a committed revolving nature with drawings allowable under a variety of currencies. The facility is guaranteed by the Company and certain of its subsidiaries.

Loans repayable, included within creditors, are analysed as follows:

Cross Currency Swaps

The fair value of the cross currency swaps entered into at 31 December 2007 is £(15.9) million (2006: £(9.3)million). The fair value is based on a discounted cash flow model and market interest yield curves applicable and represents movements in the Euro/US$ foreign exchange spot rate and in Euro and US$ interest rate yields. The cross currency swaps are synthetically split to reflect the Company's functional currency of Sterling. The US$/Sterling leg of the swaps act as cash flow hedges against the Company's US$ loan notes. The Euro/Sterling leg of the swaps has been designated as a fair value through the profit and loss.

Details of the fair value of the Company's cross currency swaps are set out in note 20 of the Group's financial statements.