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Rensburg Sheppards (RBG)

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Friday 13 October, 2006

Rensburg Sheppards

IFRS Transitional Statement

Rensburg Sheppards plc
13 October 2006


                                                                 13 October 2006

                             RENSBURG SHEPPARDS PLC
                      ('Rensburg Sheppards' or 'the group')
           TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS


The group today announces the effect of the transition to International
Financial Reporting Standards.  The information contained in this announcement
will shortly be available as a separate document in the Investor Relations
section of the group's website at www.rensburgsheppards.co.uk.  For further
information, please contact:

Jonathan Wragg, Group Finance Director
Rensburg Sheppards plc
Tel: 0114 275 5100

Iain Hooley, Group Financial Controller
Rensburg Sheppards plc
Tel: 0114 275 5100


TRANSITIONAL STATEMENT

From 1 April 2006, Rensburg Sheppards plc is required by EC Regulation No. 1606/
2002 to report its consolidated financial statements in accordance with
International Financial Reporting Standards as endorsed by the European Union 
('EU') and adopted by the EU ('adopted IFRSs').  The purpose of this
announcement is to explain how the changes in accounting treatment required
under IFRS impact upon the group's results as previously reported under UK
Generally Accepted Accounting Principles ('UK GAAP').  The date of transition to
IFRS for the group is 1 December 2004, being the start of the earliest period of
comparative information.  The preliminary IFRS financial information contained
in this announcement is audited.

The preliminary IFRS financial information provided in this document has been
prepared in accordance with current standards and interpretations as issued by
the International Accounting Standards Board ('IASB') and its predecessors and
adopted by the European Commission ('EC').  However, the standards that are in
issue are subject to ongoing review and endorsement by the IASB and the EC,
whilst the application of the standards continues to be subject to review by the
International Financial Reporting Interpretations Commission ('IFRIC').
Accordingly, modifications may be required to be made to the information as
presented in this announcement as further guidance is issued and as practice
develops.

The table below gives a summary of the impact of the transition to IFRS on the
group's results for the 16 month period to 31 March 2006:

                                                                        UK                                 %
                                                                       GAAP              IFRS           Change

16 months ended 31 March 2006:

Profit on ordinary activities before tax (£'000)                        9,738           13,007              33.6%

Adjusted profit on ordinary activities before tax (£'000)               29,347*          29,077**          (0.9%)

Earnings per share (pence)

- Basic                                                                   7.6p           20.9p            175.0%

- Adjusted basic                                                         55.6p*           55.1p**          (0.9%)

Total equity (£'000)                                                  153,675          157,784              2.7%



* Before amortisation of both goodwill (£8.6 million) and the Employee Benefit
Trust ('EBT') prepayment (£4.2 million), exceptional reorganisation costs (£9.9
million) and exceptional profit on disposal of fixed asset investments (£3.1
million).  These adjustments amount to a net charge before tax of £19.6 million.

** Before amortisation of client relationships intangible asset (£5.1 million),
share-based charges relating to the EBT (£4.2 million),  reorganisation costs
(£9.9 million) and profit on disposal of available-for-sale investments (£3.1
million).  These adjustments amount to a net charge before tax of £16.1 million.

The most significant changes arising from the transition to IFRS are as follows:

  • goodwill is no longer amortised (IFRS 3).

  • the acquisition of Carr Sheppards Crosthwaite Limited has been restated in
    accordance with IFRS 3.  This has resulted in client relationships being
    recognised as an intangible asset, separate to that of goodwill.  The client
    relationships intangible asset recognised at the date of acquisition is
    £61.1 million and is being amortised over its estimated useful economic life
    of up to 12 years.

  • final dividends are recognised as a liability in the period in which they
    are declared (IAS 10).

  • the recognition of a charge in respect of both the group's SAYE employee
    share option scheme and potential future entitlements to shares granted by
    the Employee Benefit Trust ('EBT') (IFRS 2).

  • the classification of equity investments as 'available-for-sale' (IAS 39).

  • revenue is disclosed both before and after fees and commissions payable to
    intermediaries.

  • the provision of deferred taxation in respect of the above adjustments,
    where applicable (IAS 12).

On 2 June 2005 the accounting reference date of Rensburg Sheppards plc was
changed from 30 November to 31 March.  As a result, the group's interim results
for the current financial year will be in respect of the six months ended 30
September 2006.  The comparative interim results will be restated to present a
six month period ended 30 September 2005.  Previously, the interim results of
the prior period, which were reported under UK GAAP, were in respect of the 10
months ended 30 September 2005.  As a result of the change of accounting
reference date, the results for the 10 months ended 30 September 2005 will not
be reported under IFRS in the forthcoming interim report and hence no
reconciliation of these results from UK GAAP to IFRS has been included within
this transitional statement.


FIRST TIME ADOPTION

IFRS 1 'First time adoption of International Financial Reporting Standards'
outlines how a company should apply the requirements of IFRSs upon transition
and in its first IFRS financial statements.  The standard requires that a
company adopts accounting policies that comply with adopted IFRSs effective at
the first reporting date, and for those policies to be applied retrospectively
to all periods presented in those first IFRS financial statements.  IFRS 1 does
however provide a number of optional exemptions to this requirement that can be
applied at the date of transition to IFRS.  Of these exemptions, the group has
chosen to take advantage of the following:


Business Combinations

The group has chosen not to apply IFRS 3 'Business Combinations' retrospectively
to business combinations that took place prior to the date of transition to
IFRS, being 1 December 2004.


Share based payments

The group has chosen not to apply IFRS 2 'Share Based Payments' to equity
instruments that were granted before 7 November 2002 or to those that were
granted after 7 November 2002 that vested before 1 January 2005.


IMPACT ANALYSIS

The significant adjustments arising from the transition to IFRS are explained
below.  The effect of these adjustments on the group's financial statements are
shown in the financial information section.


Business combinations - IFRS 3

In accordance with the transitional provisions of IFRS 1, the group has chosen
not to apply IFRS 3 retrospectively.  Business combinations arising before the
date of transition to IFRS, being 1 December 2004, have therefore not been
restated.  As a result, the value of goodwill arising on such combinations has
been frozen at its carrying value at 1 December 2004, being £13.0 million.  The
amortisation charged in the period to 31 March 2006 relating to all acquisitions
of £8.6 million has been reversed.

The acquisition of Carr Sheppards Crosthwaite Limited ('CSC'), which occurred
after the date of transition, has been restated in accordance with IFRS 3.  This
has resulted in the recognition of an intangible asset in respect of client
relationships of £61.1 million and a related deferred tax liability of £18.3
million.  These items have been recognised as part of the net assets of CSC at
the date of acquisition.  The client relationships intangible asset has a finite
economic life, estimated at up to 12 years, and is being amortised over this
period.

Goodwill existing at the date of transition of 1 December 2004 was tested for
impairment at that date and at the end of the last financial period, being 31
March 2006.  Goodwill will be tested annually thereafter for impairment and
carried at cost less accumulated impairment losses.  Under UK GAAP, goodwill was
amortised on a straight-line basis over its useful economic life, not exceeding
20 years.

The impact of these changes on the income statement for the 16 months ended 31
March 2006 is to reverse the goodwill amortisation charged under UK GAAP of £8.6
million and to charge £5.1 million of amortisation in respect of the client
relationships intangible asset, being the amortisation charge for the period
from the date of acquisition of CSC of 6 May 2005 to 31 March 2006.  In
addition, there is a credit to the income tax expense for the period of £1.5
million, representing the movement of the deferred tax liability that arose in
respect of the client relationships intangible asset.  The impact on the balance
sheet at 31 March 2006 is to increase intangible assets by £22.1 million and to
increase deferred tax liabilities by £17.1m, resulting in an overall increase in
closing equity reserves of £5.0 million.  The net impact on intangible assets of
£22.1 million comprises the additional deferred tax liabilities recognised at
the date of acquisition of £18.3 million referred to above, plus other deferred
tax liabilities recognised at the date of acquisition of £0.3 million, the write
back of goodwill amortisation of £8.6 million and the amortisation of the client
relationship intangible asset of £5.1 million.


Intangible assets - IAS 38

In accordance with the requirements of IAS 38, capitalised computer software has
been classified as a separate category of intangible fixed assets.  Previously,
computer software was recognised within tangible fixed assets.

The effect of this change is to increase the net book value of intangible assets
by £1.1 million at 1 December 2004 and by £1.2 million at 31 March 2006; the net
book value of tangible fixed assets has reduced by the corresponding amounts at
the respective dates.  The period over which these assets are being depreciated
remains unchanged and hence there is no overall impact on equity reserves.


Property, plant and equipment - IAS 16

The group's policy under IAS 16 will be to recognise all categories of tangible
fixed assets at depreciated historic cost, less provision for any impairment,
with the exception of freehold land and buildings, which will be carried at fair
value.  This policy of revaluation of freehold land and buildings has been
applied retrospectively at the date of transition and the depreciation charge
from the date of transition has been restated based on the revalued amount.
Under UK GAAP, freehold land and buildings were carried at historic cost, less
provision for any impairment.

The effect of this change is to increase the carrying value of freehold land and
buildings by £1.4 million at 1 December 2004 and 31 March 2006.  The revaluation
gives rise to a deferred tax liability, recognised in accordance with IAS 12, of
£0.4 million at 1 December 2004 and 31 March 2006 and hence a revaluation
reserve of £1.0 million has been recognised.  The depreciation charge for the 16
months ended 31 March 2006 has increased by £0.02 million; as permitted by the
Companies Act 1985, a corresponding amount of the revaluation reserve has been
recognised as a realised profit and transferred from the revaluation reserve to
retained earnings.  Equity reserves have increased by £1.0 million at 1 December
2004 and 31 March 2006.


Presentation of financial statements - IAS 1

In accordance with IAS 1 'Presentation of Financial Statements', revenue is
disclosed both before and after the deduction of fees and commissions payable to
third parties.  Under UK GAAP, turnover was stated net of fees and commissions
payable. There is no net effect on profit before tax or equity reserves as a
result of this change.


Financial instruments: recognition and measurement - IAS 39

In accordance with IAS 39, financial assets held by the group, consisting
entirely of equity investments, have been classified as available-for-sale
investments.  IAS 39 requires that available-for-sale investments be carried at
fair value.  The impact of these changes is to increase the carrying value of
the investments by £3.4 million at 1 December 2004 and by £1.4 million at 31
March 2006.  The difference in value between 1 December 2004 and 31 March 2006
includes the effect of the disposal of 662,857 shares of London Stock Exchange
plc during 16 months ended 31 March 2006.   The measurement of these investments
at fair value gives rise to a deferred tax liability, recognised in accordance
with IAS 12, of £1.0 million at 1 December 2004 and £0.4 million at 31 March
2006.  An available-for-sale reserve has therefore been recognised of £2.4
million at 1 December 2004 and £1.0 million at 31 March 2006.

As noted above, 662,857 shares of London Stock Exchange plc were disposed of
during the 16 months ended 31 March 2006.  The gain arising on this disposal
previously reported under UK GAAP was £3.1 million.  The gain as reported under
IFRS remains at £3.1 million; however, this gain now includes the recycling of
fair value gains previously recognised directly in equity, amounting to £2.7
million at 1 December 2004.

The net effect of the above changes is to increase equity reserves by £2.4
million at 1 December 2004 and by £1.0 million at 31 March 2006.


Events after the balance sheet date - IAS 10

IAS 10 'Events after the Balance Sheet Date' requires that assets and
liabilities at the balance sheet date be adjusted for events occurring after the
balance sheet date where they provide evidence of conditions that existed at the
balance sheet date.  In accordance with this requirement, final dividends
payable are recognised during the period in which they are declared, i.e. the
dividends are appropriately authorised and are no longer at the discretion of
the company.  Previously, under UK GAAP, dividends declared after the end of the
period but prior to the financial statements being authorised for issue were
recognised as a liability at the balance sheet date.

The impact of this change is to increase equity reserves by £2.6 million at 1
December 2004 and by £5.8 million at 31 March 2006.


Share based payments - IFRS 2


(i) SAYE scheme and Employee Share Ownership Plan

IFRS 2 'Share Based Payments' is applicable to equity instruments granted after
7 November 2002 that had not vested by 1 January 2005.  IFRS 2 therefore applies
to the group's Savings Related Share Option Scheme (SAYE) but does not apply to
the group's Employee Share Ownership Plan.  In accordance with IFRS 2, a charge
has been recognised in the income statement representing the fair value of the
options outstanding under the SAYE scheme.  The fair value of the options is
measured at the date the awards were granted using the Black-Scholes valuation
model and is spread over the three year vesting period, taking into account the
expected and actual number of options vesting.  Under UK GAAP, no such charge
was recognised in the income statement in respect of the SAYE scheme.

Deferred tax assets have been recognised on the above adjustments relating to
the SAYE scheme, in accordance with IAS 12.  In addition, although the Employee
Share Ownership Plan does not fall within the scope of IFRS 2, a deferred tax
asset has been recognised in accordance with IAS 12 based on the corporation tax
relief that is expected to be available at the time options are exercised.

The effect on retained earnings and total equity of these changes is an increase
of £0.4 million at 1 December 2004 and an increase of £1.1 million at 31 March
2006.  Profit before tax for the 16 months ended 31 March 2006 is reduced by
£0.2 million.


(ii) Employee Benefit Trust

The company acquired the entire share capital of Carr Sheppards Crosthwaite
Limited ('CSC') on 6 May 2005 from Investec 1 Limited ('Investec').  A total of
25,500,000 ordinary shares of the company were issued to Investec under the
terms of the acquisition.  Investec immediately transferred 2,800,000 of these
shares to an Employee Benefit Trust ('EBT') for the future benefit of employees
of CSC. The fair value of the shares at the date of acquisition was 499 pence
per share and hence the fair value of the shares relating to the EBT at the date
of acquisition was £13.972 million.  The EBT does not fall within the control of
the Rensburg Sheppards group and hence, under UK GAAP, the EBT was not accounted
for under UITF 38.  The issue of these shares was considered to represent
consideration for employment services from CSC's employees and therefore the
fair value of these shares at the date of issue was recognised as a prepayment
of the group's employment costs.  This prepayment was then amortised through the
consolidated profit and loss account on a straight-line basis over the three
year period to which the awards relate.  A total of £4.2 million of amortisation
had been recognised under UK GAAP at 31 March 2006, resulting in a carrying
value of the EBT prepayment at that date of £9.746 million.

Upon transition to IFRS, the awards to employees by the EBT have been treated by
the group as an equity settled share-based payment, in accordance with IFRS 2.
This has resulted in the fair value of the awards being charged to the income
statement over the three year vesting period. Under IFRS, the services provided
by the relevant employees are regarded as being paid for, in part, by the awards
made by the EBT; as the fair value of these awards has been recognised by the
group, the original issue of shares to the EBT is considered, for the purposes
of the group's consolidated accounts under IFRS, to be an issue for no
consideration, thus giving rise to no accounting entries, other than within
equity. Accordingly, the transitional adjustment to move from UK GAAP to IFRS is
to eliminate the prepayment directly against equity, resulting in a reduction in
equity reserves at 31 March 2006 of £9.7 million.

The fair value of the EBT awards has been calculated using the Black-Scholes
valuation model.  By virtue of the specific terms of the EBT awards, the fair
value of the awards is equal to the fair value of the related shares at the date
the awards were made.  The reversal of the EBT prepayment of £4.2 million has
been replaced with the fair value IFRS 2 charge of £4.2 million and there is
therefore no net impact on profit before tax for the period, nor on the value of
equity reserves at 1 December 2004 and 31 March 2006.

The above accounting treatment may be affected by the current IFRIC Draft
Interpretation D17 "Group and Treasury Share Transactions".  Accordingly,
modifications may be required to this accounting treatment once the IFRIC
interpretation has been finalised.


Income taxes - IAS 12

Deferred tax assets and liabilities have been recognised in accordance with IAS
12 'Income Taxes' on each of the above adjustments, as explained in the relevant
sections.


Cash flow statements - IAS 7

In accordance with IAS 7 'Cash Flow Statements', cash and cash equivalents
includes short-term deposits that are readily convertible into known amounts of
cash.  Under UK GAAP, such short-term deposits did not meet the definition of
cash to be reported in the cash flow statement.  The impact of this change is
that £5.0 million of cash on deposit has been recognised within the cash flow
statement under IFRS.  There is no impact on the balance sheet, as these
deposits were included within cash at bank and in hand under UK GAAP.


FINANCIAL INFORMATION

The financial information provided in this document as listed in the index to
the IFRS reconciliations below, does not constitute statutory accounts within
the meaning of section 240 of the Companies Act 1985.  The consolidated
statutory accounts for Rensburg Sheppards plc for the 16 month period ended 31
March 2006, upon which the auditor made a report under section 235 of the
Companies Act 1985, have been delivered to the Registrar of Companies.  The
auditor's report in respect of the statutory accounts for the 16 month period
ended 31 March 2006 was unqualified and did not contain a statement under
section 237 (2) or (3) of the Companies Act 1985.


Index to the IFRS reconciliations
     
1)   Consolidated balance sheet at 1 December 2004 - presentation effects of
     IAS 1 'Presentation of Financial Statements' on UK GAAP balances.

2)   Consolidated balance sheet at 1 December 2004 - measurement effects of
     IFRS on UK GAAP balances - summary.

3)   Consolidated balance sheet at 1 December 2004 - measurement effects of
     IFRS on UK GAAP balances - detail.

4)   Reconciliation of equity at 1 December 2004.

5)   Consolidated income statement for the 16 months ended 31 March 2006 -
     presentation effects of IAS 1 'Presentation of Financial Statements' on UK 
     GAAP income and expenses.

6)   Consolidated income statement for the 16 months ended 31 March 2006 -
     measurement effects of IFRS on UK GAAP income and expenses - summary.

7)   Consolidated income statement for the 16 months ended 31 March 2006 -
     measurement effects of IFRS on UK GAAP income and expenses - detail.

8)   Consolidated balance sheet at 31 March 2006 - presentation effects of IAS
     1 'Presentation of Financial Statements' on UK GAAP balances.

9)   Consolidated balance sheet at 31 March 2006 - measurement effects of IFRS
     on UK GAAP balances - summary.

10)  Consolidated balance sheet at 31 March 2006 - measurement effects of IFRS 
     on UK GAAP balances - detail.

11)  Consolidated statement of total recognised income and expense for the 16
     months ended 31 March 2006.

12)  Reconciliation of equity at 31 March 2006.

13)  Consolidated cash flow statement for the 16 months ended 31 March 2006 -
     presentation and measurement effects of IFRS on reported cashflows.


Consolidated balance sheet
at 1 December 2004 (date of transition to IFRS)
Presentation effects of IAS 1 'Presentation of Financial Statements' on UK GAAP
balances

                             As reported             IFRS             IFRS        UK GAAP
                                   Under     adjustments:     adjustments:    balances in
                                 UK GAAP           Assets      Liabilities    IFRS format
                                   £'000            £'000            £'000          £'000

Fixed assets                                                                              Non-current assets

Intangible assets                13,000                -                -         13,000  Intangible assets

Tangible assets                   4,132                -                -          4,132  Property, plant and
                                                                                          equipment

Investments                         500                -                -            500  Available-for-sale
                                                                                          investments

                                      -              295                -            295  Deferred tax assets

                                 17,632              295                -         17,927


Current assets                                                                            Current assets

Debtors - due within one         26,226             (295)               -         25,931  Trade and other receivables
year

Cash at bank and in hand         40,618                -                -         40,618  Cash and cash equivalents

                                 66,844             (295)               -         66,549

Total assets                     84,476                -                -         84,476  Total assets

Creditors                                                                                 Current liabilities

Amounts falling due within      (40,389)               -            2,438        (37,951) Trade and other payables
one year

                                      -                -             (750)          (750) Financial liabilities

                                      -                -           (1,688)        (1,688) Current tax liabilities

                                (40,389)               -               -         (40,389)

Creditors                                                                                 Non-current liabilities

Amounts falling due after          (232)               -                -           (232) Financial liabilities
more than one year

                                      -                -              (24)           (24) Deferred tax liabilities

Provisions for liabilities         (206)               -               24           (182) Provisions
and charges

                                   (438)               -                -           (438)

Total liabilities               (40,827)               -                -        (40,827) Total liabilities

Net assets                       43,649                -                -         43,649  Net assets


Capital and reserves                                                                      Equity attributable to
                                                                                          equity holders of the
                                                                                          parent

Called up share capital           2,209                -                -          2,209  Share capital

Share premium account             9,252                -                -          9,252  Share premium

Capital redemption reserve          100                -                -            100  Capital redemption reserve

Other reserves                    6,086                -                -          6,086  Other reserves

Profit and loss account          26,002                -                -         26,002  Retained earnings

Equity shareholders' funds       43,649                -                -         43,649  Total equity


Consolidated balance sheet
at 1 December 2004 (date of transition to IFRS)
Measurement effects of IFRS on UK GAAP balances - summary

                                                                     UK GAAP         Effect of
                                                                 balances in        transition
                                                                 IFRS format           to IFRS              IFRS
                                                                       £'000             £'000             £'000

Assets

Non-current assets

Intangible assets                                                    13,000             1,126            14,126

Property, plant and equipment                                         4,132               287             4,419

Available-for-sale investments                                          500             3,359              3,859

Deferred tax assets                                                     295               397               692

                                                                      17,927            5,169             23,096

Current assets

Trade and other receivables                                          25,931                -             25,931

Cash and cash equivalents                                            40,618                -             40,618

                                                                     66,549                 -            66,549


Total assets                                                         84,476             5,169            89,645

Current liabilities

Trade and other payables                                            (37,951)             2,629          (35,322)

Financial liabilities                                                  (750)                -              (750)

Current tax liabilities                                              (1,688)                -            (1,688)

                                                                    (40,389)            2,629           (37,760)

Non-current liabilities

Financial liabilities                                                  (232)                 -             (232)

Deferred tax liabilities                                                (24)           (1,432)           (1,456)

Provisions                                                             (182)                 -             (182)

                                                                       (438)           (1,432)           (1,870)

Total liabilities                                                   (40,827)            1,197           (39,630)

Net assets                                                           43,649             6,366            50,015

Equity attributable to equity
holders of the parent

Share capital                                                         2,209                 -             2,209

Share premium                                                         9,252                 -             9,252

Capital redemption reserve                                               100                -                100

Available-for-sale reserve                                                -              2,351             2,351

Revaluation reserve                                                       -                989               989

Other reserves                                                        6,086                 -             6,086

Retained earnings                                                    26,002             3,026            29,028

Total equity                                                         43,649             6,366            50,015


Consolidated balance sheet
at 1 December 2004 (date of transition to IFRS)
Measurement effects of IFRS on UK GAAP balances - detail


                                     UK GAAP                   Property                  Events     Share-
                                                                                          after
                                    balances     Intangible   plant and   Financial     balance      based
                                     in IFRS         assets   equipment instruments  sheet date   payments
                                      format         IAS 38      IAS 16      IAS 39      IAS 10     IFRS 2          IFRS
                                       £'000          £'000       £'000       £'000       £'000      £'000         £'000

Assets

Non-current assets

Intangible assets                    13,000          1,126           -           -           -          -        14,126

Property, plant and equipment         4,132         (1,126)      1,413           -           -          -         4,419

Available-for-sale investments          500              -           -       3,359           -          -         3,859

Deferred tax assets                     295              -           -           -           -        397           692

                                      17,927             -       1,413       3,359           -        397        23,096

Current assets

Trade and other receivables          25,931              -           -           -           -          -        25,931

Cash and cash equivalents            40,618              -           -           -           -          -        40,618

                                     66,549              -           -           -           -          -        66,549

Total assets                         84,476              -       1,413       3,359           -        397        89,645

Current liabilities

Trade and other payables            (37,951)             -           -           -       2,629          -       (35,322)

Financial liabilities                  (750)             -           -           -           -          -          (750)

Current tax liabilities              (1,688)             -           -           -           -          -        (1,688)

                                    (40,389)             -           -           -       2,629          -       (37,760)

Non-current liabilities

Financial liabilities                  (232)             -           -           -           -          -          (232)

Deferred tax liabilities                (24)             -        (424)     (1,008)          -          -        (1,456)

Provisions                             (182)             -           -           -           -          -          (182)


                                       (438)             -        (424)     (1,008)          -          -        (1,870)



Total liabilities                   (40,827)             -        (424)     (1,008)      2,629          -       (39,630)

Net assets                           43,649              -         989       2,351       2,629        397        50,015

Equity attributable to equity
holders of the parent

Share capital                         2,209              -           -           -           -          -         2,209

Share premium                         9,252              -           -           -           -          -         9,252

Capital redemption reserve               100             -           -           -           -          -           100

Available-for-sale reserve                -              -           -       2,351           -          -         2,351

Revaluation reserve                       -              -         989           -           -          -           989

Other reserves                        6,086              -           -           -           -          -         6,086

Retained earnings                    26,002              -           -           -       2,629        397        29,028

Total equity                         43,649              -         989       2,351       2,629        397        50,015


Reconciliation of equity
at 1 December 2004 (date of transition to IFRS)
                                                                                                      At 1 December
                                                                                                               2004
                                                                                                              £'000

Total equity as previously reported under UK GAAP                                                            43,649

Revaluation of available-for-sale investments                                                                 3,359

Deferred tax on revaluation of available-for-sale investments                                                (1,008)

Deferred tax on share based payments                                                                            397

Dividends                                                                                                     2,629

Revaluation of property, plant and equipment                                                                  1,413

Deferred tax on revaluation of property, plant and equipment                                                   (424)

Total value of IFRS adjustments                                                                               6,366

Total equity as restated under IFRS                                                                          50,015


Consolidated income statement
for the 16 months ended 31 March 2006

Presentation effects of IAS 1 'Presentation of Financial Statements' on UK GAAP
income and expenses

                                      As reported                       UK GAAP
                                            Under           IFRS    balances in
                                          UK GAAP    adjustments    IFRS format
                                            £'000          £'000          £'000

                                         109,385          8,792        118,177  Revenue
                                               -         (8,792)        (8,792) Fees and commissions payable

Turnover                                 109,385             -         109,385  Net revenue

Operating expenses                       (79,198)        79,198              -
Reorganisation costs - exceptional        (9,907)             -         (9,907) Reorganisation costs
Amortisation of EBT prepayment            (4,226)             -         (4,226) Amortisation of EBT prepayment
Goodwill amortisation                     (8,605)             -         (8,605) Goodwill amortisation
Other operating expenses                       -        (79,198)       (79,198) Other operating expenses

Total administrative expenses           (101,936)             -       (101,936) Operating expenses

Operating profit                           7,449              -          7,449  Operating profit

Profit on disposal of fixed asset          3,129              -          3,129  Profit on disposal of
investments                                                                     available-for-sale investments

Profit on ordinary activities before      10,578              -         10,578
interest and investment income

Interest receivable and similar            3,365              -          3,365  Finance income
income

Interest payable and similar charges      (4,205)             -         (4,205) Finance charges

Profit on ordinary activities before       9,738              -          9,738  Profit before tax
taxation

Tax on profit on ordinary activities      (6,975)             -         (6,975) Income tax expense

Profit for the financial period            2,763              -          2,763  Profit for the period attributable
                                                                                to the equity holders of the parent


Consolidated income statement
for the 16 months ended 31 March 2006
Measurement effects of IFRS on UK GAAP income and expenses - summary

                                                                            UK GAAP         Effect of
                                                                        balances in        transition
                                                                        IFRS format           to IFRS            IFRS
                                                                              £'000             £'000           £'000

Revenue                                                                    118,177                 -         118,177
Fees and commissions payable                                                (8,792)                -          (8,792)

Net revenue                                                                109,385                 -         109,385

Reorganisation costs                                                        (9,907)                -          (9,907)
Amortisation of EBT prepayment                                              (4,226)            4,226               -
Share based charges - EBT                                                        -            (4,226)         (4,226)
Share-based charges - other                                                      -              (246)           (246)
Goodwill amortisation                                                       (8,605)            8,605               -
Amortisation of intangible assets - client                                       -            (5,066)         (5,066)
relationships
Other operating expenses                                                   (79,198)              (24)        (79,222)

Operating expenses                                                        (101,936)            3,269         (98,667)

Operating profit                                                             7,449             3,269          10,718

Profit on disposal of available-for-sale investments                         3,129                 -           3,129

Finance income                                                               3,365                 -           3,365

Finance charges                                                             (4,205)                -          (4,205)

Profit before tax                                                            9,738             3,269          13,007

Income tax expense                                                          (6,975)            1,601          (5,374)

Profit for the period attributable to the equity                             2,763             4,870           7,633
holders of the parent

Earnings per share
  Basic                                                                        7.6p             13.3p           20.9p
  Diluted                                                                      7.5p             13.1p           20.6p

Adjusted earnings per share
  Basic                                                                      55.6p*            (0.5p)         55.1p**
  Diluted                                                                    54.8p*            (0.5p)         54.3p**


* Before amortisation of both goodwill (£8.6 million) and the Employee Benefit
Trust ('EBT') prepayment (£4.2 million), exceptional reorganisation costs (£9.9
million) and exceptional profit on disposal of fixed asset investments (£3.1
million).  These adjustments amount to a net charge before tax of £19.6 million.

** Before amortisation of client relationships intangible asset (£5.1 million),
share-based charges relating to the EBT (£4.2 million),  reorganisation costs
(£9.9 million) and profit on disposal of available-for-sale investments (£3.1
million).  These adjustments amount to a net charge before tax of £16.1 million.



Consolidated income statement
for the 16 months ended 31 March 2006
Measurement effect of IFRS on UK GAAP income and expenses - detail

                                                               UK GAAP                   Property
                                                              balances        Business  plant and Share-based
                                                               in IFRS    combinations  equipment    payments
                                                                format          IFRS 3     IAS 16      IFRS 2      IFRS
                                                                 £'000           £'000      £'000       £'000     £'000

Revenue                                                       118,177               -          -           -    118,177
Fees and commissions payable                                   (8,792)              -          -           -     (8,792)

Net revenue                                                   109,385               -          -           -    109,385

Reorganisation costs                                           (9,907)              -          -           -     (9,907)
Amortisation of EBT prepayment                                 (4,226)              -          -       4,226          -
Share-based charges - EBT                                           -               -          -      (4,226)    (4,226)
Share-based charges - other                                         -               -          -        (246)      (246)
Goodwill amortisation                                          (8,605)          8,605          -           -          -
Amortisation of intangible assets - client relationships            -          (5,066)         -           -     (5,066)
Other operating expenses                                      (79,198)              -        (24)          -    (79,222)

Operating expenses                                           (101,936)          3,539        (24)       (246)   (98,667)

Operating profit                                                7,449           3,539        (24)       (246)    10,718

Profit on disposal of available-for-sale investments            3,129               -          -           -      3,129

Finance income                                                  3,365               -          -           -      3,365

Finance charges                                                (4,205)              -          -           -     (4,205)

Profit before tax                                               9,738           3,539        (24)       (246)    13,007

Income tax expense                                             (6,975)          1,520          7          74     (5,374)

Profit for the period attributable to the equity holders        2,763           5,059        (17)       (172)     7,633
of the parent



Consolidated balance sheet
at 31 March 2006
Presentation effects of IAS 1 'Presentation of Financial Statements' on UK GAAP
balances

                             As reported             IFRS             IFRS        UK GAAP
                                   Under     adjustments:     adjustments:    balances in
                                 UK GAAP           Assets      Liabilities    IFRS format
                                   £'000            £'000            £'000         '£'000

Fixed assets                                                                              Non-current assets

Intangible assets               170,326                -                -        170,326  Intangible assets

Tangible assets                   4,540                -                -          4,540  Property, plant and
                                                                                          equipment

Investments                         800                -                -            800  Available-for-sale
                                                                                          investments

                                      -            1,915                -          1,915  Deferred tax assets

                                175,666            1,915                -        177,581

Current assets                                                                            Current assets

Debtors - due within one        173,829           (6,572)               -        167,257  Trade and other receivables
year

Debtors - due after one year      5,089            4,657                -          9,746  EBT prepayment

Cash at bank and in hand         49,958                -                -         49,958  Cash and cash equivalents

                                228,876           (1,915)               -        226,961

Total assets                    404,542                -                -        404,542  Total assets

Creditors                                                                                 Current liabilities

Amounts falling due within     (183,693)               -            3,634       (180,059) Trade and other payables
one year

                                      -                -             (840)         (840)  Financial liabilities

                                      -                -           (2,794)        (2,794) Current tax liabilities

                               (183,693)               -                -       (183,693)

Creditors                                                                                 Non-current liabilities

Amounts falling due after       (60,000)               -                -        (60,000) Subordinated loan
more than one year

Provisions for liabilities       (7,174)               -             7,174             -
and charges

                                      -                -              (15)           (15) Deferred tax liabilities

                                      -                -           (7,159)        (7,159) Provisions

                                (67,174)               -                -        (67,174)

Total liabilities              (250,867)               -                -       (250,867) Total liabilities

Net assets                      153,675                -                -        153,675  Net assets


Capital and reserves                                                                      Equity attributable to
                                                                                          equity holders of the
                                                                                          parent

Called up share capital           4,760                -                -          4,760  Share capital

Share premium account             9,276                -                -          9,276  Share premium

Capital redemption reserve          100                -                -            100  Capital redemption reserve

Other reserves                  130,601                -                -        130,601  Other reserves

Profit and loss account           8,938                -                -          8,938  Retained earnings

Equity shareholders' funds      153,675                -                -        153,675  Total equity



Consolidated balance sheet
at 31 March 2006

Measurement effects of IFRS on UK GAAP balances - summary

                                                                      UK GAAP          Effect of
                                                                  balances in         transition
                                                                  IFRS format            to IFRS               IFRS
                                                                        £'000              £'000              £'000

Assets

Non-current assets

Intangible assets                                                    170,326             23,285            193,611

Property, plant and equipment                                          4,540                235              4,775

Available-for-sale investments                                           800              1,388              2,188

Deferred tax assets                                                    1,915              1,069              2,984

                                                                     177,581             25,977            203,558

Current assets

Trade and other receivables                                          167,257                  -            167,257

EBT prepayment                                                         9,746             (9,746)                -

Cash and cash equivalents                                             49,958                  -             49,958

                                                                     226,961             (9,746)           217,215

Total assets                                                         404,542             16,231            420,773

Current liabilities

Trade and other payables                                            (180,059)             5,783           (174,276)

Financial liabilities                                                   (840)                 -               (840)

Current tax liabilities                                               (2,794)                 -             (2,794)

                                                                    (183,693)             5,783           (177,910)

Non-current liabilities

Subordinated loan                                                    (60,000)                  -           (60,000)

Deferred tax liabilities                                                 (15)           (17,905)           (17,920)

Provisions                                                            (7,159)                 -             (7,159)

                                                                     (67,174)           (17,905)           (85,079)

Total liabilities                                                   (250,867)           (12,122)          (262,989)

Net assets                                                           153,675              4,109            157,784

Equity attributable to equity
holders of the parent

Share capital                                                          4,760                  -              4,760

Share premium                                                          9,276                  -              9,276

Capital redemption reserve                                               100                  -                100

Available-for-sale reserve                                                 -                972                972

Revaluation reserve                                                        -                972                972

Other reserves                                                       130,601                 -             130,601

Retained earnings                                                      8,938              2,165             11,103

Total equity                                                         153,675              4,109            157,784



Consolidated balance sheet
at 31 March 2006
Measurement effects of IFRS on UK GAAP balances - detail


                               UK GAAP                             Property                 Events
                                                                                             after
                              balances       Business Intangible  plant and   Financial    balance Share-based
                               in IFRS   combinations     assets  equipment instruments sheet date    payments
                                format         IFRS 3     IAS 38     IAS 16      IAS 39     IAS 10      IFRS 2     IFRS
                                 £'000          £'000      £'000      £'000       £'000      £'000       £'000    £'000

Assets

Non-current assets

Intangible assets             170,326         22,131      1,154          -           -          -           -   193,611

Property, plant and             4,540              -     (1,154)     1,389           -          -           -     4,775
equipment

Available-for-sale                800              -          -          -       1,388          -           -     2,188
investments

Deferred tax assets             1,915              -          -          -           -          -       1,069     2,984

                              177,581         22,131          -      1,389       1,388          -       1,069   203,558

Current assets

Trade and other               167,257              -          -          -           -          -           -   167,257
receivables

EBT prepayment                  9,746              -          -          -           -          -      (9,746)        -

Cash and cash equivalents      49,958              -          -          -           -          -           -    49,958

                              226,961              -          -          -           -          -      (9,746)  217,215

Total assets                  404,542         22,131          -      1,389       1,388          -      (8,677)  420,773

Current liabilities

Trade and other payables     (180,059)             -          -          -           -      5,783           -  (174,276)

Financial liabilities            (840)             -          -          -           -          -           -      (840)

Current tax liabilities        (2,794)             -          -          -           -          -           -    (2,794)


                             (183,693)             -          -          -           -      5,783           -  (177,910)


Non-current liabilities

Subordinated loan             (60,000)             -          -          -           -          -           -   (60,000)

Deferred tax liabilities          (15)       (17,072)         -       (417)       (416)         -           -   (17,920)

Provisions                     (7,159)             -          -          -           -          -           -    (7,159)

                              (67,174)       (17,072)         -       (417)       (416)         -           -   (85,079)

Total liabilities            (250,867)       (17,072)         -       (417)       (416)     5,783           -  (262,989)

Net assets                    153,675          5,059          -        972         972      5,783      (8,677)  157,784

Equity attributable to
equity holders of the
parent

Share capital                   4,760              -          -          -           -          -           -     4,760

Share premium                   9,276              -          -          -           -          -           -     9,276

Capital redemption reserve        100              -          -          -           -          -           -       100

Available-for-sale reserve          -              -          -          -         972          -           -       972

Revaluation reserve                 -              -          -        972           -          -           -       972

Other reserves                130,601              -          -          -           -          -           -   130,601

Retained earnings               8,938          5,059          -          -           -      5,783      (8,677)   11,103

Total equity                  153,675          5,059          -        972         972      5,783      (8,677)  157,784



Consolidated statement of recognised income and expense
for the sixteen months ended 31 March 2006
                                                                                                       At 31 March
                                                                                                              2006
                                                                                                             £'000
Revaluation of available-for-sale investments

-gain arising from changes in fair value                                                                       738

-gain on disposal transferred to the income statement                                                       (2,709)

Deferred tax on revaluation of available-for-sale investments

-on gain arising from changes in fair value                                                                   (221)

-on gain on disposal transferred to the income statement                                                       813

Net expense recognised directly in equity                                                                   (1,379)

Profit for the period                                                                                       7,633

Total recognised income and expense for the period                                                           6,254


Reconciliation of equity
at 31 March 2006

                                                                                                       At 31 March
                                                                                                              2006
                                                                                                             £'000

Total equity as previously reported under UK GAAP                                                          153,675

Revaluation of available-for-sale investments                                                                1,388

Deferred tax on revaluation of available-for-sale investments                                                 (416)

Deferred tax on share based payments                                                                         1,069

Dividends                                                                                                    5,783

Revaluation of property, plant and equipment                                                                 1,389

Deferred tax on revaluation of property, plant and equipment                                                  (417)

Business combinations                                                                                        5,059

EBT prepayment taken to equity                                                                              (9,746)

Total value of IFRS adjustments                                                                              4,109

Total equity as restated under IFRS                                                                        157,784


Consolidated cash flow statement
for the sixteen months ended 31 March 2006
Presentation and measurement effects of IFRS on reported cashflows

                                       As
                                 reported
                                    under           IFRS adjustments
                                  UK GAAP    Presentation       Measurement         IFRS
                                    £'000           £'000             £'000        £'000

Reconciliation of operating                                                                 Cash flows from operating
profit to operating cash                                                                    activities
flows
Operating profit                   7,449          (7,449)                -            -
                                       -           9,738             3,269       13,007     Profit before taxation
                                                                                            Adjustments for:
Goodwill amortisation              8,605          (8,605)                -            -
                                       -           9,156            (3,539)       5,617     - Amortisation of
                                                                                            intangible   assets
                                       -           4,205                 -        4,205     - Finance cost
                                       -          (3,365)                -       (3,365)    - Investment income
Depreciation                       1,274            (551)               24          747     - Depreciation
Amortisation of EBT                4,226               -            (4,226)           -
prepayment
                                       -               -             4,472        4,472     Share-based charges
                                       -          (3,129)                -       (3,129)    Profit on disposal of
                                                                                            available-for-sale
                                                                                            investments
Loss on disposal of                   58               -                 -           58     Loss on disposal of
tangible fixed assets                                                                       tangible fixed assets
Non-cash reorganisation              669               -                 -          669     Non-cash reorganisation
costs                                                                                       costs
Increase in debtors              (52,992)              -                 -      (52,992)    Increase in trade and other
                                                                                            receivables
Increase in creditors and         55,095               -                 -       55,095     Increase in trade payables
provisions                                                                                  and provisions

Net cash inflow from              24,384
operating activities
                                                                                 24,384     Cash generated from
                                                                                            operations

Returns on investment and
servicing of finance
Interest received                  3,823               -                 -      3,823       Interest received
Interest paid                     (2,496)          2,179                 -         (317)    Interest paid
Taxation paid                     (5,595)              -                 -       (5,595)    Income taxes paid

                                                                                 22,295     Net cash from operating
                                                                                            activities

Capital expenditure and                                                                     Cash flows from investing
financial investment                                                                        activities
Purchase of tangible fixed        (1,834)            810                 -       (1,024)    Purchase of property, plant
assets                                                                                      and equipment
                                       -            (810)                -         (810)    Purchase of intangible
                                                                                            software
Proceeds from sale of fixed        3,129               -                 -        3,129     Proceeds from disposal of
asset investments                                                                           available-for-sale
                                                                                            investments
Acquisitions and disposals
Costs associated with             (5,781)          5,781                 -            -
purchase of subsidiary
undertakings
Cash acquired with                17,611         (17,611)                -            -
subsidiary undertakings
                                       -          11,830             5,000       16,830     Acquisition of
                                                                                            subsidiaries, net of cash
                                                                                            acquired
Payment of deferred                  (52)              -                 -          (52)    Deferred consideration paid
consideration
                                                                                 18,073     Net cash used in investing
                                                                                            activities

                                                                                            Cash flows from financing
                                                                                            activities
Equity dividends paid            (26,939)              -                 -      (26,939)    Dividends paid to
                                                                                            shareholders

Cash inflow before                  6,250
financing
Financing
Issue of ordinary share               25               -                 -           25     Proceeds from issue of
capital                                                                                     ordinary share capital
Costs associated with issue         (180)              -                 -         (180)    Costs associated with issue
of shares                                                                                   of shares
Redemption of loan notes          (1,755)              -                 -       (1,755)    Redemption of loan notes
                                       -          (2,179)                -       (2,179)    Interest paid on
                                                                                            subordinated loan

                                                                                (31,028)    Net cash used in financing

Increase in cash in the            4,340               -             5,000        9,340     Net increase in cash and
period                                                                                      cash equivalents



SIGNIFICANT ACCOUNTING POLICIES

Accounting convention

The preliminary IFRS financial information has been prepared in accordance with
International Financial Reporting Standards as adopted by the EU ('adopted
IFRSs') and IFRS 1 'First Time Adoption of IFRSs' to establish the financial
position, results of operations and cash flows of the group necessary to provide
the comparative financial information expected to be included in the group's
first complete set of IFRS financial statements for the year ending 31 March
2007. The preliminary IFRS financial information does not include comparative
financial information for the prior period.  The preliminary IFRS financial
information has been prepared under the historical cost convention, except that:
(1) non-current assets held for sale are stated at fair value less cost to sell
and (2) freehold property is carried at a revalued amount, being its fair value
at the date of revaluation, less any accumulated depreciation and subsequent
accumulated impairment losses.  The principal accounting policies that the
directors intend to apply in the preparation of the group's first full IFRS
financial statements for the year ending 31 March 2007 are set out below.

The preliminary IFRS financial information provided in this document has been
prepared in accordance with current standards and interpretations as issued by
the International Accounting Standards Board ('IASB') and its predecessors and
adopted by the European Commission ('EC').  However, the standards that are in
issue are subject to ongoing review and endorsement by the IASB and the EU,
whilst the application of the standards continues to be subject to review by the
International Financial Reporting Interpretations Commission ('IFRIC').
Accordingly, modifications may be required to be made to the information as
presented in this announcement as further guidance is issued and as practice
develops.

No changes to accounting estimates have been made in preparing the preliminary
IFRS financial information; such estimates have been applied in preparing the
IFRS balances as were originally applied under UK GAAP.


Revenue

Revenue comprises fees, commissions and interest receivable in the course of
ordinary investment business and is stated net of Value Added Tax.  Revenue is
disclosed both before and after the deduction of fees and commissions payable to
third parties.


Basis of consolidation

The group accounts comprise the accounts of the company and its subsidiaries.
The results of subsidiaries acquired or disposed of are included in the
consolidated financial statements from or to the date on which control changes.
All intra-group transactions and balances between group companies are eliminated
on consolidation.


Property, plant and equipment

Freehold property is stated at revalued amount less accumulated depreciation and
accumulated impairment losses.  Freehold property is subject to a formal
independent valuation when, in the opinion of the directors, there is evidence
to indicate that the fair value of the property is materially different to the
carrying value.  Plant and equipment is stated at cost less accumulated
depreciation and accumulated impairment losses.

Depreciation has been calculated to write off the cost or revalued amount of
property, plant and equipment over the assets expected useful economic life on a
straight-line basis to its residual value at the following annual rates:

            Freehold land                                   Nil
            Freehold buildings                              2%
            Fixtures, fittings and office equipment         Between 7% and 25%
            Computer equipment                              Between 20% and 33%

Where assets are revalued, depreciation is charged prospectively based on the
revalued amount.

                                                                    
Intangible assets


(i) Goodwill

Goodwill arising on the acquisition of subsidiary undertakings and businesses
represents the excess of the fair value of the consideration given over the fair
value of the identifiable assets and liabilities acquired.  Goodwill is
recognised as an asset and is reviewed annually for impairment.

Goodwill arising on acquisitions before the date of transition to IFRS has been
retained at the value as previously stated under UK GAAP, subject to a review
for impairment at that date.  Goodwill arising on acquisitions in the year ended
30 November 1998 and earlier periods that was written off to reserves in
accordance with the accounting standards then in force, has not been restated.


(ii) Computer software and software development costs

Costs to acquire computer software licences are capitalised based on the
acquisition cost and any direct costs of bringing the software into use.  These
costs are amortised on a straight-line basis over the expected useful economic
life of the software, being 3 years.  Where software is acquired under a
licence, the cost is written off over the life of the licence.


(iii) Client relationships

Costs to acquire client relationships and contracts are capitalised where the
client relationships and contracts represent an identifiable asset, in
accordance with IAS 38, and their value can be measured reliably.  Where the
client relationships and contracts are expected to have a finite economic life,
the cost is amortised on a straight-line basis over the estimated economic life.
  Where the economic life is considered to be indefinite, the carrying value is
reviewed annually for impairment and any impairment losses are recognised
immediately in the income statement.


Impairment

The carrying values of goodwill and intangible assets where the economic life is
considered to be indefinite are reviewed at least annually or where changes in
circumstances or events indicate that the carrying value of an asset may not be
recoverable.  Impairment reviews for all other assets are performed where
circumstances exist that indicate the carrying value of an asset may not be
recoverable.

An impairment loss is recognised whenever the carrying value of an asset or a
cash generating unit exceeds its recoverable amount.  Recoverable amount is the
higher of fair value less any cost to sell and value in use.  Impairment losses
recognised in respect of cash generating units are allocated first to reduce the
carrying amount of any goodwill allocated to cash generating units and then to
reduce the carrying amount of the other assets in the unit on a pro-rata basis.

Impairment losses relating to assets carried at depreciated historic cost are
recognised in the income statement immediately.  Impairment losses that relate
to assets carried at valuation are first allocated against any revaluation
surplus directly in reserves, with the balance of the impairment loss being
recognised in the income statement.

Impairment losses in respect of goodwill are not reversed. Impairment losses
relating to assets other than goodwill may only be reversed where there has been
a change in the estimates used to determine their recoverable amount.  Such
impairment losses would only be reversed to the extent that the asset's
recoverable amount exceeds its carrying value, net of depreciation and
amortisation, that would have applied had no impairment loss originally have
been recognised.


Provisions

Provisions are recognised when the group has a present obligation, either legal
or constructive, that can be reliably measured and is the result of a past
event, where it is probable that a transfer of economic benefits will result.


Leases

Annual rentals in respect of assets held under operating lease agreements are
charged to the income statement on a straight-line basis over the term of the
lease.


Taxation

Tax on profit on ordinary activities comprises both current and deferred
taxation.  Tax is charged or credited to the income statement, except where it
relates to items charged or credited directly to equity, in which case the tax
is also recognised within equity.

Current tax represents the expected tax payable on profits chargeable to
corporation tax, using the rates of taxation applicable at the balance sheet
date, net of any adjustments to tax payable in respect of prior years.

Deferred tax reflects the tax that is anticipated to be payable or recoverable
on differences between the carrying amounts of assets and liabilities in the
financial statements and the corresponding tax bases used in the calculation of
taxable profits, and is accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised only to the extent that the
directors consider that it is more likely than not that there will be suitable
taxable profits in the future against which the deductible temporary difference
can be utilised. Deferred tax assets and liabilities are not recognised if the
temporary difference arises on the initial recognition of goodwill.  The
carrying amount of deferred tax assets and liabilities are reviewed at each
balance sheet date. Deferred tax assets and liabilities are not discounted.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised.


Pension costs

Contributions to occupational pension schemes are charged to the income
statement in the period to which they relate.


Financial instruments

Equity investments held by the group are classified as available-for-sale and
are carried at fair value. Gains or losses arising from changes in fair value
are recognised directly in the available-for-sale reserve.  When the investment
is no longer recognised, the cumulative gain or loss on the equity investment,
including any gain or loss previously recognised directly in the
available-for-sale reserve, is recognised in the income statement.


Loans and borrowings

Loans and borrowings are initially recognised at the fair value of the
consideration received.  Subsequent to initial recognition, loans and borrowings
are measured at amortised cost using the effective interest rate method.
Borrowing costs are recognised as an expense in the period in which they are
incurred.


Interest income and expense

Interest income and expense for all financial assets and liabilities that are
measured at amortised cost is recognised in the income statement using the
effective interest rate method.


Share-based payments

The group has applied the requirements of IFRS 2 'Share-Based Payments' to all
grants of equity instruments made after 7 November 2002 that had not vested by 1
January 2005.

The group has issued equity-settled share based payments to certain employees.
Equity-settled share based payment transactions are measured at fair value.  The
fair value is determined at the date of grant using the Black-Scholes option
pricing model, the fair value being expensed on a straight-line basis over the
vesting period, taking into account the group's estimate of the number of
options that will ultimately vest.

The fair value of shares issued to Investec 1 Limited ('Investec') upon the
acquisition of Carr Sheppards Crosthwaite Limited ('CSC') and transferred by
Investec to an Employee Benefit Trust ('EBT') for the future benefit of
employees of CSC has been recognised directly in equity.


Equity instruments

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


Dividends

Final dividends are recognised as a deduction from equity once approved and
interim dividends are charged once paid.


Cash and cash equivalents

Cash and cash equivalents comprise cash in hand and deposits with banks and
financial institutions with a maturity of up to three months.  For the purpose
of the cash flow statement, bank overdrafts repayable on demand are included
within cash and cash equivalents.

Special Purpose Audit Report of KPMG Audit Plc to Rensburg Sheppards plc ("the
Company") on its Preliminary International Financial Reporting Standards
("IFRS") Financial Information

In accordance with the terms of our engagement letter dated 27 September 2006,
we have audited the accompanying consolidated preliminary IFRS balance sheet of
Rensburg Sheppards plc ("the Company") at 1 December 2004 and at 31 March 2006,
and the related consolidated statements of income, changes in equity and cash
flows for the 16 month period then ended and the related accounting policy and
other notes ("the preliminary IFRS financial information").


Respective responsibilities of directors and KPMG Audit Plc

The directors of the Company have accepted responsibility for the preparation of
the preliminary IFRS financial information which has been prepared as part of
the Company's conversion to IFRS. Our responsibilities, as independent auditors,
are established in the United Kingdom by the Auditing Practices Board, our
profession's ethical guidance and the terms of our engagement.

Under the terms of engagement we are required to report to you our opinion as to
whether the preliminary IFRS financial information has been properly prepared,
in all material respects, in accordance with the Significant Accounting Policies
section.  We also report to you if, in our opinion, we have not received all the
information and explanations we require for our audit.

We read the other information accompanying the preliminary IFRS financial
information and consider whether it is consistent with the preliminary IFRS
financial information.  We consider the implications for our report if we become
aware of any apparent misstatements or material inconsistencies with the
preliminary IFRS financial information.

Our report has been prepared for the Company solely in connection with the
Company's conversion to IFRS.  Our report was designed to meet the agreed
requirements of the Company determined by the Company's needs at the time. Our
report should not therefore be regarded as suitable to be used or relied on by
any party wishing to acquire rights against us other than the Company for any
purpose or in any context. Any party other than the Company who chooses to rely
on our report (or any part of it) will do so at its own risk. To the fullest
extent permitted by law, KPMG Audit Plc will accept no responsibility or
liability in respect of our report to any other party.


Basis of audit opinion

We conducted our audit having regard to Auditing Standards issued by the UK
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the preliminary IFRS
financial information.  It also includes an assessment of the significant
estimates and judgements made by the directors in the preparation of the
preliminary IFRS financial information, and of whether the accounting policies
are appropriate to the Group's circumstances, consistently applied and
adequately disclosed.

We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the preliminary IFRS
financial information is free from material misstatement, whether caused by
fraud or other irregularity or error. In forming our opinion we also evaluated
the overall adequacy of the presentation of information in the preliminary IFRS
financial information.


Emphasis of matters

Without qualifying our opinion, we draw your attention to the following matters:

  • The Accounting Convention section explains why the accompanying
    preliminary IFRS financial information may require adjustment before its
    inclusion as comparative information in the IFRS financial statements for
    the year ending 31 March 2007 when the Company prepares its first IFRS
    financial statements.
  • As described in the Accounting Convention section, as part of its
    conversion to IFRSs, the Company has prepared the preliminary IFRS financial
    information for the 16 month period ended 31 March 2006 to establish the
    financial position, results of operations and cash flows of the Company
    necessary to provide the comparative financial information expected to be
    included in the Company's first complete set of IFRS financial statements
    for the year ending 31 March 2007. The preliminary IFRS financial
    information does not include comparative financial information for the prior
    period.
  • As explained in the Accounting Convention section, in accordance with IFRS
    1 First-time Adoption of International Financial Reporting Standards, no
    adjustments have been made for any changes in estimates made at the time of
    approval of the UK Generally Accepted Accounting Practices financial
    statements on which the preliminary IFRS financial information is based.


Opinion

In our opinion, the accompanying preliminary IFRS financial information for the
16 month period ended 31 March 2006 has been prepared, in all material respects,
in accordance with the basis set out in the Significant Accounting Policies
section, which describes how IFRS have been applied under IFRS 1, including the
assumptions made by the directors of the Company about the standards and
interpretations expected to be effective, and the policies expected to be
adopted, when they prepare the first complete set of consolidated IFRS financial
statements of the Company for the year ending 31 March 2007.


KPMG Audit Plc
Chartered Accountants
Leeds

12 October 2006




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