Continued

21 Operating leases
Lease commitments of the Group to pay operating lease rentals for the next year comprise:

	Land and buildings		Other
	2003 £million	2002 £million	2003 £million	2002 £million
Leases terminating:
Within one year	0.9	1.1	0.4	0.5
Between one and five years	3.0	2.2	1.6	0.6
After five years	1.1	0.4	-	-
	5.0	3.7	2.0	1.1

Operating lease rentals charged to the profit and loss account in the year amounted to £3.7 million (2002: £3.4 million), including £1.6 million (2002: £1.2 million) for plant and machinery.

22 Share capital and reserves

	Issued and fully paid ordinary share capital £million		Issued and fully paid B share capital £million		Share premium account £million		Capital redemption reserve £million		Profit & loss account £million		Total £million
Group
At 1 January 2003	21.6		1.8		1.2		52.9		197.8		275.3
Retained profit for the year	-		-		-		-		4.3		4.3
Currency translation differences	-		-		-		-		(21.5	)	(21.5	)
Issue of B shares	-		9.5		-		-		(9.6	)	(0.1	)
Redemption of B shares	-		(9.4	)	-		9.4		(9.4	)	(9.4	)
Actuarial gain on pension scheme	-		-		-		-		6.0		6.0
Deferred tax associated with gain on pension scheme	-		-		-		-		(2.3	)	(2.3	)
At 31 December 2003	21.6		1.9		1.2		62.3		165.3		252.3

At 31 December 2003, the cumulative amount of goodwill written off to reserves for businesses acquired prior to 1 January 1998 amounted to £52.7 million (2002: £52.7 million).

	Issued and fully paid ordinary share capital £million	Issued and fully paid B share capital £million		Share premium account £million	Capital redemption reserve £million		Other reserves £million		Profit & loss account £million		Total £million
Company
At 1 January 2003	21.6	1.8		1.2	52.9		173.2		227.7		478.4
Retained loss for the year	-	-		-	-		-		(1.2	)	(1.2	)
Issue of B shares	-	9.5		-	-		(9.6	)	-		(0.1	)
Redemption of B shares	-	(9.4	)	-	9.4		-		(9.4	)	(9.4	)
At 31 December 2003	21.6	1.9		1.2	62.3		163.6		217.1		467.7

The authorised share capital of the Company at 31 December 2003 was £32.0 million (2002: £32.0 million) in 5 pence ordinary shares and £125.0 million (2002: £125.0 million) in 1 penny redeemable B shares.

The allotted, called up and fully paid 5 pence ordinary shares comprise:
	Number '000		Share capital £ million
At 1 January 2003	431,576		21.6
Issue of shares	65		-
At 31 December 2003	431,641		21.6
The allotted, called up and fully paid 1 penny redeemable B shares comprise:
	Number '000		B share capital £million
At 1 January 2003	182,957		1.8
Issue of B shares	949,552		9.5
Redemption of B shares	(938,244	)	(9.4	)
At 31 December 2003	194,265		1.9

On 2 May 2003, 474,742,205 redeemable B shares were issued to ordinary shareholders at a rate of 1.1 redeemable B shares for every 1 ordinary share held. On 3 November 474,809,266 redeemable B shares were issued to ordinary shareholders at a rate of 1.1 redeemable B shares for every 1 ordinary share held.

Holders of redeemable B shares are entitled, in priority to holders of ordinary shares, to a non-cumulative preferential dividend per share at a rate of 75 per cent of six month sterling LIBOR payable six monthly in arrears. In the event of a winding up of the Company, repayment is limited to the nominal value of the shares. Holders are not entitled to vote at any general meeting except if a resolution to wind up the Company is to be considered.

Holders of redeemable B shares were given the opportunity to redeem their shares on 2 May 2003 and 3 November 2003. As a result, 938,243,809 redeemable B shares were purchased for cash at their nominal value of 1 penny and cancelled.

At 31 December 2003, certain directors and employees held the following options to subscribe for ordinary shares of 5 pence each:

	Exercise price per share		Exercise 2003 Number	2002 Number
Share option scheme 1987 normally exercisable between:
11 May 1996 and 11 May 2003	168.5	p	-	65,893
13 September 1997 and 13 September 2004	184.8	p	67,855	74,610
19 September 1998 and 19 September 2005	152.5	p	73,402	78,574
5 November 1999 and 5 November 2006	132.8	p	73,185	79,159
			214,442	298,236
Share option scheme 1998 normally exercisable between:
6 April 2001 and 6 April 2008	137.0	p	68,126	99,549
15 September 2001 and 15 September 2008	86.0	p	78,488	78,488
1 April 2002 and 1 April 2009	92.8	p	121,275	160,607
31 March 2003 and 31 March 2010	69.5	p	1,919,016	2,142,296
7 March 2004 and 7 March 2011	97.9	p	1,646,959	1,803,929
10 September 2004 and 10 September 2011	56.5	p	2,127,515	2,223,451
10 April 2005 and 10 April 2012	29.0	p	3,257,497	3,396,556
			9,218,876	9,904,876
Share option scheme 2003 normally exercisable between:
29 April 2006 and 29 April 2013	24.8	p	7,304,072	-
			7,304,072	-
UK savings related share option scheme 1989 exercisable within six months of:
1 November 2000 or 1 November 2002	123.6	p	-	30,920
			-	30,920
UK savings related share option scheme 1998 exercisable within six months of:
1 November 2001 or 1 November 2003	94.2	p	74,726	90,844
1 December 2002 or 1 December 2004	93.4	p	48,028	101,491
1 June 2003 or 1 June 2005	53.4	p	168,264	428,477
1 May 2004 or 1 May 2006	78.3	p	135,729	175,069
1 December 2004 or 1 December 2006	45.2	p	193,633	265,608
1 June 2005 or 1 June 2007	21.9	p	2,858,810	3,328,677
1 June 2006 or 1 June 2008	20.5	p	963,720	-
			4,442,910	4,390,166
US savings related share option scheme exercisable within three months of:
1 March 2003	85.0	p	-	43,948
2 October 2003	34.0	p	-	364,599
20 March 2004	25.0	p	562,808	1,288,912
20 March 2005	18.0	p	2,173,936	-
			2,736,744	1,697,459
Performance Share Plan exercisable between:
1 January 2003 and 11 April 2007	1.0	p	-	388,406
1 January 2004 and 31 January 2008	1.0	p	629,733	629,733
1 January 2005 and 11 November 2009	1.0	p	1,325,540	1,325,540
			1,955,273	2,343,679

The share option schemes 1987 and 1998 are discretionary schemes under which senior management below Board level are granted options to purchase shares in the Company. The option price is the average market price over the five working days preceding the grant and there is no discount.

Options are capable of exercise after three years and within ten years of the date of grant; those granted since 1995 are subject to earnings per share performance targets.

The share option scheme 2003 is a discretionary scheme under which Executive Directors and Senior Managers below Board level are granted options to purchase shares in the Company. The option price is the market price of a share on the dealing day immediately preceding the day on which the option is granted with no discount applied. Options are capable of exercise after three years, subject to earnings per share and total shareholder return performance targets being met, and within ten years of the date of grant.

The UK savings related share option schemes 1989 and 1998 are schemes under which UK employees can enter into savings contracts with a building society or bank for a perod of three or five years and use the proceeds from their savings accounts to purchase shares in the Company on the exercise of their options. The option price is the average market price over the five working days preceding the invitation date discounted by a maximum of 20 per cent.

The US savings related share option scheme is a scheme under which US employees can enter into savings contracts with a bank for a period of two years and use the proceeds from their savings accounts to purchase shares in the Company on the exercise of their options. The option price is the market price on the date of grant, discounted by 15 per cent.

The Company has taken advantage of the exemption for Inland Revenue approved employee SAYE schemes provided by UITF abstract 17. Details of the Performance Share Plan are shown in the Directors' remuneration report.

Notes to the financial statements continue on the next page >
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