Notes to accounts

For the year ended 31 December 2007

21 Intangible assets

Syndicate
participations
£m
Goodwill
£m
Other
intangibles
£m
Total
£m
At 31 December 2006
63.2 2.8 66.0
Acquisitions
3.8 3.8
Amortisation
(0.8) (0.8)
At 31 December 2007
63.2 2.8 3.0 69.0

Syndicate participations represent the ongoing rights, acquired in Lloyd’s auctions, to trade on Syndicate 2001 within the Lloyd’s insurance market. Amlin subsidiaries have supported all of the ongoing capacity of Syndicate 2001 since 1 January 2004. All remaining liabilities of the Syndicate underwritten by third party capital prior to this date were taken on by Amlin subsidiaries at 1 January 2004 (see note 5).

Other intangibles relate to the costs of acquiring rights to customer contractual relationships. The additions during the year comprise the Group’s acquisition of the customer relationships of Cedar Insurance Group Limited (see note 35).

22 Share capital

2007
Number
2007
£m
2006
Number
2006
£m
Authorised ordinary shares
       
At 1 January authorised ordinary shares of 25p each
800,000,000 200.0 800,000,000 200.0
Reduction of authorised ordinary shares
(88,888,889)
Cancelled ordinary shares
(7)
At 31 December authorised ordinary shares of 28.125p (2006: 25p)
 
711,111,104
 
200.0
 
800,000,000
 
200.0
 
Authorised redeemable non-cumulative preference shares ('B shares')
       
Authorised B shares
544,624,000 122.0
At 31 December authorised B shares of 22.4p each
544,624,000 122.0
 
Allotted, called up and fully paid ordinary shares
       
At 1 January Authorised ordinary shares at 25p
534,006,720 133.5 530,113,127 132.5
Shares issued
3,695,766 0.9 3,893,593 1.0
Reduction of issued ordinary shares
(59,718,291)
At 31 December allotted ordinary shares of 28.125p
477,984,195 134.4 534,006,720 133.5
 
Issued redeemable non-cumulative preference shares ('B shares')
       
Issued B shares
537,464,619 120.4
At 31 December issued B shares of 22.4p each
537,464,619 120.4

The ordinary shares issued on exercise of options were issued for a total consideration of £4.5 million at an average price of 122 pence per share (2006: £3.7 million, average price 98 pence).

Return of capital

On 14 November, the Group announced its intention to return approximately £120 million of capital to shareholders by way of a B share issue combined with a consolidation of Amlin’s existing shares on the basis of 8 new ordinary shares for 9 existing ones. This was subsequently approved by the shareholders at an Extraordinary General Meeting held on 12 December 2007.

B shares were issued on 17 December 2007 to existing shareholders on the basis of one B share for each ordinary share held on 14 December 2007. Each B share enabled the shareholder to redeem the share at 22.4 pence per share at various dates in the future up to August 2009 or alternatively to receive a B share initial dividend in January 2008 of 22.4 pence per share. Following such dividend receipt, the relevant B shares were converted into deferred shares which were themselves redeemed on 14 January 2008 for a total redemption value of one penny in all. Holders of B shares not redeemed or converted into deferred shares on or around the initial redemption date in January 2008 have the right, subject to the Company having profits available for distibutiion, to receive continuing dividends at the rate of 75% of the sterling six month LIBOR. The B shares have no right to vote at general meetings of the Company other than to wind up the Company. They are fully transferable but are not listed on any stock exchange.

The amount outstanding to be returned to B shareholders at 31 December 2007 has been recognised as a liability in note 25. The total cost of the issue including expenses was £120.4 million which has been charged against share premium.

23 Share options

Details of the Amlin Executive Share Option Schemes are set out in the Directors' remuneration report in the Accountability section. At 31 December 2007 the following options over new shares, which are potentially exercisable between three and ten years after grant, or earlier in special circumstances such as redundancy, were outstanding under these executive schemes:

 
Usual first month of exercise
per share of shares
2007
Option price
per share
2007
Number
of shares
2006
Option price
per share
2006
Number
of shares
June 2003
72.95p 72.95p 9,690
May 2005
76.33p 112,380 76.33p 359,612
October 2002
80.16p 16,652 80.16p 27,754
May 2004
108.09p 36,422 108.09p 79,372
September 2001
108.54p 45,000 108.54p 91,196
April 2006
110.82p 435,062 110.82p 1,025,441
March 2007
152.85p 1,057,018 152.85p 2,683,054
March 2008
161.77p 2,207,065 161.77p 2,367,018
March 2009
293.00p 2,020,164 293.00p 2,173,915
    5,929,763   8,817,052

The following changes in new shares under option pursuant to these executive schemes took place during the year:

Number of
shares
2007
Weighted
average
exercise price
2007
(pence)
Number of
shares
2006
Weighted
average
exercise price
2006
(pence)
At 1 January
8,817,052 180.40 10,751,095 128.29
Granted during the year
2,290,481 293.00
Exercised during the year
(2,755,592) 139.09 (3,710,443) 98.00
Lapsed during the year
(131,697) 241.10 (514,081) 187.00
At 31 December
5,929,763 198.57 8,817,052 180.40

The weighted average remaining contractual life of the executive options outstanding at 31 December 2007 was 7.1 years (2006: 7.4 years).

In addition to these executive options, the following employee Sharesave options over new shares were outstanding at 31 December 2007:

 
Savings period
Usual first month
of exercise
Option price
per share
Number
of shares
5 years
December 2007 78.89p 64,125
3 years
July 2007 134.11p 5,622
5 years
July 2009 134.11p 134,827
3 years
December 2008 146.49p 450,389
5 years
December 2010 146.49p 191,002
3 years
July 2010 266.0p 303,381
5 years
July 2012 266.0p 214,993
    1,364,339

The following changes in new shares under option pursuant to the Sharesave scheme took place during the year:

 
 
Number of
shares
2007
Weighted
average
exercise price
2007
(pence)
 
 
Number of
shares
2006
Weighted
average
exercise price
2006
(pence)
At 1 January
1,324,239 123.17 1,611,327 127.7
Granted during the year
544,062 266.00
Exercised during the year
(406,234) 122.70 (183,150) 74.46
Lapsed during the year
(94,247) 171.58 (103,926) 82.03
Adjustments during the year
(3,481) 195.25 (12) 106.5
At 31 December
1,364,339 187.45 1,324,239 123.17

The weighted average remaining contractual life of the Sharesave options outstanding at 31 December 2007 was 2.6 years (2006: 3.0 years).

The trustee of the Group’s Employee Share Ownership Trust (ESOT) held 1,064,470 ordinary shares and 1,197,529 B shares as at 31 December 2007 (2006: 774,579 ordinary shares and nil B shares), of which 100,388 shares (2006: 201,959) were reserved to meet potential future exercises of executive options, in addition to the options over new shares detailed above. In addition, there are arrangements whereby the ESOT will provide up to 1,685,333 Performance Share Plan (PSP) shares, normally not until 2009, 2010, 2011 or 2012 and up to 581,386 Long Term Incentive Plan (LTIP) shares normally not until 2010. The ESOT shares are valued at the lower of cost and net realisable value. The market value of Amlin plc ordinary shares at 31 December 2007 was 298.0p per share (2006: 325.25p).

The assets, liabilities, income and costs of the ESOT are incorporated into the consolidated financial statements. The ESOT waives the right to dividends on ordinary shares in excess of 0.01p per each share ranking for an interim or final dividend.

A charge has been made to the income statement for options granted after 7 November 2002 pursuant to the executive and Sharesave option schemes, the PSP and the LTIP, details of which are as follows:

 
 
 
 
Schemes and grant
 
Option
exercise
price
pence
 
Charge
for
2007
£m
Closing
reserve
31 December
2007
£m
 
Charge
for
2006
£m
Closing
reserve
31 December
2006
£m
2003 executive grant
110.82 0.5 0.1 0.5
2004 executive grant
152.85 0.5 0.2 0.5
2004 Sharesave 3 yrs grant
134.11 0.1 0.1
2004 PSP grant
0.00 0.2 0.1 0.2
2005 executive grant
161.77 0.1 0.4 0.2 0.3
2005 Sharesave 3 yrs grant
46.49 0.1 0.2 0.1 0.1
2005 Sharesave 5 yrs grant
146.49
2005 PSP grant
0.00 0.1 0.3 0.1 0.2
2006 executive grant
293.00 0.2 0.4 0.2 0.2
2006 PSP grant
0.00 0.2 0.3 0.1 0.1
2007 Sharesave 3 yrs grant
266.00 0.1 0.1
2007 PSP grant
0.00 0.2 0.2
2007 LTIP grant
0.00 0.2 0.2
  1.2 3.4 1.1 2.2

Schemes and grant At 31 December 2007
Schemes and grant At 31 December 2006

The weighted average share price of Amlin plc throughout the year was 305.42 pence (2006: 269.9 pence).

The “Black Scholes” option pricing model has been used to determine the fair value of the option grants listed above. The assumptions used in the model are as follows:

2007 2006
Weighted average share price
201.78 185.43p
Weighted average exercise price
183.37 159.02p
Expected volatility
30.00% 30.00%
Expected life (years)
3.25 – 7.50 3.25 – 7.50
Risk free rate of return
4.30% – 5.00% 4.30% – 4.50%
Expected dividend yield
2.00% – 5.00% 2.00% – 5.00%
Volatility

The volatility of the Amlin share price is calculated as a normalised standard deviation of the log of the daily return on the share price. In estimating a 30% volatility, the volatility of return for six months, one year and three year intervals are considered. As a guide to the reasonableness of the volatility estimate similar calculations are performed on a selection of Amlin’s peer group.

Interest rate

The risk free interest rate is consistent with government bond yields.

Dividend yield

The assumptions are consistent with the information given in the report and accounts for each relevant valuation year.

Staff turnover

The option pricing calculations are split by staffing grades as staff turnover is higher for more junior grades. Furthermore historical evidence suggests that senior employees tend to hold their options for longer whereas more junior levels within the organisation appear to exercise earlier. In addition senior employees hold a larger proportion of the options but represent a smaller group of individuals.

Market conditions

Amlin issues options that include targets for the Group’s performance against a number of market and non-market conditions. Failure to meet these targets can reduce the number of options exercisable. In some circumstances no options may be exercised. Assumptions are made about the likelihood of meeting the market and non-market conditions based on the outlook at the time of each option grant.

24 Reserves

Share
premium
£m
Other
reserves
£m
ESOT
shares
£m
Retained
earnings
£m
Minority
interest
£m
At 1 January 2007
347.6 (21.8) (0.6) 477.4 0.3
Issues of share capital on exercise of options
over new shares (note 22)
 
3.6
 
 
 
 
Gains on revaluation of employee share
ownership trust recognised directly in equity
 
 
(0.1)
 
 
 
Net purchase of treasury shares
(1.5)
Share option valuation charge
1.2
Deferred tax
(1.3)
Currency translation differences
on overseas operations
 
 
(8.2)
 
 
 
Profit for the financial year
352.7 0.1
Dividends (note 29)
(111.1)
Return of capital (note 22)
(120.4)
At 31 December 2007
230.8 (30.2) (2.1) 719.0 0.4
Share
premium
£m
Other
reserves
£m
ESOT
shares
£m
Retained
earnings
£m
Minority
interest
£m
At 1 January 2006
344.0 52.7 (1.7) 257.3
Issues of share capital on exercise of options
over new shares
 
3.6
 
 
1.1
 
 
Gains on revaluation of employee share
ownership trust recognised directly in equity
 
 
0.2
 
 
 
Gain on defined benefit pension scheme
0.1
Share option valuation charge
1.1
Deferred tax
1.3
Currency translation differences
on overseas operations
 
 
(77.2)
 
 
 
Profit for the financial year
267.5 0.3
Dividends (note 29)
(47.4)
At 31 December 2006
347.6 (21.8) (0.6) 477.4 0.3

Other reserves is comprised of £45.7 million (2006: £45.7 million) being the cumulative amount of goodwill written off to reserves on acquisitions prior to January 1999, a capital redemption reserve, charges for share options issued, deferred tax in respect of share options and the cumulative foreign exchange losses of £59.3 million (2006: £73.4 million) on investments in overseas operations.

In January 2008, 423,449,598 B shares were redeemed by shareholders. 102,635,603 B shareholders elected to take a dividend and these shares were converted into deferred shares and redeemed. The remaining 11,379,418 B shares are outstanding. Consequently £117.8 million has been charged to retained earnings in 2008 and a capital redemption reserve created.

25 Trade and other payables and deferred income

2007
£m
2006
£m
Trade payables and accrued expenses
84.3 66.3
Social security and other tax payables
2.4 2.1
Issued redeemable non-cumulative preference shares (note 22)
120.4
207.1 68.4
2007
£m
2006
£m
Current portion
201.4 57.9
Non-current portion
5.7 10.5
207.1 68.4

26 Borrowings

2007
£m
2006
£m
Bank loans
0.1 0.9
Subordinated debt
277.4 277.9
277.5 278.8
2007
£m
2006
£m
Current portion
0.1 0.9
Non-current portion
277.4 277.9
277.5 278.8

The Group’s borrowings comprise three issues of subordinated debt. Details of the subordinated debt issues are as follows:

 
 
 
 
Issue date
 
 
 
Principal
amount
 
 
 
Reset
date
 
 
 
Maturity
date
 
Interest
rate
to reset
date %
Interest rate
from reset
date to
maturity
date %
23 November 2004
$50m November 2014 November 2019 7.11 LIBOR + 3.48
15 March 2005
$50m March 2015 March 2020 7.28 LIBOR + 3.32
25 April 2006
£230m December 2016 December 2026 6.50 LIBOR + 2.66

The debt will be redeemed on the maturity dates at the principal amounts, together with any outstanding accrued interest. The Company has the option to redeem the bonds in whole, subject to certain requirements, on the reset dates or any interest payment date thereafter at the principal amount plus any outstanding accrued interest.

The directors' estimation of the fair value of the Group’s borrowings is £322.2 million (2006: £306.3 million).

On 13 November 2006 the Company entered into a new debt facility with its banks which is available for three years from the signing date and provides an unsecured £200 million multicurrency revolving credit facility available by way of cash advances or sterling letters of credit (LOC). The facility is guaranteed by the Company’s subsidiaries Amlin Corporate Services Limited and Amlin Investments Limited.

In December 2006 Amlin Bermuda Ltd entered into a $300 million LOC and Revolving Credit Facility. The facility comprised a secured LOC facility for $200 million for a three year term and an unsecured revolving credit facility for $100 million for a term of 364 days, twice renewable, which has been renewed once in December 2007. The secured LOC facility is secured by a registered charge over a portfolio of assets managed by Aberdeen Asset Management Limited with State Street Bank and Trust Company as custodian. As at 31 December 2007 $28.7million (31 December 2006: $1.7 million) LOCs were issued with an additional $1.8m LOCs issued in January 2008.

Obligations due under finance leases and hire purchase contracts are payable as follows:

2007
£m
2006
£m
Within one year
0.1

27 Retirement benefit obligations

The Group participates in a number of pension schemes, including defined benefit, defined contribution and personal pension schemes.

The total charge to the income statement for these schemes is shown in the table below:

2007
£m
2006
£m
Defined benefit schemes
   
Lloyd’s Superannuation Fund
0.2 (0.2)
J E Mumford (Underwriting Agencies) Limited retirement benefit scheme
0.3 0.1
0.5 (0.1)
Ongoing funding
1.2 1.3
Defined contribution schemes
3.8 2.7
5.5 3.9

A summary of retirement benefit liabilities at 31 December 2007 is shown in the table below:

  2007
£m
2006
£m
Lloyd’s Superannuation Fund (see section a)
   
Opening net present value of contractual cash payments
6.7 11.1
Payments during the year
(4.6) (4.7)
Additional payment liability
0.5
Unwinding of discount
0.2 0.3
Closing net present value of contractual cash payments
2.8 6.7
J E Mumford (Underwriting Agencies) Ltd retirement benefit scheme (see section a)
Benefit obligation at end of year
3.0
Fair value of plan assets at end of year
(2.2)
Net scheme deficit
0.8
Total retirement benefit obligations
2.8 7.5
a) The Lloyd’s Superannuation Fund funded defined benefit scheme

The scheme is operated as part of the Lloyd’s Superannuation Fund (the Fund). The Amlin Group is the employer in respect of two sections of the scheme, the Amlin section, as in previous years, and now also the J E Mumford section as a result of the transfer during February 2007. The summary of liabilities at 31 December 2007 includes liabilities relating to the J E Mumford section.

Historically the Fund has catered for a number of employers in the Lloyd’s market. As a consequence of the consolidation in the market, employers closing final salary schemes and some companies failing, there are now only around five (2006: five) employers with active members in the Fund. A large proportion of the liability of the Fund relates to employers no longer participating in the Fund. The assets of the Fund are pooled and the current active employers are responsible collectively for the funding of the Fund as a whole.

For the purposes of determining contributions to be paid, the Trustee has split the Fund into a number of notional sections. This is a notional split and has no legal force. Previously this notional split allowed for separate sections in respect of each employer’s active members and one combined section for non-employed members of all current and former employers.

With effect from 31 December 2002, the Trustee altered this notional split so that, from that date, the active employers contributing to the Fund, including the Amlin Group, have individual notional sections comprising the notionally allocated assets in respect of their active employees, deferred pensioners and pensioners, and their corresponding liabilities. A separate notional fund is maintained for members whose former employers no longer contribute to the Fund (Orphan Section). Amlin is also liable for a proportion of the Orphan Section’s liabilities.

Since this alteration Amlin can now more clearly identify its expected contribution requirement to the Fund. However, as the asset allocation is notional and at the discretion of the Trustee, it is not possible for Amlin to be certain of its overall surplus or deficit at any time. Indeed, as other employers have bought themselves out of the scheme in recent years, Amlin has been notionally allocated an increased share of the scheme. For this reason the scheme continues to be classified as a multi-employer scheme for the purposes of International Accounting Standard No 19 (IAS 19), Employee Benefits. The Group is required to recognise the net present value of any contribution schedule that has been agreed with the Trustee. Therefore, £0.2 million (2006: £0.2 million) was charged to the Group result relating to the unwinding of the discount on the future contractual payments.

The funding position of the Fund is assessed every three years by an independent qualified actuary. Contributions are made at the funding rates recommended by the actuary, which vary across different sections of the Fund reflecting the notional sections then adopted, and typically include adjustments to amortise any funding surplus or shortfall over a period. Amounts borne under the scheme are charged to Syndicate 2001 or other Group companies. However, actuarial amounts quoted below are for the Group’s notional share of the scheme.

The last completed formal valuation of the Fund was as at 31 March 2004 and was carried out by Mr P Lofthouse, Fellow of the Institute of Actuaries, and used the projected unit credit actuarial method. For the purposes of providing disclosures in accordance with IAS19, the Group has requested the actuary update the 2004 valuation to 31 December 2006 and 2007 using appropriate techniques and the following assumptions:

2007
% pa
2006
% pa
Price inflation
3.4 3.1
Rate of increase in pay
Rate of increase in pensions payment
   
– LPI (maximum 5% pa)
3.4 3.1
– LPI (minimum 3% pa, maximum 5% pa)
3.6 3.25
– LPI (maximum 3% pa)
3.0 3.0
Rate of increase of statutory revaluation on deferred pension
3.4 3.1
Discount rate
5.7 5.1

During 2005 the Group reviewed its remaining defined benefit arrangements and made a number of changes to the Amlin section’s future benefit structure, which were implemented during 2006. In particular in order to remove much of the risk associated with salary inflation, the Amlin section was changed to allow members to continue accruing additional years' service under the schemes, but these accruals would be generally based on March 2006 pensionable salaries. Future salary increases are pensionable through the defined contribution schemes. Therefore the salary inflation assumption used for the ongoing valuation is now nil%.

The mortality assumptions used in the latest valuation included the following life expectancies:

Life expectancy (years) at age 60
31 December 2007
31 December 2006
for a member currently:
Male Female Male Female
Aged 60
25.2 28.2 25.0 28.1
Aged 45
26.6 29.4 26.1 29.1

The analysis of the Fund’s assets and the expected rate of return at the balance sheet date are as follows:

Asset mix 31 December 2007
Asset mix 31 December 2006
Long term rate of return
Amlin
Sections
Orphans
Section
Amlin
Sections
Orphans
Section
31 December
2007
31 December
2006
Equities
32% 32% 45% 20% 7.6% 7.5%
Bonds
68% 68% 55% 80% 5.4% 4.9%

The long term rates of return are estimated by the Directors based upon current expectations of future investment performance.

The updated assessment at 31 December 2007 showed that the assets notionally relating to the Amlin section of the Fund were £152 million (2006 : £146 million). The fair value of the assets in the scheme as a whole at 31 December 2007 was £318 million (2006: £315 million), being £23 million greater than (2006: £11 million) the amount required to fund members' accrued liabilities on the assumptions adopted, resulting in a surplus of 8% (2006: 4%).

The table below shows the impact on the defined benefit obligation that a change in certain key assumptions would have.

Assumption change
Defined benefit
obligation impact
£m
– Increase / decrease in discount rate by 0.25%
(12)/12
– Increase / decrease in inflation rate by 0.25%
6/(6)
– Increase in floor mortality improvements for males of 1.5%
and females of 1.0% per annum
 
6

The total amounts paid in respect of the Fund for Syndicate 2001 and Amlin Group companies are analysed in the table below.

2007
£m
2006
£m
Contributions relating to:
   
2004 valuation deficit – Amlin section
1.2 1.2
2004 valuation deficit – Orphan section
3.5 3.5
Ongoing funding
1.2 1.3
5.9 6.0
Group share of total payment
5.9 6.0

In 2004 Amlin agreed with the Trustee that it would make six annual payments to the Fund of £1.2 million. This agreement was based on the formal valuation at 31 March 2004 and not the updated valuation at 31 December 2004. The first payment was made in December 2004 and five subsequent annual payments were agreed commencing on 31 March 2005.

In 2004 Amlin agreed to pay contributions to the notional orphans' section to rectify a share of the funding shortfall revealed in the actuarial valuation at 31 March 2004, when the Group and Syndicate’s share of the shortfall was estimated to be £11.4 million and £12.8 million respectively. The first payment of £3.5 million was made on 31 December 2004. Three subsequent annual payments of £3.5 million were agreed commencing on 31 March 2005.

Contributions will also be paid to provide for the cost of benefit accrual after the date of the valuation. The rate of contribution agreed with the Trustee is 30% (2006: 30%) paid by the employer plus 5% (2006: 5%) member contributions, in each case of pensionable earnings, and totalled £1.3 million (2006: £1.3 million).

b) The stakeholder defined contribution scheme

The defined contribution scheme operated by the Group is a stakeholder arrangement. The total contributions for the year ended 31 December 2007 to the scheme were £3.8 million (2006: £2.7 million).

c) Other arrangements

Other pension arrangements include an occupational money purchase scheme which provides Death In Service protection for all employees. Regular contributions, expressed as a percentage of employees' earnings, are paid into this scheme and are allocated to accounts in the names of the individual members, which are independent of the Group’s finances. There were no outstanding contributions at 31 December 2007 (2006: £nil).

28 Earnings and net assets per share

Earnings per share are based on the profit attributable to shareholders and the weighted average number of shares in issue during the period. Shares held by the Employee Share Ownership Trust (ESOT) are excluded from the weighted average number of shares.

Basic and diluted earnings per share are as follows:

2007 2006
Profit attributable to equity holders of the Parent Company
£352.7m £267.5m
Weighted average number of shares in issue
532.0m 531.8m
Dilutive shares
6.1m 6.4m
Adjusted average number of shares in issue
538.1m 538.2m
Basic earnings per share
66.3p 50.4p
Diluted earnings per share
65.5p 49.8p

Basic and tangible net assets per share are as follows:

2007 2006
Net assets
£1,052.3m £936.4m
Adjustments for intangible assets
(£69.0m) (£66.0m)
Tangible net assets
£983.3m £870.4m
Number of shares in issue at end of period
478.0m 534.0m
Adjustment for ESOT shares
(1.1m) (0.8m)
Basic number of shares after ESOT adjustment
476.9m 533.2m
Net assets per share
220.7p 175.6p
Tangible net assets per share
206.2p 163.2p

29 Dividends

The amounts recognised as distributions to equity holders are as follows:

 
Group
2007
£m
2006
£m
Final dividend for the year ended:
   
– 31 December 2006 of 7.8 pence per ordinary share
41.7
– 31 December 2005 of 6.2 pence per ordinary share
25.0
Interim dividend for the year ended:
   
– 31 December 2007 of 5.0 pence per ordinary share
26.7
– 31 December 2006 of 4.2 pence per ordinary share
22.4
Special dividend for the year ended:
   
– 31 December 2006 of 8.0 pence per ordinary share
42.7
111.1 47.4

The final ordinary dividend of 10.0 pence per ordinary share for 2007, amounting to £47.8 million, payable in cash was approved by the Board on 27 February 2008 and has not been included as a liability as at 31 December 2007.

30 Principal exchange rates

The principal exchange rates used in translating foreign currency assets, liabilities, income and expenditure in the production of these financial statements were:

Average rate
Year end rate
2007 2006 2007 2006
US dollar
2.00 1.84 1.99 1.96
Canadian dollar
2.15 2.09 1.96 2.28
Euro
1.46 1.47 1.36 1.48