NOTES TO THE BALANCE SHEETS

19 Intangible Assets

(i) Goodwill is capitalised on new acquisitions made after 28th September, 1998. Such goodwill is amortised over the lower of its useful economic life and a period of 20 years. Goodwill arising on acquisitions made prior to 28th September, 1998 was written off directly to reserves.

(ii) Other intangible assets comprise publishing rights, titles, radio licences and certain other intangible assets. These assets were valued by the Directors and are stated at fair value on acquisition and are amortised over the lower of their useful economic life and a period of 20 years.

Trade marks are amortised over the lower of their useful economic life and a period of 20 years.

20 Tangible Assets

(i) The Group’s properties, other than its specialised buildings, were revalued at 30th September, 1994, on the basis of external valuations and are depreciated over their useful economic lives. Subsequent additions are carried at historical cost, less accumulated depreciation, in accordance with FRS 15 Tangible Fixed Assets. Specialised buildings, being those properties constructed specifically for use in the business, are carried at historical cost less accumulated depreciation.

(ii) Group fixed assets include assets in the course of construction, made up as follows:

No depreciation was charged on assets in the course of construction during the year (2004 £Nil).

(iii) The net book value of Group plant and equipment includes £24.8 million (2004 £30.5 million) in respect of assets held under finance leases mainly held in a number of the Group’s provincial newspaper centres. Depreciation of £4.8 million (2004 £4.0 million) was charged on such assets in the year.

(iv) No significant unprovided liability for taxation would have arisen, had the trading properties been sold at the balance sheet date for their net book values, due to the availability of roll-over relief.

The historical cost and related depreciation of Group properties are set out below:

21 Investments in Group Undertakings (as listed in Principal Subsidiaries)

Additions and disposals comprise intra-group transfers of subsidiaries.

22 Investments in Joint Ventures and Associates

(i) The principal disposal during the year related to the Group’s investment in California Market Centre Inc.

Information on principal joint ventures from the latest available accounts (all incorporated in Great Britain and registered and operating in England and Wales unless otherwise stated).

The transfer represents the transfer of the Group’s interests in GCap Media (formerly GWR) from associates into long-term investments.

Associates
Information on principal associates from the latest available accounts (all incorporated and operating in Great Britain unless otherwise stated).

(ii) Joint ventures have been accounted for under the gross equity method and associates under the net equity method using unaudited accounts to 2nd October, 2005, provided in the case of listed associates that such information is public information at the latest practicable date for inclusion by the Group.

(iii) As part of a prior year transaction to acquire a 25% interest in George Little Management LLC, the Group receives a preferred profit distribution of US$1.5 million for the first five years to November 2005. The purchase agreement included ‘put and call options’ for the balance of the shares. Details of these commitments are given in Note 35.

(iv) The Group has significant influence in Shopcreator plc and participates in its direction through board representation, even though its holding is below 20%.

(v) Share of post-acquisition reserves is stated after deducting goodwill written off directly against reserves of £15.7 million (2004 £32.8 million). The carrying value of joint ventures and associates includes goodwill on acquisition by the Group, less cumulative amortisation, of £98.8 million (2004 £124.9 million). The charge for the year was £9.0 million (2004 £16.2 million) (Note 4).

23 Other Investments

Investments are analysed as follows:

Information on principal investments, taken from latest published accounts (incorporated in Great Britain unless stated otherwise).

(i) The market value of the listed investments at 2nd October, 2005 was £101.6 million (2004 £35.6 million).

24 Stocks and Work in Progress

The replacement cost of stocks and work in progress is not materially different from that shown above.

25 Debtors

(i) The Company’s corporation tax debtor represents amounts due from subsidiaries for Group relief and payments made on account of the 2005 liability.

(ii) The Group’s deferred tax asset primarily represents certain overseas tax losses.

26 Treasury Information

An overview of treasury policies is included within the Financial and Treasury Review on pages 17 to 20.

Short-term debtors and creditors have been excluded from all of the following disclosures, other than those relating to currency risk.

Currency exposures
The following table shows the degree to which companies within the Group have net monetary assets/(liabilities) in currencies other than their functional currency. Translation differences are taken to the profit and loss account of both Group companies and of the Group.

Currency and Interest Rate Composition of Financial Assets

Committed Borrowing Facilities

The following undrawn committed borrowing facilities were available to the Group on 2nd October, 2005 and at 3rd October, 2004, in respect of which all conditions precedent had been met:

Financial Liability Maturity Profile
The maturity profile of the carrying value of the Group’s financial liabilities at the end of the year was as follows:

Financial Asset Maturity Profile
The maturity profile of the carrying value of the Group’s financial assets at the end of the year was as follows:

Currency Profile of Financial Liabilities
The currency profile of financial liabilities, stated after taking account of applicable derivative instruments as at 2nd October, 2005 and at 3rd October, 2004, was as follows:

The above tables do not take into consideration the effect of U.S. dollar and Australian dollar forward contracts which are used by the Group to create ‘synthetic currency debt’. The impact of including these derivatives on the above table would be as follows:

At the year end, the Group had a US$ fixed interest rate swap outstanding amounting to US$10 million (2004 US$10 million) at a rate of 5.0025% (2004 5.0025%). The Group also had outstanding floating rate interest rate swaps of £75 million (2004 £75 million) at rates between 4.91% and 5.1825% (2004 4.47875% and 4.80875%).

The Group also had outstanding cross currency fixed to fixed interest rate swaps. These amounted to £207.7 million/US$370.1 million (2004 £83 million/US$140 million) resulting in the Group paying fixed US dollar interest at rates of between 2.615% and 5.04% (2004 between 2.615% and 4.3515%), £43.9 million/Aus$105 million (2004 £35 million/Aus$85 million) with the Group paying fixed Australian dollar interest at rates of between 5.66% and 6.44% (2004 between 5.66% and 6.44%), JPY21.3 billion/£118.4 million (2004 JPYNil/£Nil) with the Group paying fixed JPY interest of 0.9% (2004 JPY Nil) (and in the prior year JPY 19.9 billion/Aus$252 million) resulting in the Group paying fixed Japanese Yen interest of 0.9%.

The Group also had outstanding a number of interest rate caps. These amounted to US$80 million (2004 US$80 million) at rates of between 4% and 6% (2004 4% and 6%) and Aus$Nil (2004 Aus$25 million at rates of between 6% and 7%).

Interest Rate Risk Profile of Fixed Rate Financial Liabilities

Floating rate financial liabilities comprise Sterling-denominated bank borrowings and lease finance that bear interest at rates based on LIBOR, Sterling loan notes that bear interest at rates based upon LIBID and Australian and US dollar denominated borrowings that bear interest based upon LIBOR.

Fair value of Financial Assets and Liabilities
Where available, market prices have been used to derive fair value. Forward foreign exchange contracts have been valued, using the closing forward rate of exchange on 2nd October, 2005 and at 3rd October, 2004.

Derivative financial instruments, held to manage the interest rate and currency profile comprise interest rate swaps, caps, currency swaps and forward currency contracts. The book value of these instruments at the year end was £Nil (2004 £Nil) and the fair value was an asset of £9.0 million (2004 £3.0 million).

Hedges
Unrecognised gains and losses on hedging instruments and the movements therein are as follows:

27 Short-Term Investments

These investments comprise bank deposits and other similar investments with original maturities exceeding one day.

28 Creditors

(i) Short-term bank loans of £3.5 million (2004 £93.2 million) are drawn on bank facilities expiring within one year at the balance sheet date and have thus been classified within creditors due within one year.

(ii) Loan notes attract interest at approximately LIBID to LIBID minus 1% and were issued as part of the consideration for various acquisitions. The loan notes are repayable at the option of the loan note holder.

(iii) In accordance with FRS 4, the Group’s bonds have been adjusted from their nominal values to offset the unamortised issue costs of £3.5 million (2004 £3.8 million). The issue costs are being amortised over the expected lives of the bonds.

(iv) The Group’s bank loans, payable after more than one year are denominated in US dollars, Australian dollars and Sterling. The interest rates on these borrowings ranged from 4.0664 to 5.76% (2004 1.61% to 5.465%).

(v) The interest rates on finance leases were approximately 8% (2004 8%).

(vi) The Group’s long-term borrowings are repayable as follows:

Details of creditors not wholly repayable within 5 years are as follows:

(vii) Leases over five years are repaid by instalments.

(viii) The Company’s long-term borrowings are repayable as follows:

29 Provisions for Liabilities and Charges

Movements on other provisions were as follows:

The provisions are expected to be utilised within the next financial period.

30 Deferred Taxation

Movements on the provision for deferred taxation were as follows:

Contingent (assets)/liabilities and gains in respect of deferred taxation, not included in the balance sheet, were as follows:

(i) The deferred tax assets disclosed in note 25 in respect of overseas tax losses, relate primarily to trading losses incurred in the U.S. and have been recognised on the basis that the Directors are of the opinion based on recent and forecast trading, that sufficient suitable taxable profits will be generated in the relevant territories in future accounting periods, such that it is considered more likely than not that these assets will be recovered. The unrecognised deferred tax asset of £18.2 million (2004 £29.9 million) above relates primarily to overseas tax losses where there is insufficient certainty that these losses will be utilised in the immediate future.

(ii) No deferred tax has been provided on revalued assets due to the availability of realised capital losses for which no deferred tax asset has been recognised.

(iii) There are additional unprovided capital losses carried forward which have not yet been agreed with the Inland Revenue.

(iv) The Group is able to obtain tax relief in some overseas territories for the cost of goodwill arising on its acquisitions of some businesses. In certain cases the goodwill was written off to reserves under the transitional rules set out in FRS 10 Goodwill and Intangible Fixed Assets. Utilisation of the available tax relief in the overseas territories gives rise to a timing difference as set out above. The potential timing differences will only reverse on sale of the relevant businesses. As the relevant businesses are considered core to the Group there is currently no intention to dispose of them. The potential reversal is so far into the future that after discounting, the potential liability becomes insignificant. The effect of discounting the Group’s accelerated capital allowances is a credit of £2.2 million (2004 £3.2 million). The effect of discounting the Group’s other deferred tax assets and liabilities is not material.

31 Called Up Share Capital

(i) The two classes of shares are equal in all respects, except that the ‘A’ Ordinary Non-Voting shares do not have voting rights and hence their holders are not entitled to vote at general meetings of the Company.

(ii) During the year, 184,766 ‘A’ Ordinary Non-Voting shares were allotted for aggregate consideration of £1,069,664 under the terms of the Company’s 1997 Executive Share Option scheme.

(iii) At 2nd October, 2005, options were outstanding under the terms of the Company’s 1997 Executive Share Option Schemes over a total of 5,490,734 (2004 4,700,500) ‘A’ Ordinary Non-Voting shares as follows:

*Vested

(iv) These options were granted at market value at the date of the grant and none required any payment. They are not normally exercisable before the third anniversary of the grant and in all circumstances will lapse if not exercised within ten years.

(v) They are normally exercisable only when the relevant performance conditions have been met. The first condition is that, in respect of four out of six consecutive monthly calculation dates (which start in the thirtieth month following the date of grant of a particular option), the total shareholder return (‘TSR’) of the Company must exceed that of the FTSE 100 index. Secondly, there must be real growth in earnings per share over a period of three consecutive financial years.

(vi) The TSR condition has not been met so far in respect of the options granted in December 1999 or June 2000. As a consequence, these options have not vested yet. The eps condition was met in the year ended 28th September, 2003.

(vii) Options granted on 14th December, 2001 at £6.45 per share, on 2nd January, 2002 at £6.48 per share and on 21st January, 2002 at £6.45 per share vested after three years when the respective TSR conditions were met, the eps condition having been met in the year ended 3rd October, 2004.

(viii) For the options granted in December, 2002 at £5.73 per share and in January, 2003 at £5.815, the eps condition was met in the year, since real growth in adjusted earnings per share was achieved, compared to the year ended 29th September, 2002. The respective TSR conditions have not yet been met.

DMGT Long Term Incentive Plan
At 2nd October, 2005, 1,006,441 (2004 910,791) ‘A’ Ordinary Non-Voting shares had been committed by executives to the Company’s LTIP, full details of which are set out in the Remuneration Report.

These committed shares are analysed below:

32 Reserves

(i) The transfer from the revaluation reserve recognises the progressive realisation of a previously unrealised gain on disposal of businesses to GWR Group plc, as the goodwill on the interest in GWR is amortised. Following the merger of Capital Radio and GWR to form GCap Media, the Group’s interest is now 14.3% of the combined Group and is now accounted for as a long-term investment. This progressive transfer ceased on the date of the merger and the balance of £31.0 million would be a recognised as a realised gain in the event of a disposal of the Group’s interest in GCap Media.

(ii) At 2nd October, 2005, cumulative goodwill of continuing businesses of £621.2 million (2004 £626.6 million) had been written off against the profit and loss account.

(iii) As required by UITF Abstract 38 the Group’s investment in its own shares is now classified within shareholders’ funds as an other reserve. At 2nd October, 2005 this investment comprised the cost of 6,280,751 ‘A’ Ordinary Non-Voting shares (2004 4,213,000 shares). The market value of these shares at 2nd October, 2005 was £41.5 million (2004 £30.7 million). The Treasury shares are considered to be a realised loss for the purposes of calculating distributable reserves.

33 Summary of the Effects of Acquisitions

The principal acquisitions completed during the year and the dates of acquisition were:

(i) The aggregate consideration for these and other businesses was £119.2 million, of which £80.7 million was paid during the year, £1.9million issued in the form of loan notes and an estimated amount of £36.6 million payable in the form of deferred consideration, dependent upon trading results. This deferred consideration has been discounted back to current values in accordance with FRS 7 Fair Values in Acquisition Accounting. In each case, the Group has used acquisition accounting to account for the purchase.

34 Summary of the Effects of Disposals

The principal disposal completed during the year and its date of disposal was:

The aggregate consideration for this and other businesses, was £8.4 million, all of which was received in the form of cash.

The impact of disposals on net assets was:

35 Commitments

At 2nd October, 2005 the Group had annual commitments under non-cancellable operating leases as follows:

Most property leases are subject to rent reviews.

The Group entered into arrangements with its ink suppliers to obtain ink for the period to 2010 at competitive prices and to secure supply. At the year end, the commitment to purchase ink over the period was £106.4 million (2004 £126.9 million).

dmg world media (USA) Inc acquired a 25% stake in George Little Management LLC (GLM) in November 2000 and acquired a further 15% in January 2005. The purchase agreement included ‘put and call’ arrangements to acquire the membership interests of the other members of GLM. Some of these arrangements were re-negotiated in 2005 and the overall terms are now as follows:

(i) With effect from 1st October, 2010, dmg world media (USA) Inc will acquire a further 11% of GLM shares at an agreed multiple of pre tax profits.

(ii) With effect from 1st October, 2014, the Group is required to acquire any remaining membership interests, which it does not own in GLM, at an agreed multiple of pre tax profits.

(iii) The shareholders cumulatively will now be limited in the number of shares that they can put to the Group to a maximum of 20% of the shares in GLM in any one year.

(iv) In certain circumstances, the Group is required to purchase the membership interests of individual members of GLM. These circumstances include disability, death and retirement.

36 Contingent Liabilities

Four writs claiming damages for libel have been issued in Malaysia against Euromoney Institutional Investor and three of its employees in respect of an article published in one of Euromoney’s magazines, International Commercial Litigation, in November 1995. The writs were served on Euromoney in October, 1996. The total amount claimed is 280 million Malaysian ringgits, £42.0 million (2004 £40.7 million). No provision has been made in these accounts since the Directors do not believe that Euromoney has any material liability in respect of these writs.

At 2nd October, 2005 the Group had outstanding commitments under forward foreign exchange contracts amounting to £725.2 million (2004 £488.5 million).

At 2nd October, 2005 the Company had guaranteed borrowing facilities and finance leases of subsidiaries under which £182.1 million (2004 £85.2 million) were outstanding. The Company had also guaranteed a subsidiary’s interest rate derivatives with a principal value of £42.3 million (2004 £16.7 million) and letters of credit of £3.2 million (2004 £5.2 million).

37 Pension Arrangements

The Group operates several pension schemes covering most major U.K. group companies under which contributions are paid by the employer and employees.

The schemes for most employees are funded defined benefit pension arrangements, providing service-related benefits, based on final pensionable salary. The assets of the schemes are held independently from the Group’s finances and are administered by trustee companies. Pension costs are assessed on the advice of an independent qualified actuary following triennial valuations using the projected unit method.

A valuation of the principal schemes was carried out as at 31st March, 2004 and the long-term assumptions having the most significant effect on the pension costs reported under SSAP 24 Accounting for Pension Costs, are shown in the following table:

The surpluses or deficits identified from the valuation of the principal schemes are amortised over a period of eleven years using the straight line method.

Following the triennial valuation of the principal schemes as at 31st March, 2004, the company cash contribution rate was increased to 18% of pensionable salaries (2004 – 15%). With effect from 1st April, 2005 the Group introduced a new benefits structure for the principal schemes to include a new “Standard” section and a “Pension +” section. In the “Standard” section, employees pay contributions of 5% of pensionable salaries but accrue future benefits at a lower rate than before. Under the “Pension +” section, employees currently pay contributions of 6% rising progressively to 7.5% by 1st July, 2007 and retain existing benefit accrual rates (2004 – all employees paid 5%). The schemes remain open to eligible new employees who, after one year’s service, can join the “Standard” section with an option to join the “Pension +” section after a further four years’ service.

The pension charge for the year ended 2nd October, 2005 was £39.9 million (2004 £34.7 million).

The components of the total pension charge were as follows:

A prepayment of £62.6 million (2004 £53.1 million) is included under debtors, representing the excess of accumulated contributions paid over the equivalent pension charge. This includes an advance payment into the Group’s pension schemes amounting to £32.3 million in respect of the 2006 contributions (2005 £26.9 million). A provision of £0.4 million (2004 £1.1 million) is included in provisions, representing the excess of the accumulated pension charge over pension contributions paid.

The effect of UITF 6 Accounting for post-retirement benefits other than pensions, is not material.

FRS 17
In accordance with the requirements of FRS 17 Retirement Benefits, this note sets out the main financial assumptions made in valuing the liabilities of the schemes and the fair value of assets held. Additionally, this note discloses the amounts that would be charged or recognised in the accounts under FRS 17, together with an analysis of the movement in scheme surpluses or deficits which would result. As permitted by FRS 17, the costs, accruals and prepayments recorded in the Accounts continue to be reported under the requirements of SSAP24 ‘Accounting for Pension Costs’.

Defined Benefit Schemes
The figures in this note are based on the calculations carried out in connection with the formal actuarial valuation of the main schemes as at 31st March, 2004 and updated to 2nd October, 2005 by the actuary.

The main financial assumptions used for FRS 17, Retirement Benefits, purposes are shown in the following table:

The assumptions made for life expectancy in retirement have been selected, based on a detailed analysis of data for scheme members. In addition, an allowance is made for improvements in mortality rates in future, and further analysis of the schemes’ membership will be carried out from time to time to monitor actual changes against that allowance.

The fair value of the assets held by the pension schemes, the long-term expected rate of return on each class of assets and the value of the schemes’ liabilities assessed on the assumptions described above are shown in the following table:

The asset weightings indicated in the table above are monitored by the schemes’ trustees and should be viewed against a background where the schemes remain open to new, eligible, employees and continue to generate a net positive cash flow.

An analysis of the amount which would be chargeable to operating profit is shown below:

An analysis of the amount which would be credited to other finance income is shown below:

An analysis of the amount which would be recognised in the Statement of Total Recognised Gains and Losses (STRGL) is shown in the following table, together with the components shown as a percentage of scheme assets or liabilities:

The movement in deficit during the year is shown in the following table:

If the above amounts had been recognised in the accounts, the effect on shareholders’ funds would have been as shown below:

U.K. Defined Contribution Plans
A number of defined contribution pension plans are operated by certain divisions of the Group where a business case exists for this type of pension provision. The pension cost attributable to these plans during the year amounted to £4.7 million (2004 £4.1 million).

An amount of £0.5 million (2004 £0.5 million) is included in provisions representing outstanding contributions due at the balance sheet date.

Overseas Pension Plans
Overseas subsidiaries of certain Group divisions operate defined contribution retirement benefit plans, primarily in North America and Australia. The pension cost attributable to these plans during the year amounts to £3.1 million (2004 £3.3 million).

Pension Arrangements for Executives
The Group operates a two-tier, defined benefit pension scheme for senior executives (including executive Directors), details of which are incorporated in the above disclosures. On 1st April, 2005, this became a contributory scheme. It is the Group’s policy that annual bonuses, payments under the Executive Bonus Scheme and benefits in kind are not pensionable.

Included in U.K. Defined Contribution Plans above are investments in a funded unapproved retirement benefit scheme for certain executives of the Group including two executive Directors who are subject to the pensionable earnings cap imposed by the Inland Revenue. The assets of this scheme are held under individual trusts independently from the Group’s finances; investment during the year totalled £1.1 million (2004 £0.4 million). The Group will terminate its investment in this scheme with effect from 5th April, 2006, to coincide with the tax changes being introduced after that date.

Stakeholder Pensions
DMGT provides access to a stakeholder pension plan for relevant employees who are not eligible for the other pension schemes operated by the Group.

38 Ultimate Holding Company

The Company’s ultimate holding company is Rothermere Continuation Limited, a company incorporated in Bermuda.

39 Related Party Transactions

The Company has taken advantage of the exemption under FRS 8 Related Party Disclosures, not to disclose related party transactions between subsidiaries. The disclosures that are required under FRS 8 are set out below.

Ultimate Controlling Party
The Company’s ultimate controlling party is the Viscount Rothermere, the Company’s Chairman. Transactions relating to the remuneration and shareholdings of the Viscount Rothermere are given in the "Remuneration Report"../remunerationreport/.

Transactions with Directors
There were no material transactions with Directors of the Company, except for those relating to remuneration and shareholdings, disclosed in the "Remuneration Report"../remunerationreport/.

Transactions with Joint Ventures and Associates
Associated Newspapers had a 50% joint venture interest in Zoom which was sold during the year. No funding was made during the year and the amount due from Zoom at 2nd October, 2005 was £Nil (2004 £3.5 million) which is included in investments in joint ventures (Note 22).

Associated Newspapers has a 38% investment in Indigo Holidays Limited which is an associate. During the year, the Group received advertising revenue from Indigo Holidays of £1.1 million (2004 £1.8 million). The amount due from Indigo Holidays at 2nd October, 2005 was £6.1 million (2004 £4.3 million).

During the year, Northcliffe Newspapers Group Limited provided equity funding of £2.0 million (2004 £1.5 million) to Fish4 Limited, a 26% associate. Full provision has been made against this funding in these Accounts. During the year, George Little Management LLP (‘GLM’), a 40% associate of dmg world media inc, charged US$7.8 million (£4.2 million) (2004 $5.5 million or £3.1 million) to operations for consulting fees to dmg world media.

During the year, GLM recorded US$1.8 million (£1.0 million) and US$1.8 million (£1.0 million), of management revenue related to the California Gift Shows which is owned by dmg world media (USA) inc.

GLM also recorded approximately US$0.4 million (£0.2 million) (2004 $0.3 million or £0.2 million) of management fee revenue related to shows owned by dmg world media (USA) inc.

During the year, dmg world media (USA) inc received distributions from GLM in the amount of $1,000,000 (£0.5 million) (2004 £Nil).

Details of the Group’s principal joint ventures and associates are set out in Note 22.

All transactions with joint ventures and associates arose in the normal course of business. Material transactions are set out as follows:

The Group has contracts with Greenland Interactive Limited, a joint venture which was sold during the year. Greenland administers premium-rate telephone lines and a customer care line. During the year, the Group received £0.3 million (2004 £0.7 million) from Greenland in respect of premium rate telephone revenue. No amounts were outstanding at the beginning or at the end of the year.

Other Related Party disclosures
At 2nd October, 2005, there was a loan of £179,233 (2004 £188,066) made to Mr K. J. Beatty, before his appointment as a Director, to assist with relocation after joining the Group. The loan bears interest at 2½% per annum. The maximum amount outstanding during the year was £188,066. At 2nd October, 2005, there was a further loan of £96,107 (2004 £96,107), bearing interest at 5% per annum, made before his appointment as a Director, to enable Mr Beatty to purchase ‘A’ Ordinary Non-Voting shares in the Company for commitment to the LTIP. The maximum amount outstanding during the year was £96,107.

At 2nd October, 2005, the Group owed £2.9 million (2004 £2.9million) to the pension schemes which it operates. This amount comprised employees’ and employer’s contributions in respect of September 2005 payrolls which were paid to the pension schemes in October 2005.

The Group recharges its principal pension schemes with costs of investment management fees. The total amount recharged during the year was £0.7 million (2004 £0.6 million).

40 Post Balance Sheet Events

There are no material post balance sheet events.