internal audit functions of both of the divisions. During 2004 a Business Risk Assurance Manager was appointed who reports to the Committee on the processes in relation to the mitigation and review of business risks.

All members of the Audit Committee are independent, as defined by the Combined Code, the SEC and the NYSE and the only remuneration members of the Audit Committee receive, from the Group, is as directors. Russell Walls ~~succeeded Brook Land as chairman on 1 April 2003,~~is Chairman and is an “audit committee financial expert” as defined by the applicable ~~Securities and Exchange Commission~~SEC regulations. ~~From 7 January 2004~~During the year the Audit Committee consisted of Dale Hilpert, Brook Land and Russell ~~Walls. From 1 April 2003 to 7 January 2004 it consisted~~Walls with all having significant financial experience either as a result of ~~Lee Abraham, Brook Land and Russell Walls and~~positions held in other companies or from ~~2 February 2003 to 31 March 2003 Robert Blanchard was also a member.~~advising on such matters. The Audit Committee met ~~six~~nine times in ~~2003/04,~~2004/05, including a meeting entirely dedicated to the consideration of corporate governance matters. ~~Two~~All directors ~~were each~~attended all Audit Committee meetings except for Mr. Walls who was unable to attend one meeting.

The Nomination Committee ~~charter was~~terms of reference were revised in early ~~2004/05~~2004 to reflect corporate governance developments in the UK and the USUS. The terms of reference were reviewed in 2005 and isare available on request from the Group Company Secretary orand on the Group’s web site. The Nomination Committee has responsibility for reviewing the composition and balance of the Board, as well as Board and senior management succession. It also makes recommendations to the Board on all new Board appointments and nominations for re-election as directors. Once the Nomination Committee has agreed a job specification, the services of external recruitment agencies are used to identify suitable candidates for senior executive posts and for all Board appointments. The Nomination Committee carries out interviews with such individuals. The re-election procedures have been reviewed and formalised, particularly with regard to the performance evaluation procedures for individual directors. The review of any non-executive director, who is serving beyond six years from first being elected to the Board, is considered with particular care. No director is involved in any decision about his own re-appointment. The procedure for the election of directors is laid out on page ~~34.~~41.

When the role of the Group Chairman or any matter relating to succession to that role is discussed, the Chairman may be consulted, but the responsibility for preparing a job specification and making any recommendation to the Board rests solely with the independent non-executive directors of the Nomination Committee. The Nomination Committee also reviews a number of other senior appointments within the Group, such as that of the Group Company Secretary.

The senior independent director chairs the Nomination Committee. ~~From 1 April 2003~~During the year the Nomination Committee consisted of Robert Blanchard, Brook Land, and James ~~McAdam and from 2 February 2003~~McAdam. The Group Company Secretary acts as secretary to ~~31 March 2003 Lee Abraham and~~

~~Russell Walls were also members.~~the Nomination Committee. The Nomination Committee met ~~four~~six times in ~~2003/04~~2004/05 and there was full attendance at all meetings.

The role of the Remuneration Committee is discussed in the Board report on remuneration on page ~~42.~~51.

Further details regarding the chairmen and members of these Committees are set out on page ~~34.~~41.

Executive management
The Group comprises two separate operating divisions, one in the US and one in the UK, each with a separate executive committee which meets regularly. The Group Chief Executive is also Chief Executive of the Group’s US division. The Group Finance Director and the Chief Executive of the UK division report to the Group Chief Executive.

The executive management is responsible to the Board for the performance of the Group and its compliance with the internal policies and procedures set by the Board. As part of this responsibility the executive management regularly reports to the Board on the performance of the Group, ~~its~~the competitive environment and its relations with stakeholders.

Business strategies; long range plans; budgets; acquisitions, disposals, material agreements and capital expenditures outside predetermined limits set by the Board; and internal policies and procedures are presented to the Board by executive management for consideration. Within this approved framework the executive management is responsible for the day to day running of the business including: merchandising; store operations; human resource management and planning; marketing; real estate; financial reporting; treasury management; risk management; tax management; social, ethical and environmental matters; and communications with investors.

Code of Conduct and Code of Ethics
Signet strives to act in accordance with the laws and customs of each country in which it operates; to adopt proper standards of business practice and procedure; to operate with integrity; and to observe and respect the culture of each country in which it operates. To that end, the Group has adopted a Statement of Social, Ethical and Environmental Principles and supporting policies applicable to all officers and employees of the Group and substantially complies with the ~~requirement~~requirements of ~~Nasdaq.~~the NYSE. In

Signet Group plc Annual Report & Accounts year ended 29 January 2005

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Corporate governance statement (continued)

addition, it has a policy on business integrity, as well as more detailed guidance and regulations in the Group’s staff induction, training and operational procedures. ~~The~~During 2004 the Group is


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~~Corporate governance statement~~ ~~(continued)~~

~~currently reviewing~~reviewed these policies in order to meet the recently revised corporate governance requirements of the Nasdaq, ~~National Market, which require~~and implemented a code of business conduct and ethics. ~~This Nasdaq requirement~~The Company moved its US listing for its ADSs to the NYSE with effect from 16 November 2004, for which a similar code is ~~not currently effective but will take effect after May 2004.~~ required.

A code of ethics meeting the requirements of the Sarbanes-Oxley Act, covering the Chairman, the Group Chief Executive, the Group Finance Director and senior ~~financial~~ officers, is also in place. These codes are available on request from the Group Company Secretary orand on the Group’s web site.

Relations with shareholders
The Board recognises the importance of relations with shareholders and communicates regularly with them about the Group’s strategy, financial performance and prospects. It does this through documents distributed to shareholders, stock exchange announcements and in meetings. Presentations on quarterly and annual results and the Christmas trading statement are open to all interested parties, including private shareholders, through the use of teleconferences and web casting. Other presentations are available on the Group web ~~site~~~~(www.signetgroupplc.com)~~.site.

The Board recognises that the prime opportunity for private investors to question the Board is at a general meeting of shareholders. At the annual general meeting the chairmen of the Audit, Nomination and Remuneration Committees, in addition to the Chairman of the Board, are ~~expected~~required to be available for questions relating to the function of their respective ~~Committees.~~Committees and all directors are expected to attend.

The Group Chief Executive, the Group Finance Director and the Investor Relations Director carry out an extensive programme of meetings with institutional investors. The Chairman and the senior independent director are also available to meet with investors from time to time. ~~Following the appointment of a new non-executive director, major~~Major shareholders ~~will in future be~~are offered an opportunity to meet new non-executive directors following the appointment of the individual.

The Board is kept informed of investment market attitudes to the Group by receiving regular reports on investor relations, copies of brokers’ research, press cuttings and third party surveys of investor perceptions.

Compliance statement and ~~revised~~ Combined Code
In ~~June 1998 the London Stock Exchange published the Principles of Good Corporate Governance and the Code of Best Practice (“~~July 2003 the Combined ~~Code”).~~ Code was issued that applies for reporting years starting on or after 1 November 2003. During 2003/04 the Board reviewed the Combined Code, the Smith

Report and corporate governance developments in the US. Based on that review the Board agreed a programme of action that was completed during 2004/05. A further review of US requirements was undertaken when the Group moved its US listing for its ADSs to the NYSE from Nasdaq. The NYSE requirements are not mandatory for foreign issuer companies such as Signet, but the Group has chosen in general to comply as a matter of best practice.

In a limited number of areas the Group, as is permitted by the NYSE rules, has elected to defer to the UK corporate governance practices. This is permissible provided significant variations are explained. The explanation of those variations can be found on the Group’s web site.

The Board considers that it has complied throughout the year with the provisions of the Combined Code required to be observed by companies. ~~In July 2003 a revised Combined Code was issued that applies for reporting years starting on or after 1 November 2003. During~~

2003/04 the Board reviewed the revised Combined Code, the Smith Report and corporate governance developments in the US. Based on that review the Board agreed a programme of action that has largely been completed with any remaining actions being scheduled for later in 2004/05.

Internal ~~control~~controls
The Combined Code requires that the directors review the effectiveness of the Group’s system of internal ~~control~~controls including the following areas:

•	Financial
•	Operational
•	Compliance
•	Risk management

~~Guidance for directors~~ Internal Control: Guidance for Directors on the Combined Code(“the Turnbull guidance”) was published in September 1999. The Board of Directors considers that it has complied with the Turnbull guidance throughout the year and up to the date of approval of this Annual Report & Accounts. In addition, during ~~2003/04~~2004/05 the Board continued to review the implications of the Sarbanes-Oxley Act and took steps to ensure compliance.

The Board exercises ultimate responsibility for the Group’s system of internal controls and for monitoring its effectiveness. The internal ~~control~~controls system is designed to safeguard shareholders’ ~~investment~~investments and the Group’s assets, both tangible and intangible, including the reputation of the Group with its various stakeholders. Procedures are in place to ensure the maintenance of proper accounting records, the reliability of the financial information used within the business or for publication and the determination of disclosure obligations and of materiality. These procedures also cover disclosure on a timely

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basis of information to the investment markets. However, such procedures are designed to manage rather than wholly eliminate the risk of failure to achieve business objectives and can provide only reasonable, not absolute, assurance against material misstatement or loss.

Signet’s disclosure control procedures are designed to help ensure that processes and procedures for information management are in place at all levels of the Group. The disclosure control procedures aim to ensure that any information disclosed by the Group is recorded, processed, and summarised appropriately. The procedures are also designed to ensure that information is accumulated and communicated to management


40	~~Signet Group plc~~ ~~Annual Report & Accounts year ended 31 January 2004~~

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to allow timely decisions to be made regarding required disclosure. The Group’s Disclosure Control Committee consists of the Group Finance Director, the Group Company Secretary, the Investor Relations Director and the Group Financial Controller who consult with the Group’s external advisers and ~~auditors~~auditor, as necessary. These procedures are designed to enable Signet to make timely and accurate public disclosures.

Key procedures designed to provide effective internal ~~control~~controls are:

•	Control environment – control is exercised through an organisational structure with clearly defined levels of responsibility and authority together with appropriate reporting procedures, particularly with respect to financial information, capital expenditure, investment, granting of guarantees and the use of treasury products (see ~~pages 32 and 33~~page 39 for more detail) as well as health, safety, environmental and customer service issues.

•	Reporting and information systems – the Group has a comprehensive budgeting and five year strategic planning system with an annual budget and strategic plan approved by the Board. ~~Monthly~~Reported monthly trading results and balance sheets ~~when reported~~ include the corresponding figures for the budget or revised forecast and for the previous year. Any significant variances are examined by divisional operating management and discussed with Group management, with action being taken as appropriate. A forecast of the full year’s results is updated regularly, based on performance to date and any changes in outlook. The executive directors regularly report to the Board on the development of the business, the competitive environment and any material breaches of procedure. Through these mechanisms, the Group’s performance is continually monitored, risks identified in a timely manner and their implications ~~assessed,~~assessed.

	The Group as part of its ongoing review of procedures has taken steps to strengthen resources committed to meet the

	increasing demands of corporate governance, to comply with the Sarbanes-Oxley Act, to monitor and address evolving and more complex accounting standards, including changes in the application and interpretation of US GAAP and the transition from UK GAAP to IFRS. Accordingly during the year, the Group has separated the roles of Group Company Secretary and Investor Relations Director. In addition, a Business Risk Assurance Manager was appointed to co-ordinate risk management information and processes; he is responsible for assessing the risk management and internal controls for the Group, ensuring such processes satisfy the applicable standards in both the UK and the US and he reports his findings to the Group Audit Committee. At the divisional level in both the UK and the US, the internal audit functions have been strengthened with particular focus on review of internal control ~~procedures re-evaluated~~processes. In the near term, the Group also intends to strengthen its Group Finance function reflecting the increasing demands of IFRS accounting and ~~corrective actions agreed and implemented.~~ US GAAP requirements.

	The Group issues both sales and financial results on a quarterly basis. The external auditor reviews the quarterly and half year statements, and Christmas ~~Trading Statement~~trading statement and presents reports to the Audit Committee for consideration.

•	Risk management – the identification of major business risks is carried out in conjunction with operational management and appropriate steps are taken to monitor and mitigate risks. The Risk Management Committee, whose members include the Group Finance Director, the Business Risk Assurance Manager and senior divisional executives, meets on a regular basis, at least four times a year. Matters considered by the Risk Management Committee include reviews of the Group’s risk register, emerging issues, new

	regulations and the activity of the internal audit function. The external ~~auditors~~auditor receive copies of the papers submitted to the ~~committee.~~Committee. A report from each Risk Management Committee meeting, and any material non-compliance or emerging issue, is considered by the Board in a timely manner. ~~From the start of 2004/05 the Audit Committee will review the effectiveness of the Group’s internal control and risk management procedures and report to the Board on these matters.~~

•	Control procedures – each operating division maintains documented financial and operating controls as well as procedures appropriate to its own business environment and in conformity with Group guidelines. Each of the operating divisions has an internal audit function which primarily reviews the processes in the store operations but also reviews central service functions. The work of the internal audit function is monitored by senior divisional executives, Group management, the Risk Management Committee and the Audit Committee.

•

Signet Group plc Annual Report & Accounts year ended 29 January 2005

~~Reviews of effectiveness~~ 49– the Board, in addition to receiving the Risk Management Committee reports, annually reviews the effectiveness of the internal control system on the basis of a report submitted to the Risk Management Committee. This report is based on annual written self-certification statements prepared by the operating divisions and head office departments which confirm the extent of their compliance with all material internal financial operating and disclosure controls. These statements are prepared by the divisional finance directors on behalf of each operating division and are reviewed by senior divisional executives, Group management and the Board. The Disclosure Control Committee reports to the Audit Committee on a quarterly basis as to the effectiveness of the disclosure control procedures.

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Corporate governance statement (continued)

Other than as discussed under “Reporting and Information Systems” above, there have been no changes in the Group’s internal controls over financial reporting during the period covered by this Annual Report & Accounts that have materially affected, or are reasonably likely to materially affect those controls.

Reviews of effectiveness – the Board, in addition to receiving the Risk Management Committee reports, annually reviews the effectiveness of the internal controls system on the basis of a report submitted to the Risk Management Committee. This report is based on annual written self-certification statements prepared by the operating divisions and head office departments which confirm the extent of their compliance with all material internal financial operating and disclosure controls. These statements are prepared by the divisional finance directors on behalf of each operating division and are reviewed by senior divisional executives, Group management and the Board. The Disclosure Control Committee reports to the Audit Committee on a quarterly basis as to the effectiveness of the disclosure control procedures.

Based on their review of the Group’s disclosure controls and procedures, as of the end of the period covered by this Annual Report & Accounts, the Group Chief Executive and Group Finance Director have concluded that the Group’s current disclosure controls and procedures are effective in achieving their objective of ensuring that information regarding the Group is recorded, processed, summarised and reported and that the information is accumulated and communicated to management to allow timely decisions regarding required disclosure.

In reaching the conclusion on effectiveness of disclosure controls, the Group Chief Executive and Group Finance Director considered the disclosure controls in light of the restatement of the US GAAP reconciliation for adjustments for lease accounting and accounting for extended service plans described in note 31 to the financial statements. After considering the materiality, timing and nature of the information relating to restatements they continued to conclude that the disclosure controls were effective as of the evaluation date.

It should be noted that while the Group Chief Executive and Group Finance Director conclude that its disclosure controls and procedures are effective to provide a reasonable level of assurance, they recognise such disclosure controls cannot eliminate all error and fraud. They ~~concluded~~are designed to provide only reasonable, not absolute, assurance that ~~there have not been any significant changes in~~ the ~~Group’s~~objectives of this control system are met.

Sarbanes-Oxley Act of 2002
As a Foreign Private Issuer, Signet is required to comply with Section 404 of the Sarbanes-Oxley Act of 2002 (“the Act”) for fiscal years ending on or after 15 July 2006. The primary requirement of the Act is that management perform appropriate due diligence to conclude on the design and operating effectiveness of internal controls over financial ~~reporting during~~reporting. To date, significant effort has been afforded to establish structured project teams within the ~~period covered~~UK and US divisions and at the corporate level. The overall project is coordinated by the Business Risk Assurance Manager who communicates closely with the Group Finance Director and manages relationships with the Group adviser Ernst & Young, KPMG as auditor and the Audit Committee on all issues relating to Sarbanes-Oxley.

The initial step of the project was the production of a detailed Risk Assessment and Mapping document, which carefully scoped out the work required based on an analysis of the financial statements for the year ended 2003/04. Following this ~~Annual Report~~detailed scoping assessment, significant individual accounts were linked to relevant process streams that would be documented and assessed going forward.

Consistent with the Group’s structure, the project effort is focused predominantly within the divisions, additional work being required to complete those processes that are unique to the corporate function. In total, 11 key process streams are identified to be within scope in the US division, compared with ten in the UK. The corporate function effort involves three unique key process streams.

The documentation phase is well underway with a significant amount of the documentation required for the key process streams now completed. Key controls have ~~materially affected, or are reasonably likely to materially affect those controls.~~been identified for each of the process streams involved and these will form the basis of the testing phase of the project following which any identified gaps will be prioritised for remediation on a timely basis.

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Directors’ remuneration report

Information contained in sections and figures marked ß has been audited.

1. The role of the Remuneration Committee

The prime purpose of the Remuneration Committee is to set the remuneration policy for executive directors and senior managers and to ensure that they are fairly rewarded for their individual contribution to the Group’s overall performance, having due regard to the interests of shareholders, toand the financial and commercial health of the ~~Group~~Group.

The Company’s remuneration policy seeks, by application of the six principles detailed below, to provide an overall remuneration package to a value within a specific range. The way that each package as a whole is structured, and the components that make it up, may differ. Due to the ~~relevant market place~~significant differences in remuneration practices in the two countries in which ~~recruitment takes place.~~the Group operates, the level of remuneration is based upon surveys which are undertaken in both the UK and the US.

All members of the Remuneration Committee are independent non-executive directors ~~and~~who do not have any personal financial interest (other than as shareholders) in matters decided by the Committee. No executive director or senior manager is involved in determining his or her own remuneration.

The Remuneration Committee sets the remuneration of the Chairman of the ~~Board (James McAdam).~~Board. It also sets that of the Group Chief Executive ~~(Terry Burman)~~ after consultation with the Chairman. The remuneration of the other executive ~~director~~directors and certain senior managers is set by the Committee based on recommendations made by the Group Chief Executive after consultation with the Chairman of the Board. Performance targets are set by the Committee in consultation with the Chairman of the Board and, where appropriate, external professional consultants. Where executive directors are involved in ~~advising and~~ assisting the Remuneration Committee, care is taken to recognise and avoid possible conflicts of interest.

The Remuneration Committee draws on external professional advice on a regular basis and makes use of relevant and reliable independent market surveys. ~~In 2002/03 the~~The Committee ~~appointed~~has retained Towers Perrin as advisers to assist ~~it. Towers Perrin~~it and they are not retained in any other capacity within the Group. In addition ~~Addleshaw Goddard (to 8 July 2003),~~ Herbert Smith ~~(from 8 July 2003)~~(on UK aspects) and Weil, Gotshal & Manges (on US aspects) advised the Remuneration Committee on legal matters. These firms also ~~provided~~provide general legal advice to Signet.

The remuneration of the non-executive directors is not within the remit of the Remuneration Committee. Such remuneration is

determined by the Chairman and the executive ~~component~~members of the Board following a recommendation by the Chairman after consideration of, among other factors, external comparisons, ~~and~~ the time commitment and ~~responsibility of the role.~~responsibilities.

~~From 2 February 2003 to 31 March 2003 the~~The Remuneration Committee ~~consisted~~consists of ~~Lee Abraham,~~Robert Blanchard (Chairman), Brook Land ~~Robert~~

~~Blanchard (Chairman)~~(until 1 March 2005), Russell Walls and ~~Russell Walls. From~~Robert Walker (from 1 April 2003 to 7 January 2004 the Committee consisted of Lee Abraham, Robert Blanchard (Chairman) and Russell Walls. Lee Abraham retired and Brook Land rejoined the Remuneration Committee on 7 January 2004.March 2005). The Committee met ~~nine~~eight times during ~~2003/04~~2004/05 and there was full attendance at all meetings.

The terms of reference for the Remuneration Committee are available on request from the Group Company Secretary and are on the Group’s web site.

2. Remuneration policy

The Remuneration Committee believes that the Group’s remuneration policy must be based on sound, clearly stated principles which recognise the long term interests of the Group, its shareholders and employees. After careful consideration during ~~2002 and 2003,~~2002/03, the Remuneration Committee formally adopted a set of six principles. Following a further review by the Remuneration Committee in early ~~2004~~2005 these principles remain unaltered and they are set out below:

(i)	Signet’s primary business objective ~~should be~~is to deliver results which should consistently outperform the average of the industry sector.

(ii)	It is recognised that to consistently deliver ~~consistently~~ above ~~industry-average~~industry average performance Signet will need to retain, and where necessary attract, executives of well above ~~industry-average~~industry average ability and leadership potential.

(iii)	It is also recognised that retaining, and where necessary recruiting, senior executives of this calibre will require that the Group provide above ~~industry-average~~industry average total remuneration.

(iv)	Therefore, Signet’s executive directors and other senior executives should be remunerated in a range beginning with the 51st and ending with the 75th percentiles of industry total remuneration, based on current surveys of relevant companies appropriate to the executive’s position and geographic location. The remuneration of each executive within this range will be based on performance (both of the Group and the individual executive), potential (i.e. the executive’s potential to grow in responsibility and performance), and scarcity (i.e. the availability of candidates to replace the executive should he/she leave the Group).

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Directors’ remuneration report (continued)

(v)

Total remuneration for executive directors and other senior executives should be highly geared towards performance with the proportion of “at risk” pay increasing disproportionately according to: a) the level of performance achieved, and b) the seniority of the ~~executive~~executives and their ability to influence results. Excluding ~~pensions~~pension contributions, the provision of a company car and private health insurance, there should


42	~~Signet Group plc~~ ~~Annual Report & Accounts year ended 31 January 2004~~

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	be only one element of guaranteed remuneration; base salary. The performance related portion of total remuneration should reward short term and long term performance separately, with the potential level of payment being heavily weighted in favour of the latter. Short term achievement should be recognised through the annual bonus plan with long term achievement being rewarded through executive share option awards and participation in long term incentive plans.

(vi)	Surveys will be undertaken on a regular basis to ensure that total remuneration packages remain in the percentile range described in (iv) above. Recognising that some 70% of Signet’s sales and profits are generated in the US and that significant differences in remuneration practices exist between the US and the UK, separate surveys will be conducted in each country.

The components of total remuneration are:

(a) Base salary

The base pay of each senior executive is intended to reflect the size and scope of that executive’s responsibilities. Base salary is reviewed annually, taking into account factors such as the level of individual performance, experience over time in the post, relevant external comparative data, the geographic location of the post and the general movement of base pay within the Group.

(b) Annual bonus plan

Individual annual bonus targets are set each year to take account of the role of the executive and current business plans. Annual bonus awards for executive directors are based on the achievement of growth in pre-tax profit in the year at a rate above ~~inflation.~~inflation measured using constant exchange rates. There is a cap set each year on such awards and a threshold performance below which no payments are made. The bonus rate increases after an intermediate target rate of profit growth, which is set each year, is achieved.

From the start of 2004/05 the growth in pre-tax profits will be measured using constant exchange rates. The Remuneration Committee believes this change to be appropriate as it will avoid subsequent foreign exchange rate movements unjustly rewarding, or unfairly penalising, Group senior management. It will also bring Group senior management bonuses on to the same basis as divisional senior management, whose bonuses are unaffected by exchange rates.

(c) Share option ~~plan~~plans

The Remuneration Committee believes that an executive share option plan is an appropriate part of the total remuneration package necessary to execute the remuneration principles

set out on pages 4251 and ~~43,~~52, and that a well constructed plan forms an

important element in motivating executives to deliver the long term performance needed to generate strong returns to shareholders.

It is the policy of the Remuneration Committee that all employees, including directors, who satisfy certain qualifying conditions, should have the opportunity to participate in the equity of the Company through a ~~savings related~~savings-related share option plan, and annual invitations are normally made. Under the relevant legislation the exercise of these share options is not subject to performance criteria.

(d) Long term incentive plan (“LTIP”)

The Remuneration Committee believes that, in addition to the provision of share options, it is appropriate to operate an LTIP to encourage executive directors, senior members of the divisional executive management committees and certain other senior executives with a similar level of responsibility, to meet long term strategic and financial objectives set by the Board. The policy is to make annual awards subject to the general principles explained in paragraphs 2(iv) and 2(v) above. Vesting is dependent on the achievement of challenging performance conditions set by the Committee at the time the awards are made and such awards do not normally vest within three years from the date the award is granted.

(e) Performance criteria

The Remuneration Committee believes that where performance criteria are used they should be:

•	easily understood,

•	able to be directly linked to the performance of the Group or relevant business unit and to be influenced by management’s own actions,

•	designed to motivate management to increase profitability significantly beyond the rate of inflation,

•	designed to incentivise senior management to make efficient use of capital and to increase shareholder value,

•	equity based for long term schemes, and

•	consistent with the overall objectives of the Group.

The criteria used to measure performance are based on the results of the Group (subject to minor adjustments that are approved by the Remuneration Committee) so as to provide clarity and objectivity.

(f) Pensions for executive directors

UK based executive directors are normally members of the Group Scheme.

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Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005	43

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~~Directors’ remuneration report~~ ~~(continued)~~

At the present time there ~~is only one~~are two such ~~director,~~directors, the Group Finance ~~Director.~~Director and the Chief Executive of the UK division. The Group Scheme is a funded, Inland Revenue approved, final salary, occupational pension scheme and has a separate category of membership for ~~directors.~~directors (although only the Group Finance Director is in this category currently). Pensionable salary is the member’s base salary, excluding all bonuses. All Group Scheme benefits are subject to Inland Revenue limits. Where such limitation is due to the Inland Revenue earnings cap the Signet Group Funded Unapproved Retirement Benefit Scheme (the “FURBS”) is used to supplement pension benefits. This is a defined contribution arrangement.

The main features of the Group Scheme for a director (currently only the Group Finance Director) are:

(i)	a normal pension age of 60;

(ii)	pension at normal pension age of two-thirds of final pensionable salary, subject to completion of 20 years’ service;

(iii)	life assurance cover of four times pensionable salary; and

(iv)	spouse’s pension on death.

The Group Chief Executive receives, proportionately to base salary, equivalent pension contributions to the ~~UK based executive director.~~Group Finance Director. These pension benefits are provided through an unfunded, unqualified deferred compensation plan and the Sterling Jewelers Inc. 401(k) Retirement Savings Plan. This is a defined contribution arrangement.

In the context of impending changes to pension taxation in the UK in 2006, no changes have yet been made to the pension arrangements of executive directors or senior executives. The Remuneration Committee will be consulting with its professional advisers on the appropriateness of any changes which may be proposed for future pension provision in due course.

Apart from remuneration itself, there are certain other allied policy matters which are the concern of the Remuneration Committee. These are:

(i) Companies used for comparison

In assessing all aspects of pay and benefits, the Remuneration Committee takes account of the packages offered by a range of other retailers and, where appropriate, companies outside the retail sector. Different companies are used for comparison for executives in Group functions, and in the UK and the US divisions. These companies are chosen on the basis of turnover, market capitalisation, profits, number of employees and the nature and geographic spread of their operations. ~~There have been no significant changes in the comparator companies used during the year.~~

(ii) Service contracts

It is the policy of the Remuneration Committee that an executive director’s contract should be a ~~one year~~ rolling contract with the period of notice to terminate the contract to be given by either side not exceeding one year and that, if it is necessary to grant a longer period of notice when recruiting from outside the Group, this should reduce to a maximum of one year after an initial period. No director has a service contract of more than one year.

(iii) Early termination

The Remuneration Committee believes that the circumstances of early termination vary. Only in very exceptional circumstances will explicit terms for compensation for early termination be included in contracts for new directors. Where no explicit compensation terms are included, departing directors or senior managers are expected to mitigate their loss within the framework of individual circumstances.

(iv) Executive directors – outside appointments

The Group recognises the benefits to the individual and to the Group when executive directors of the Company also act as non-executive directors of other companies not associated with Signet. Subject to certain conditions, unless otherwise determined by the Board, executive directors are permitted to accept one appointment as a non-executive director of another company. The executive director is permitted to retain any fees paid for such service. Unless otherwise determined by the Board, executive directors may not normally accept more than one such non-executive directorship. During 2003/04 no executive director had an outside appointment. On 3 March 2004 Walker Boyd became a non-executive director of WH Smith PLC.

3. Directors’ remuneration

The remuneration package of the Group Chief Executive, the highest paid director, is determined with regard to the fact that he is a US citizen, based in the US and his remuneration is set in US dollars and not pounds sterling. Some 70% of Group sales and profits are generated in the US.

(a) Salary and benefits

The Remuneration Committee normally reviews the salary and benefits of executive directors annually. Details of the salaries received by executive directors are shown on page ~~45.~~54. Following the ~~2004~~2005 annual reviews the Remuneration Committee increased the Group Chief Executive’s basic salary from ~~$1,210,000~~$1,283,000 to ~~$1,283,000~~$1,354,000 and that of the Group Finance Director from ~~£310,000~~£330,000 to ~~£330,000.~~£350,000. The Chairman’s remuneration was increased from ~~£300,000~~£327,000 to ~~£327,000.~~£350,000. The basic salary of the Chief Executive of the UK division is £295,000, having been increased from £280,000 as part of the review.

(b) Annual bonus plan

In ~~2003/04~~2004/05 an annual bonus of ~~23.0%~~71.0% (maximum 100%) of base salary was paid to the Group Chief Executive and ~~17.2%~~53.3% (maximum 75%) to the Group Finance Director, reflecting the ~~6.0%~~12.1% increase in reported pre-tax profit. At constant exchange rates the Group achieved a 13.0% increase in pre-tax profit, which would have earned a bonus of 80.0% of base salary for the Group Chief Executive and 60.0% for the Group Finance Director. As the Remuneration Committee believes that these

Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005

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Directors’ remuneration report (continued)

Directors’ emoluments^ß
Details of directors’ emoluments for the year to 3129 January ~~2004~~2005 were as follows:

Short term Termination
Basic salary or fees Benefits⁽¹⁾ bonuses payments⁽²⁾ Total
2004 2003 2004 2003 2004 2003 2004 2003 2004 2003
£000 £000 £000 £000 £000 £000 £000 £000 £000 £000
Executive
James McAdam
Chairman 296 271 23 24 – – – – 319 295
Walker Boyd
Group Finance Director 308 291 22 21 116 131 – – 446 443
Terry Burman⁽³⁾
Group Chief Executive 714 743 26 30 360 444 – – 1,100 1,217
Ian Dahl⁽⁴⁾
former Chief Executive of
UK division – 184 – 15 – – – 304 – 503
Non-executive
Lee Abraham⁽⁵⁾ 35 35 – – – – – – 35 35
Robert Blanchard 38 35 – – – – – – 38 35
Brook Land 38 35 – – – – – – 38 35
Dale Hilpert⁽⁶⁾ 17 – – – – – – – 17 –
Russell Walls⁽⁷⁾ 38 18 – – – – – – 38 18
David Wellings⁽⁸⁾ – 13 – – – – – – – 13

Total 1,484 1,625 71 90 476 575 – 304 2,031 2,594

	Basic salary or fees			Benefits⁽¹⁾	Short term bonuses			Total

	2005	2004	2005	2004	2005	2004	2005		2004
	£000	£000	£000	£000	£000	£000	£000		£000

Executive:⁽²⁾
James McAdam Chairman	323	296	24	23	–	–	347		319
Walker Boyd Group Finance Director	327	308	23	22	176	116	526		446
Terry Burman⁽³⁾Group Chief Executive	683	714	26	26	490	360	1,199		1,100


Non-executive:
Lee Abraham⁽⁴⁾	–	35	–	–	–	–	–		35
Robert Blanchard	43	38	–	–	–	–	43		38
Brook Land	44	38	–	–	–	–	44		38
Dale Hilpert	42	17	–	–	–	–	42		17
Robert Walker⁽⁵⁾	12	–	–	–	–	–	12		–
Russell Walls	43	38	–	–	–	–	43		38

Total	1,517	1,484	73	71	666	476	2,256		2,031


(1)	Benefits incorporate all benefits arising from employment by the Group, which in the main relate to the provision of a company car and private health insurance.
(2)	~~On 30 September 2002 the former Chief Executive~~Robert Anderson was appointed as a director on 6 April 2005 with a basic salary of ~~the UK division, Ian Dahl resigned giving 12 months' notice. The Group opted to make~~£295,000. In 2004/05 his ~~resignation effective immediately in accordance with the terms~~basic salary was £277,500, benefits were £32,605 and a short term bonus of £22,680 is payable. In 2003/04 his ~~contract~~basic salary was £253,750, benefits were £29,802 and made a payment in February 2003 of £280,000 in lieu of notice. Signet also agreed to continue providing certain benefits that would have been payable had Ian Dahl remained in employment during his notice period, which amounted to £23,887 in total. No payments were made in respect to pensions. In accordance with the rules of the schemes the Remuneration Committee exercised its discretion to allow 434,211 executive share options, with an exercise price of 57p, to become exercisable in May 2003 and the 2000 LTIP grant to vest in 2003. Under the LTIP grant a payment of £62,222short term bonus was ~~paid and an option over 112,619 shares at an exercise price of £1 in total was granted. All other executive options and LTIP awards held by Ian Dahl were forfeited.~~£198,750.
(3)	Terry ~~Burman's~~Burman’s emoluments are specified and paid in US dollars and an average exchange rate of US$~~1.68~~1.86 was used ~~(2002/03:~~(2003/04:US$~~1.53)~~1.68).
(4)	~~Until his resignation on 30 September 2002.~~
~~(5)~~	Until his retirement on 8 January 2004.
~~(6)~~(5)	From his appointment on ~~1 September 2003~~
~~(7)~~	~~From his appointment on 1 August 2002.~~
~~(8)~~	~~Until his retirement on 13 June 2002.~~I November 2004.
The figures above represent emoluments earned as directors during the relevant financial year. Such emoluments are paid in the same financial year with the exception of bonus payments, which are paid in the year following that in which they are earned.

~~executives should not be unfairly benefited or penalised by short term movements~~ in profit before tax at constant exchange ~~rates, it decided to award discretionary bonuses of 27.0% and 20.3% to the Group Chief Executive and Group Finance Director. These payments took the total~~rates. The bonus payments ~~up to the target level being 50.0%~~ for the Group Chief Executive and ~~37.5% for~~ the Group Finance Director ~~set by~~were calculated for 2004/05 on the ~~Remuneration Committee even though performance at~~basis of the following formula:

2003/04 pre-tax profit + inflation: 0% of base salary
2003/04 pre-tax profit + 10%: 50% of base salary
2003/04 pre-tax profit + 15%: 100% of base salary.

Increase in pre-tax profit is calculated on a constant exchange ~~rates would have justified~~rate basis and is earned on a

~~significantly higher figure. Short term bonus targets will in future use constant exchange rates.~~ pro-rata basis for performance between the targets.

~~In 2004/05 the~~An annual bonus of 8.1% (maximum 75%) was paid to the ~~Group~~ Chief Executive ~~is capped at 100% of base salary and that~~ of the ~~Group Finance Director at 75%~~UK division on the same formula but based on operating profit of ~~base salary. The potential rate of bonus increases on a straight line basis from~~ the ~~rate of inflation up to an intermediate target~~UK division.

Bonus targets for ~~growth in Group profit before tax at~~

~~Signet Group plc~~ ~~Annual Report & Accounts year ended 31 January 2004~~

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~~Directors’ remuneration report~~ ~~(continued)~~

~~constant exchange rates, then an accelerated rate applies until the maximum bonus can be earned at 15% growth. The minimum bonuses~~2005/06 are ~~only payable after profits increase by more than inflation.~~unchanged.

(c) Share option and long term incentive plans

Share ~~options granted~~option and long term incentive plan grants to directors are set out on ~~page 50.~~pages 60 and 61 respectively. See page 4352 for the factors influencing the choice of performance criteria and for the basis of measurement.

(i) Executive share option plans

In July 2003, following consultation with the Association of British Insurers and a significant number of major shareholders, approval was given by shareholders at an extraordinary general meeting to the Signet Group plc International Share Option Plan 2003, the Signet Group plc UK Inland Revenue Approved Share Option Plan 2003 and the Signet Group plc US Share Option Plan 2003 (“2003 Plans”). Of the votes cast by proxy at the ~~extraordinary general~~ meeting 87% were in favour of the proposal. 1,160,619,434 votes were cast (68% of the issued share capital) and abstentions in respect of 7% of the issued share capital were received.

The 2003 Plans ~~replace~~replaced the Signet Group plc 1993 Executive Share Option Scheme (the “1993 Scheme”), under which no further options may be granted.

The 2003 Plans allow the Remuneration Committee discretion to set performance conditions. The performance conditions under the 2003 Plans were set out in the circular to shareholders seeking approval for the 2003 ~~Plan~~Plans and no significant change in those conditions will be made without prior consultation with major shareholders.

54	Signet Group plc Annual Report & Accounts year ended 29 January 2005

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The Remuneration Committee is fully aware that re-testing of share option performance criteria is increasingly thought not to be UK best practice and has therefore given careful consideration as to how this issue might be addressed.

The present share option plans came into effect less than two years ago, (July 2003) and the Remuneration Committee believes that removal of the re-tests for the Signet 2005/06 grants would be inappropriate at such an early stage. The Committee also believes that account must be taken of the present adverse impact of the US exchange rate on the Group results, which is not within the control of the executives and could well be the sole reason for options failing to vest.

However, the Remuneration Committee concluded that a full review of all aspects of remuneration, including the elimination of re-testing of share options, should be undertaken later this year, following the expiry of the LTIP in June 2005. Major shareholders will of course, be consulted and all shareholders will be able to vote on the new arrangements as appropriate at the 2006 annual general meeting.

The Remuneration Committee made the ~~2004~~2005/06 option grants on the same basis as in 2003/04 and 2004/05. Options granted under the ~~2003 grants.~~ executive share option plans that have passed the necessary performance conditions are normally only exercisable between three and ten years from the date of grant, after which the options lapse.

The conditions are set out below:

UK executives
For UK executives the personal performance of participants will be assessed on each occasion that share option grants take place and will be reflected in the level of the individual awards.

In addition, grants are subject to exercise conditions as follows:

	*~~UK executives~~*
		~~For UK executives the personal performance of participants will be assessed on each occasion that share option grants take place and will be reflected in the level of the individual awards.~~

	~~In addition all grants will be subject to exercise conditions as follows:~~

Level of grant
		Required annual rate of
		compound growth in earnings
~~earnings~~ per share⁽¹⁾above inflation⁽²⁾	⁽¹⁾
~~above inflation~~	⁽²⁾

Up to 200% of base salary		+3%
201% to 400% of base salary		+4%
Above 400% of base salary		+5%

	(1)	Normalised earnings per share as defined by the Institute of Investment Management and Research.
	(2)	~~As defined by~~Defined as the UK Retail ~~Price~~Prices Index.

	Performance will be measured over three ~~years from the start of the financial year in which the award is made, and may then be measured from the same start point to the end of the fourth and fifth years if not previously satisfied.~~

	*~~US executives~~* For US executives there is a pre-grant test based on both personal and corporate performance. In addition there is a post grant exercise condition that annual compound growth in earnings per share will be more than 3% above inflation.

	The post grant performance condition will be measured over three years from the start of the financial year in which the award is made, and may then be measured from the same start point to the end of the fourth and fifth years if not previously satisfied.

~~Options granted under the executive share option plans are normally only exercisable between three and ten~~ years from the ~~date~~start of ~~grant, after~~the financial year in which the ~~options lapse.~~grant is made, and may then be measured from the same start point only to the end of the fourth or fifth years if not previously satisfied.

US executives
For US executives there is a pre-grant test based on both personal and corporate performance as described later, as well as a post-grant exercise condition requiring that the annual compound growth in earnings per share be more than 3% above inflation.

The post-grant performance condition will be measured over three years from the start of the financial year in which the award is made, and may then be measured from the same start point only to the end of the fourth or fifth years if not previously satisfied.

In ~~July 2003~~April 2004 options of five times salary were awarded to the Group Chief Executive. ~~In 2004~~The Group Finance Director was awarded options amounting to ~~five~~one and a half times ~~salary will be awarded~~salary. Awards to the Group Chief Executive ~~the grant price to be fixed following the announcement of the preliminary results. The awards to the Group Chief Executive were~~are based on principles ~~2 (iv)~~2(iv), ~~2 (v)~~2(v), ~~2 (vi)~~2(vi) (set out on pages 4251 and ~~43)~~52), a comparative remuneration survey ~~that was undertaken,~~ and ~~reflected~~a review of the ~~strong~~ performance of both the Group and the executive over the prior three years. In
Before any share option grant is made to the ~~case~~Group Chief Executive, the Remuneration Committee has to satisfy itself that the demanding pre-grant conditions, mentioned above, have been achieved. This requires affirmation: (1) that the Group’s business performance has been superior to that of its industry sector; and (2) that the Group Chief Executive’s personal performance continues to be of the highest standard.

On a divisional basis this business performance review includes a three year comparison of compound like for like as well as total sales growth compared in the US to that of the US quoted jewellery sector and in the UK to the UK quoted general retail sector. Further there is a similar comparison of operating margin compared to the Group’s principal competitors in the US and the UK.

On a Group basis the review includes a comparison of compound three year earnings per share growth, at constant exchange rates, like for like as well as total sales of the UK general retail sector of FTSE 100 companies. Further there is a similar comparison of total shareholder return against that of the FTSE 350 companies (excluding investment trusts) and the FTSE general retailers index.

The Remuneration Committee concluded that the review had confirmed in 2005/06 that the pre-grant conditions had been achieved reflecting performance at the top end of the scale.

On the basis of sustained out-performance and with management achievements acknowledged by industry followers, the Committee concluded that the Group Chief Executive and Group Finance Director continued to merit total remuneration towards the upper end of the range determined by the remuneration

Signet Group plc Annual Report & Accounts year ended 29 January 2005

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Directors’ remuneration report (continued)

principles. Based on the surveys conducted, this indicated a base salary increase as detailed on page 53 and a share option grant equivalent to 5 times base salary, the same level as awarded in the previous year, for the Group Chief Executive. Similar surveys undertaken in the UK indicated a base salary, increase as detailed on page 53 for the Group Finance Director ~~he was awarded options amounting to one~~ and ~~a quarter times salary in July 2003 and will be awarded~~ options amounting to one and a half times salary, the same level as awarded in ~~2004.~~the previous year. Similarly the Chief Executive of the UK division was awarded options amounting to one times salary.

Certain provisions of all the share option plans may be amended by the Board, but certain basic provisions (and in particular most of the limitations on individual participation, the number of shares and the percentage of share capital that can be issued thereunder) cannot be altered to the advantage of the participants except with the approval of ~~the~~ shareholders ~~of the Company~~ or in accordance with the adjustment provisions in the 2003 plans.

The Remuneration Committee has approved an amendment to the 2003 Plans (other than the Inland Revenue Approved Plan) to provide that, on exercise, options may be satisfied by the Company providing to the optionholder shares with a value equal only to the gain on exercise, without the requirement of a payment of the exercise price. This does not provide any financial benefit to either the Company or optionholders, but results in less dilution for shareholders.

(ii) All-employee share plans
In 1998/99 the Group introduced an Inland Revenue approved savings related share option scheme for UK employees (the “Sharesave Scheme”), a US Section 423 Plan (the “Employee Stock Savings Plan”) and a savings related share option scheme for employees in the Republic of Ireland (the “Irish Sharesave Scheme”), ~~together,~~(together, the “All-employee Schemes”). These schemes give those employees with qualifying service the opportunity to participate in the equity of the Company, with the aim of aligning the interests of employees with those of shareholders.

46	~~Signet Group plc~~ ~~Annual Report & Accounts year ended 31 January 2004~~

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The options granted under the Sharesave Scheme and the Irish Sharesave Scheme are normally exercisable between 36 and 42 months from the date of the relevant savings contract. Options were granted under these ~~plans~~schemes at a price approximately 20% below the middle market price of the shares on the London Stock Exchange on the dealing day prior to the date that employees were invited to participate in them.

The options granted under the Employee Stock Savings Plan, which is for employees in the US, are normally exercisable between 24 and 27 months from the date of grant, such date being the first business day of any period during which savings may be accumulated under a savings contract. The options under

this plan were granted at a price approximately 15% below the middle market price of the shares on the London Stock Exchange on the date of grant. The period of exercise and the discount allowed vary from the UK due to different legal regulations in the US.

(iii) Long term incentive plan

Shareholders gave approval, in June 2000, to the Signet Group plc 2000 Long Term Incentive Plan (“~~2000~~ LTIP”).

Awards were made to executive directors and other senior executives in ~~2000/01, 2001/02,~~ 2002/03, 2003/04 and ~~2003/04.~~2004/05. All these awards are subject to fulfilment of minimum performance conditions set at the time of the award as to:

•	compound annual growth in the profit before tax of the Group using a constant exchange rate or as in the case of the Chief Executive of the UK division the operating profit of the relevant division as appropriate (“Profit Growth”) and

•	the return on capital employed (“ROCE”) of the Group or relevant division as appropriate

Growth is set at a threshold level after taking account of inflation. The conditions were selected to ensure that awards would only vest provided that growth in profits exceeded the rate of inflation and that the business’s targeted ROCE is achieved.

If the performance conditions are achieved the award will vest and its value will depend on the extent to which the minimum performance conditions are exceeded:

•	if Profit Growth exceeds the minimum threshold inflation level, the amount of the award will be calculated on a straight line basis from that level up to a specified inflection point, at which point 37.5% of the award will vest, and then at an accelerated rate on a straight line basis up to the maximum set for the particular participant. This maximum is equal to a specified percentage of his base salary at the time at which the award vests. The maximum award for the Group Chief Executive is equal to 70% of base salary at vesting and for the Group Finance Director 50% of base salary at vesting.

•	if the minimum threshold inflation level of Profit Growth is achieved but the maximum award has not been earned by reference to Profit Growth, then, in addition to the percentage of base salary which has been earned on the above basis, the amount of the award earned on the basis of Profit Growth may be increased on the basis of the ROCE increase. In the case of the Group Chief Executive, for each 0.5% by which the ROCE exceeds the level specified in the award, the amount of the award would increase by an amount equal to 5% of base salary (at vesting) up to a maximum increase equal to 35% of such base salary. Similarly in the case of the Group Finance Director, for each 0.5% by which the ROCE exceeds the specified level the amount of the award would increase by an amount equal to 3% of such base salary up to a maximum increase equal to 25% of such base salary. In no event, however, can any such increase result in the applicable maximum award amount stated in the preceding paragraph being exceeded.

if Profit Growth exceeds the minimum threshold inflation level, the amount of the award will be calculated on a straight line basis from that level up to a specified inflection point, i.e 10% at which point 37.5% of the award will vest, and then at an accelerated rate on a straight line basis up to the maximum level of award at 15%. This maximum is equal to a specified percentage of base salary at the time at which the award vests. The maximum award for the Group Chief Executive is equal to 70% of base salary at vesting and for the Group Finance Director and the Chief Executive of the UK division 50% of base salary at vesting. The maximum award for him in 2002/03 was 20% of base salary at vesting reflecting his position of Chief Operating Officer of the UK division at that time.

2000 LTIP performance criteria
2004/05 2003/04 2002/03 2001/02
award award award award
Minimum performance for any vesting
Profit measure Profit Growth in excess of threshold inflation level
ROCE measure 22.2% 21.0% 20.5% 20.5%
Profit Growth performance measure
Profit Growth rate inflection point 10.0% 10.0% 10.0% 10.0%
Profit Growth rate required for maximum vesting 15.0% 15.0% 15.0% 15.0%
ROCE performance measure
Specified ROCE required 23.2% 22.0% 21.5% 22.5%

Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005

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~~Directors’ remuneration report~~ 2000 LTIP performance criteria~~(continued)~~

		2005/06 award⁽¹⁾				2004/05 award				2003/04 award				2002/03 award
		Group		UK		Group		UK		Group		UK		Group		UK

Minimum performance for any vesting:
Profit measure		Profit Growth in excess of threshold inflation level
ROCE measure		22.8	%	42.3	%	22.2	%	43.0	%	21.0	%	35.0	%	20.5	%	35.0	%

Profit Growth performance measure:
Profit measure		10.0	%	10.0	%	10.0	%	10.0	%	10.0	%	10.0	%	10.0	%	10.0	%
ROCE measure		15.0	%	15.0	%	15.0	%	15.0	%	15.0	%	15.0	%	15.0	%	15.0	%

ROCE performance measure:
Specified ROCE required		23.8	%	43.3	%	23.2	%	44.5	%	22.0	%	36.5	%	21.5	%	37.0	%

(1)	2005/06 award criteria will be reviewed after the adoption of IFRS.

if the minimum threshold inflation level of Profit Growth is achieved but the maximum award has not been earned by reference to Profit Growth, then, in addition to the percentage of base salary which has been earned on the above basis, the amount of the award earned on the basis of Profit Growth may be increased on the basis of the ROCE increase. In the case of the Group Chief Executive, for each 0.5% by which the ROCE exceeds the level specified in the award, the amount of the award would increase by an amount equal to 5% of base salary (at vesting) up to a maximum increase equal to 35% of such base salary. Similarly in the case of the Group Finance Director, for each 0.5% by which the ROCE exceeds the specified level the amount of the award would increase by an amount equal to 3% and in the case of the Chief Executive of the UK division 2% (1% for the award made in 2002/03) of such base salary up to a maximum increase equal to 25% of such base salary. In no event, however, can any such increase result in the applicable maximum award amount stated in the preceding paragraph being exceeded.

The table ~~on page 47~~above shows the percentages and the inflection points which have been specified for the existing awards and indicates the relevant profits and ROCE to be used for ~~measurement in the case of each participant.~~measurement.

When the performance conditions have been satisfied 50% of the amount which vests will be payable in cash and the other 50% will consist of the grant of an option to acquire shares in the Company, the number of shares being determined by using the middle market price on the day preceding the grant of the award. For the ~~2001/02,~~ 2002/03, 2003/04 and ~~2003/04~~2004/05 awards, that share price was ~~74.75p,~~ 121.00p, 83.50p and ~~83.50p~~112.50p respectively. Due to the deferred equity nature of the share linked element of the award, the exercise price of the total option grant is a nominal amount of £1 or $1, as appropriate. The participants can normally exercise their option at any time after vesting, until the tenth anniversary of the grant of the award.

In ~~2004/05~~2005/06 awards under the ~~2000~~ LTIP ~~were~~have been made to the Group Chief Executive and the Group Finance Director at a similar level to that of previous years, the share price to be fixed following the announcement of the preliminary results. The Chief Executive of the UK division has also received an award on the same basis the performance criteria being related to the UK division.

(d) Employee trusts
The share option plans may be operated in conjunction with one or more employee share ownership trusts (the Signet Group plc Employee Share Trust (“ESOT”) or, the Signet Group Qualifying Employee Share Trust (“QUEST”) or the Signet Group plc 2004 Employee Share Trust (“2004 ESOT”)) which may acquire shares in the Company for the purposes of satisfying the exercise of options.

The ~~2000~~ LTIP operates in conjunction with the ESOT and the 2004 ESOT which may be funded by the Group to acquire shares in the Company for the purposes of meeting the Company’s obligation to provide shares on the exercise of options.

The trustees of the ESOT, QUEST and ~~QUEST~~2004 ESOT have waived their rights to any dividends declared on shares held in the trusts.

(e) Share ~~Scheme Limits~~scheme limits
The executive share option plans are subject to the following limits on the number of shares that may be issued:

(i)	the maximum number of shares that have been or may be issued pursuant to options granted under the executive share option plans and any other discretionary share option scheme adopted by the Company may not exceed 5% of the shares from time to time in issue in any ten year period;

Signet Group plc Annual Report & Accounts year ended 29 January 2005

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Directors’ remuneration report (continued)

(ii)	the maximum number of shares that have been or may be issued pursuant to options granted under the executive share

	option plans and any other employees’ share scheme adopted by the Company may not exceed 10% of the shares from time to time in issue in any ten year period; and

(iii)	the maximum of 171,376,839 shares (representing 10% of the issued share capital on 8 July 2003) may be issued pursuant to incentive options granted under the US ~~Plan (the equivalent 10% limit for incentive stock options under the US section of the 1993 Scheme as at 8 June 2000 was 167,996,844 shares).~~Plan.

In any ten year period not more than 10% of the issued share capital of the Company from time to time may in aggregate be issued or issuable pursuant to options granted under the All-employee Schemes or any other employees’ share schemes adopted by the Company.

The number of shares which may be issued or issuable pursuant to the ~~2000~~ LTIP (including to the ESOT and the 2004 ESOT), when aggregated with any shares issued or issuable by the Company in the preceding ten years under any employees’ share scheme, participation in which is at the discretion of the Board, is limited to 5% of the Company’s issued share capital from time to time. The number of shares which may be issued or issuable pursuant to the ~~2000~~ LTIP (including to the ESOT and the 2004 ESOT), when aggregated with all shares issued or issuable by the Company in the preceding ten years under any other employees’ share scheme, is limited to 10% of the Company’s issued share capital from time to time.

No more than 5% of the issued share capital of the Company may be held by the trustee of the ESOT or the 2004 ESOT without prior approval of shareholders.

(f) Shareholding guidelines
When the 2003 Plans were introduced, shareholding guidelines were set for executive directors and senior executives of the Group. The Group Chief Executive is expected to build a holding of shares equal to at least twice salary and the Group Finance Director to at least one times salary. Until these levels have been achieved, half of any post tax option gains under the 2003 Plans should be held in Signet shares. Since December 2004 future non-executive directors will be required to build a holding of 10,000 shares within two years of appointment and maintain that holding whilst they remain a director of the Company. Similarly the existing non-executive directors have agreed to adhere to the same shareholding guidelines within the two year period for compliance running from December 2004.

(g) Service contracts
The Group Chief Executive has a rolling service contract (dated 20 December 2000) with a US subsidiary, which can be terminated on one year’s notice in writing by either party. The Group Finance Director has a rolling service contract (dated 14 June 1995 and amended on 15 May 2000) with the Company, which can be terminated on one year’s notice in writing by either party ~~and~~or terminates on his 60th birthday. The service contracts for the Group Chief Executive and the Group Finance Director provide for

48	~~Signet Group plc~~ ~~Annual Report & Accounts year ended 31 January 2004~~

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termination payments in the cases of early termination by the Group or in the event of certain changes of control. In these circumstances the amount of termination payments due to the Group Chief Executive would equal, in summary, the aggregate of (i) 100% of his base salary at the time of termination, (ii) 25% of his base salary in respect of pension and other benefits, (iii) his outstanding entitlement to a cash bonus under the annual bonus plan referred to on page 4453 in respect of the proportion of the fiscal year prior to the effective date of termination, and (iv) a sum equal to a variable percentage (currently ~~80.6%~~79.6%) of the cash bonus to which he would have become entitled under the annual bonus plan during the notice period. The amount of termination payments due to the Group Finance Director would equal, in summary, the aggregate of (i) his annual salary as at the time of termination, (ii) the market value of the contractual benefits in kind (including any pension contribution) to which he would have become entitled during the following 12 months, and (iii) all payments to which he would have become entitled under the annual bonus plan during the same 12 month period. The Chief Executive of the UK division has a rolling service contract (dated 1 March 2003) with a UK subsidiary which can be terminated on one year’s notice in writing by either party or terminates on his 65th birthday. In the case of early termination, the contract provides for salary to be paid in lieu of notice, or where notice has been given, for any balance of the notice period. Entitlement to any share options or LTIP awards is governed by the rules of the relevant scheme. The contracts contain confidentiality and non-competition clauses.

The Chairman has a letter of appointment (dated 20 June 2001), with no fixed term. The appointment can be terminated in writing by either party on reasonable ~~notice.~~notice and does not provide for compensation for loss of office. Each non-executive director has a letter of appointment from the Company which does not have a termination clause and does not provide for compensation for loss of office. The duration of any such appointment is subject to the terms of the Articles of Association and normally runs until such director is next required to stand for election or re-election.

~~The letters of appointment are dated as set out below:~~

58	Signet Group plc Annual Report & Accounts year ended 29 January 2005

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The letters of appointment are dated as set out below:

Robert Blanchard	5 September 2000
	Dale Hilpert	15 July 2003
	Brook Land	16 October 1995
Robert Walker	21 September 2004
Russell Walls	29 May 2002

(h) Company pension

The Chairman ~~did~~does not receive any pension ~~provision in 2003/04.~~provision. The amount paid in respect of life assurance for him in the period was £19,100^ß(~~2002/03:~~2003/04: £19,100^ß).

The Group Chief Executive is a member of the Sterling Jewelers Inc. 401(k) Retirement Savings Plan and an unfunded, unqualified deferred compensation plan. Contributions made by Signet’s US division in respect of the Group Chief Executive

during the period totalled ~~£1,786~~£1,653^ß(~~2002/03: £1,797~~2003/04: £1,786^ß) and ~~£140,091~~£134,024^ß(~~2002/03: £145,571~~2003/04: £140,091^ß) respectively.

Pension benefits in respect of the UK based directors are set out below.

(i) Aggregate emoluments
for the year to 29 January 2005
The total emoluments for directors of the Company and officers of the Group (excluding amounts due under the LTIP), as listed on pages 3441 and ~~35,~~42, for services in all capacities was ~~2,403,000 (2002/03: £3,340,000)~~£2,510,000 (2003/04: £2,403,000). The amounts due under the ~~2000~~ LTIP for directors of the Company and officers of the Group was ~~£760,000 (2002/03: £1,107,000,~~£694,000 (2003/04: £794,000, restated to reflect the market value at vesting). 50% of the amounts due under the ~~2000~~ LTIP are payable in cash and the other 50% consists of the grant of an option to acquire shares in the Company. Details of the directors’ emoluments are given on page ~~45.~~54.

Pension benefits for UK based executive directors^ß
Ian Dahl
Walker Boyd former Chief Executive of
Group Finance Director the UK division

2003/04 2002/03 2003/04 2002/03 ⁽¹⁾
£ £ £ £

Change in accrued benefits during the year (gross of inflation) (A) 3,934 3,814 – 2,295
Change in accrued benefits during the year (net of inflation) 2,955 3,285 – 2,173
Accrued benefits at the end of the year 38,888 34,954 – 9,450
Transfer value of (A)⁽²⁾ 35,071 37,621 – 36,393
Transfer value of accrued benefits at the beginning of the year⁽²⁾ 400,303 336,380 – 104,583
Transfer value of accrued benefits at the end of the year⁽²⁾ 408,530 400,303 – 158,266
Change in transfer value of accrued benefits⁽²⁾⁽³⁾ 8,227 63,923 – 53,683
Group payments to the FURBS 41,760 38,787 – 30,027
Life assurance contributions 2,508 2,127 – 4,265

Pension benefits for the UK based executive directors^ß

	Robert Anderson		Walker Boyd
	Chief Executive UK division		Group Finance Director

	2004/05	2003/04	2004/05	2003/04

Change in accrued benefits during the year (gross of inflation)	2,245	2,067	4,564	3,934
Change in accrued benefits during the year (net of inflation)	2,037	1,937	3,371	2,955
Accrued benefits at the end of the year	9,010	6,765	43,452	38,888
Transfer value of change in accrued pension (net of inflation)	7,997	5,579	44,369	35,071
Transfer value of accrued benefits at the beginning of the year	38,707	25,773	408,530	400,303
Transfer value of accrued benefits at the end of the year	58,367	38,707	510,434	408,530
Change in transfer value of accrued benefits⁽¹⁾	14,585	7,999	101,904	8,227
Group payments to the FURBS	35,200	31,010	45,033	41,760
Life assurance contributions	858	1,197	2,582	2,508

(1)	~~Until his resignation on 30 September 2002.~~
~~(2)~~	~~No contributions were made by a director.~~
~~(3)~~	Calculated in accordance with the Actuarial Guidance Note GN 11.

Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005

4959

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Directors’ remuneration report (continued)

4.	Directors’ interests in shares^ß
(a)	Directors’ interest in share options^ß

		Number of shares under option

		At 31					At 29			Date from
		January					January	Exercise		which		Expiry
Director		2004	Granted	Forfeited	Exercised		2005	price		exercisable	⁽¹⁾	date	⁽¹⁾

Robert Anderson⁽²⁾		232,558	–	–	–		232,558	75.25p		2.5.04		1.5.11
	(3)(7)	19,000	–	–	(19,000	)	–	50.00p		–		–
		160,416	–	–	–		160,416	120.00p		11.4.05		10.4.12
		322,188	–	–	–		322,188	82.25p		25.4.06		24.4.13
	(4)	–	251,685	–	–		251,685	111.25p		5.4.07		4.4.14
	(5)	–	35,452	–	–		35,452	£1 in total		15.4.04		3.5.11
	(3)	–	10,985	–	–		10,985	86.25p		1.1.08		30.6.08

Total		734,162	298,122	–	(19,000	)	1,013,284	90.99p	⁽⁶⁾

Walker Boyd⁽²⁾	(10)	837,037	–	–	(837,037	)	–	33.75p		–		–
	(10)	745,665	–	–	(745,665	)	–	43.25p		–		–
		429,648	–	–	–		429,648	49.75p		10.4.02		31.3.09
		611,842	–	–	–		611,842	57.00p		8.5.03		7.5.10
		179,401	–	–	–		179,401	75.25p		2.5.04		1.5.11
	(3)(8)	19,000	–	–	(19,000	)	–	50.00p		–		–
		225,000	–	–	–		225,000	120.00p		11.4.05		10.4.12
	(5)	133,484	–	–	–		133,484	£1 in total		15.4.03		18.7.10
	(4)	397,435	–	–	–		397,435	97.50p		14.7.06		13.7.13
	(4)	–	444,943	–	–		444,943	111.25p		5.4.07		4.4.14
	(3)	–	10,985	–	–		10,985	86.25p		1.1.08		30.6.08
	(5)	–	87,505	–	��		87,505	£1 in total		15.4.04		3.5.11

Total		3,578,512	543,433	–	(1,601,702	)	2,520,243	73.78p	⁽⁶⁾

Terry Burman⁽²⁾	(9)	1,094,239	–	–	(1,094,239	)	–	$0.80		–		–
	(9)	2,217,280	–	–	(2,217,280	)	–	$0.87		–		–
		496,289	–	–	–		496,289	$1.08		2.5.04		1.5.11
		1,242,019	–	–	–		1,242,019	$1.72		11.4.05		10.4.12
	(3)(8)	8,670	–	–	(8,670	)	–	$1.10		–		–
	(4)	3,807,426	–	–	–		3,807,426	$1.59		14.7.06		13.7.13
	(4)	–	3,129,267	–	–		3,129,267	$2.05		5.4.07		4.4.14
	(3)	–	5,850	–	–		5,850	$1.64		1.11.06		31.1.07
	(5)	–	344,829	–	–		344,829	$1 in total		15.4.04		3.5.11

Total		8,865,923	3,479,946	–	(3,320,189	)	9,025,680	$1.68	⁽⁶⁾

James McAdam	(10)	1,075,145	–	–	(1,075,145	)	–	43.25p		–		–
		869,347	–	–	–		869,347	49.75p		10.4.02		31.3.09
	(3)(8)	19,000	–	–	(19,000	)	–	50.00p		–		–
	(3)	–	10,985	–	–		10,985	86.25p		1.1.08		30.6.08

Total		1,963,492	10,985	–	(1,094,145	)	880,332	50.21p	⁽⁶⁾

Director Number of shares under option

At 2 At 31 Date from
February January Exercise which Expiry
2003 Granted Forfeited Exercised 2004 price exercisable ⁽¹⁾ date ⁽¹⁾

Walker Boyd⁽²⁾
837,037 – – – 837,037 33.75p 6.10.00 5.10.07
745,665 – – – 745,665 43.25p 28.4.01 27.4.08
429,648 – – – 429,648 49.75p 10.4.02 31.3.09
611,842 – – – 611,842 57.00p 8.5.03 7.5.10
179,401 – – – 179,401 75.25p 2.5.04 1.5.11
(3 ) 19,000 – – – 19,000 50.00p 1.1.05 30.6.05
225,000 – – – 225,000 120.00p 11.4.05 10.4.12
– 133,484 – – 133,484 £1 in total 15.4.03 18.7.10
(4 ) – 397,435 – – 397,435 97.50p 14.7.06 13.7.13

Total 3,047,593 530,919 – – 3,578,512 55.04p ⁽⁵⁾

Terry Burman⁽²⁾
(6 ) 1,968,122 – – (1,968,122 ) – $0.72 – –
1,094,239 – – – 1,094,239 $0.80 10.4.02 31.3.09
2,217,280 – – – 2,217,280 $0.87 8.5.03 7.5.10
496,289 – – – 496,289 $1.08 2.5.04 1.5.11
1,242,019 – – – 1,242,019 $1.72 11.4.05 10.4.12
(3 ) 8,670 – – – 8,670 $1.10 3.11.04 31.1.05
(6 ) – 486,384 – (486,384 ) – $1 in total – –
(4 ) – 3,807,426 – – 3,807,426 $1.59 14.7.06 13.7.13

Total 7,026,619 4,293,810 – (2,454,506 ) 8,865,923 $1.30 ⁽⁵⁾

James McAdam
1,075,145 – – – 1,075,145 43.25p 28.4.01 27.4.08
869,347 – – – 869,347 49.75p 10.4.02 31.3.09
(3 ) 19,000 – – – 19,000 50.00p 1.1.05 30.6.05

Total 1,963,492 – – – 1,963,492 46.19p ⁽⁵⁾

All options were granted to directors while they were ~~directors.~~directors apart from Mr Anderson who was appointed a director on 6 April 2005. The performance conditions for grants made under the 2003 Plans are set out on page ~~46.~~56. The conditions set by the Remuneration Committee for exercise of options granted under the 1993 Executive Share Option Scheme (“1993 Scheme”) were that for vesting to take place a post inflation minimum growth in earnings per share of 10% over any consecutive three year period had to be achieved. This performance condition was chosen as the Remuneration Committee believed it to be in line with market practice. This condition has been met in respect of the options granted between October 1997 and ~~May 2001;~~April 2002; the performance criteria having been satisfied in each case over the first three year period following the grant of the options. The Black-Scholes option-pricing model fair value is given on page 99111 for options granted in the last three years.
(1)	The dates from which options are exercisable and the expiry dates are the dates that normally apply. Other dates apply in certain circumstances, such as an option holder ceasing to be employed.
(2)	See page 4657 regarding awards that will be made in ~~2004/05.~~2005/06.
(3) & (4)	& (5) The options above were all granted under the 1993 Scheme except those marked (3) which were granted under the terms of the Sharesave Scheme or, in the case of Terry Burman, the Employee Stock Savings Plan, (the 8,670 shares granted under this Plan that became exercisable in November 2004 increased to 8,690 shares as a result of a rounding difference, as the shares were delivered as ADRs and the ADR ratio changing from 30:1 to 10:1), those marked (4) which were granted under the 2003 ~~Plans.~~Plans, and those marked (5) awarded under the LTIP.
~~(5)~~(6)	These are weighted averages of the exercise prices per share for the options held at the year end.
~~(6)~~(7)	Exercised on ~~9 September 2003,~~14 January 2005, when the market price was ~~113.5p.~~110.00p.
(8)	Exercised on 17 January 2005, when the market price was 110.00p.
(9)	Exercised on 30 March 2004, when the market price was 109.25p.
(10)	Exercised on 15 June 2004, when the market price was 112.75p.
The aggregate amount of gains made by directors on the exercise of options during the year amounted to ~~£1,934,651 (2002/03: £594,191)~~£4,051,882 (2003/04: £1,934,651).


*5060*	Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005

Back to Contents

Except as set out in tables (a), (b) and (c), on pages 60 to 62, or in the notes under these tables, no director nor any member of any director’s immediate family had an interest in, or was granted or exercised any right to subscribe for, shares or debentures of the Company or any subsidiary, nor did any such right to subscribe lapse during the financial year, nor was there any change between the end of the financial year and ~~24 March 2004~~6 April 2005 in the interests of any director of the Company disclosed to the Company under the provisions of section 324 (duty of directors to disclose shareholdings in own company) as extended by section 328 (extension of section 324 to spouses and children) of

the Companies Act 1985 nor in any right to subscribe for shares in, or debentures of, the Company.

At 1 February ~~2003, 31~~2004, 29 January ~~2004~~2005 and ~~24 March 2004,~~6 April 2005, according to the register kept by the Company under section 325 of the Companies Act 1985, the directors held interests in the shares of the Company as indicated in tables (a), (b) and (c) on pages 5060 to ~~52.~~62. As explained on page 4757 the value of the awards that vest under the ~~2000~~ LTIP depends upon the extent to which the performance conditions are met. The awards are also capped by reference to a percentage of the recipient’s base salary.

Although the minimum performance conditions for the 2001/02 award have been exceeded, vesting will only occur within 60 days of the preliminary results announcement for the year ended 31 January 2004.

~~(b)~~	b) Directors’ interests in LTIPs^ß

Awards subject to

Awards where the performance

Awards subject to

Awards where the performance

performance conditions

conditions have been satisfied⁽¹⁾

performance conditions

conditions have been satisfied⁽¹⁾

Option

Cash and

Expiry of

Option

Cash and

Expiry of

Cash

Option

Cash

Option

portion

options total

options

award or

Cash

Option

Cash

Option

portion

options total

options

award or

Date of

portion

⁽²⁾

portion

⁽²⁾

portion

⁽³⁾

portion

⁽³⁾

(current

⁽⁴⁾

current

⁽⁴⁾⁽⁵⁾

total

⁽⁶⁾

vested

Date of

portion

(current

current

total

vested

award

(grant value)

(number)

(grant value)

(number)

value)

value

vested

option

award

(grant value)

⁽²⁾

(number)

⁽²⁾

(grant value)

⁽³⁾

(number)

⁽³⁾

value)

⁽⁴⁾

value

⁽⁴⁾⁽⁵⁾

vested

⁽⁶⁾

option

Director

Robert Anderson⁽⁷⁾

2001/02 award⁽⁸⁾

4.5.01

–

67,004

3.5.11

2002/03 award⁽⁸⁾

26.4.02

–

28,000

23,140

26,554

54,554

–

25.4.12

2003/04 award⁽⁸⁾

30.4.03

70,000

83,832

–

166,197

–

⁽⁹⁾

2004/05 award

5.4.04

70,000

62,222

–

141,400

–

⁽⁹⁾

Awards at end of year

140,000

146,054

28,000

23,140

26,554

362,151

67,004

Walker Boyd⁽⁷⁾

2000/01 award⁽⁸⁾

19.7.00

–

176,533

18.7.10

2001/02 award⁽⁸⁾

4.5.01

–

65,410

87,504

94,505

159,915

–

3.5.11

4.5.01

–

165,384

3.5.11

2002/03 award⁽⁸⁾

26.4.02

77,500

64,049

–

146,673

–

⁽⁹⁾

26.4.02

–

82,500

68,182

78,239

160,739

–

25.4.12

2003/04 award

2.5.03

77,500

92,814

–

177,739

–

⁽⁹⁾

2003/04 award⁽⁸⁾

30.4.03

82,500

98,802

–

195,875

–

⁽⁹⁾

2004/05 award

5.4.04

82,500

73,333

–

166,650

–

⁽⁹⁾

Awards at end of year

155,000

156,863

65,410

87,504

94,505

484,327

176,533

165,000

172,135

82,500

68,182

78,239

523,264

165,384

Terry Burman⁽⁷⁾

2000/01 award⁽⁸⁾

19.7.00

–

630,886

18.7.10

2001/02 award⁽⁸⁾

4.5.01

–

201,623

344,941

372,537

574,160

–

3.5.11

4.5.01

–

600,761

3.5.11

2002/03 award⁽⁸⁾

26.4.02

230,163

240,005

–

489,369

–

⁽⁹⁾

26.4.02

–

238,856

254,485

292,022

530,878

–

25.4.12

2003/04 award

2.5.03

230,163

316,318

–

571,787

–

⁽⁹⁾

2003/04 award⁽⁸⁾

30.4.03

238,856

335,403

–

623,731

–

⁽⁹⁾

2004/05 award

5.4.04

238,856

217,903

–

488,901

–

⁽⁹⁾

Awards at end of year

460,326

556,323

201,623

344,941

372,537

1,635,316

630,886

477,712

553,306

238,856

254,485

292,022

1,643,510

600,761

All grants were made to directors while they were directors, apart from Mr Anderson who was appointed on 6 April 2005, and the performance conditions relating to the awards are set out on page ~~47.~~57.
(1)	In respect of the ~~2001/02~~2002/03 awards the Group performance achieved was a three year compound annual growth in profit before tax of ~~12.3%~~15% per ~~annum~~annum. The UK division performance achieved was a three year compound annual growth in operating profit of 11.7% and a three year average ROCE of ~~24.0%~~ 44.3%. This resulted in ~~87.6%~~100% of the award vesting for the Group Chief Executive, ~~and 84.4%~~100% for the Group Finance ~~Director.~~Director and 100% for the Chief Executive of the UK division.
(2)	Assumes maximum performance conditions are satisfied and is calculated using salary at ~~24 March~~28 February 2005 a share price at the time of grant in 2003 of 83.5p and in 2004 of 112.5p and in the case of Terry Burman an exchange rate of $1.88.
(3)	Calculated using salary at 28 February 2005 and a share price at the time of grant in 2002 of ~~121.0p and in 2003 of 83.5p and in the case of Terry Burman an exchange rate of $1.84.~~
~~(3)~~	~~Calculated using salary at 24 March 2004 and a share price at the time of grant in 2001 of 74.75p.~~121p. The LTIP payment is made in the year following the last year in respect of which the performance condition was set.
(4)	Calculated using share price as at ~~24 March 2004~~6 April 2005 of ~~108p.~~114.75p.
(5)	Cash portion plus option portion value at ~~24 March 2004.~~6 April 2005. For awards where the level of performance is currently unknown, no payment, or a reduced payment may be made. In respect of awards where the performance is known the base salary may be different at the date of vesting.
(6)	Vesting took place on 15 April ~~2003~~2004 and the cash portion was worth ~~£73,750~~£26,500, £65,410 and ~~£256,369~~£206,794 respectively for Robert Anderson, Walker Boyd and Terry Burman. The option interest was over ~~133,484~~35,452 shares for Robert Anderson, 87,505 shares for Walker Boyd and ~~486,384~~344,829 shares for Terry Burman and are included in the table of directors’ interests in share options on page ~~50.~~60. The share price on the day of vesting was ~~77p.~~114.25p. For Terry Burman an exchange rate of ~~$1.57~~$1.79 was used.
(7)	The Remuneration Committee approved grants of LTIP awards to Terry Burman (maximum of 70% of salary at vesting), both Walker Boyd and ~~Walker Boyd~~Robert Anderson (maximum of 50% of salary at vesting) on ~~23 March 2004.~~5 April 2005.
(8)	Awards at start of year.
(9)	Expiry dates of awards will be known within 60 days after the announcement of the preliminary results for the last financial year in the performance period.


Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005	*5161*

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Directors’ remuneration report (continued)

c) Directors’ interests in shares^ß

~~(c)~~	~~Directors’ interests in shares~~^ß

Number of shares

At start

At end

At 24 March

At start

At end

At 6 April

Director

of year

of year

2004

of year

of year

2005

Lee Abraham⁽¹⁾

75,000

75,000

–

Robert Anderson⁽¹⁾

–

19,000

19,000

Robert Blanchard

6,360

6,360

6,360

6,360

6,360

Walker Boyd

433,495

433,495

433,495

452,495

452,495

Terry Burman

322,266

460,866

460,866

710,601

710,601

Dale Hilpert

–

20,000

20,000

Brook Land

25,000

25,000

25,000

25,000

25,000

James McAdam⁽²⁾

242,088

242,088

242,088

261,088

261,088

Robert Walker

–

Russell Walls

4,000

4,000

4,000

4,000

4,000

(1)	~~Until his retirement~~Appointed as a director ~~on 8 January 2004.~~6 April 2005.
(2)	22,000 of those shares held were, at each date, held by ~~James~~Mr. McAdam’s wife in trust for their grandchildren and, while ~~James~~Mr. McAdam is taken to have an interest in them for Companies Act purposes, neither he nor his wife has a beneficial interest in them.

Although the minimum performance conditions for the 2002/03 award have been exceeded, vesting will only occur within 60 days of the preliminary results announcement for the year ended 29 January 2005.

The Group operates the QUEST, which is currently used in connection with the Sharesave Scheme, the ESOT and the 2004 ESOT. Robert Anderson, Walker Boyd, Terry Burman and James McAdam, at 1 February ~~2003, 31~~2004, 29 January ~~2004~~2005 and ~~24 March 2004,~~6 April 2005, were, in common with all other UK employees of the Group, deemed to have an interest in the shares held by the QUEST, the ESOT and the 2004 ESOT. The QUEST held ~~180~~110,857 shares ~~on 30 September 2002,110,857~~ on 1 February 2003, 41,065 on 31 January 2004, nil on 29 January 2005 and ~~35,992~~nil on ~~24 March 2004, and the~~6 April 2005. The ESOT held nil shares on ~~each of those dates.~~1 February 2003, nil on 31 January 2004, 4,610,839 on 29 January 2005 and 4,443,869 on 6 April 2005. The 2004 ESOT held nil shares on 29 January 2005 and nil shares on 6 April 2005. No director had been granted any specific interest in such ~~shares other than options held by them under a savings-related share option scheme.~~shares.

The Company’s register of directors’ interests, which is open to inspection at the registered office, contains full details of directors’ shareholdings and share options.

5.	~~Share price~~

5. Share price

The middle market price of a Signet share on the London Stock Exchange was ~~94.5p~~109.75p on 29 January 2005 and was 94.50p on 31 January ~~2004 and was 75.0p on 1 February 2003.~~2004. During the 52 weeks ended 3129 January ~~2004,~~2005, the middle market prices on the London Stock Exchange ranged between a low of ~~66.0p~~93.75p and a high of ~~114.5p.~~119.75p. On ~~24 March 2004~~6 April 2005 the middle market price was ~~108.0p.~~114.75p.

6. Total shareholder return (“TSR”)
6. ~~Total shareholder return (“TSR”)~~

The graph on page 5363 (left) shows the cumulative annual total return (share price movement and dividends) to shareholders of the Group since 3129 January ~~1999~~2000 based on the 30 day average of value of the share price compared to the FTSE 350 index. This index was chosen as a suitable comparator as it is a major market index of which the Group is a member. Also shown on a similar basis on the graph on page 5363 (right), is the Group’s performance compared to the FTSE general retail sector.


*5262*	Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005

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~~Five year historical TSR performance~~

~~Growth in the value of a hypothetical £100 holding over five years~~

~~FTSE 350 (excluding investment trusts) comparison based on 30 trading day average values~~

~~Five year historical TSR performance~~

~~Growth in the value of a hypothetical £100 holding over five years~~

~~FTSE general retailers index comparison based on 30 trading day average values~~

The directors’ remuneration report was approved by the Board on ~~24 March 2004,~~6 April 2005, and signed on its behalf by:

Robert Blanchard, Chairman, Remuneration Committee


	Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005	*5363*

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Statement of directors’ responsibilities

The directors are required to prepare accounts for each financial period which give, in accordance with the Companies Act 1985, a true and fair view of the state of affairs of the Company and the Group as at the end of that financial period and of the profit or loss of the Group for that period. In preparing those accounts, the directors are required to:

•	select suitable accounting policies and then apply them consistently;

•	make judgements and estimates that are in their opinion reasonable and prudent; and

•	state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the accounts; and prepare the accounts on a going concern basis unless in their view, based on the information then available to them, that basis of preparation would not be appropriate.

The directors are responsible for ensuring that the Company complies with the requirements of the Companies Act 1985 in regard to keeping adequate accounting records which disclose with reasonable accuracy, at any time, the financial position of the Company and to enable them to ensure that the accounts comply with the Companies Act 1985. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.


*5464*	Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005

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Report of Independent ~~auditor’s report~~Registered Public Accounting Firm

~~To the~~The Board of Directors and shareholders of Signet Group plc

We have audited the accompanying consolidated balance sheets of Signet Group plc and subsidiaries as at 29 January 2005 and 31 January 2004, ~~and 1 February 2003,~~ and the related consolidated profit and loss accounts, consolidated cash flow statements, consolidated statements of total recognised gains and losses and consolidated ~~cash flow statements~~shareholders’ funds statement for the 52 week period ended 29 January 2005, the 52 week period ended 31 January 2004, and the 52 week period ended 1 February 2003 ~~and the 53 week period ended 2 February 2002~~ presented on pages 5666 to ~~102.~~114. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with ~~auditing~~the standards ~~generally accepted in~~of the ~~United States of America.~~Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Signet Group plc and subsidiaries as atof 29 January 2005 and 31 January 2004, and the results of their operations and their cash flows for 52 week period ended 29 January 2005, the 52 week period ended 31 January 2004, and the 52 week period ended 1 February 2003 in conformity with generally accepted accounting principles in the United Kingdom.

As discussed in note 17 to the consolidated financial statements, the Company has adopted Application Note (G) of FRS 5 ‘Reporting the Substance of Transactions’ resulting in the restatement of the financial position of Signet Group plc and subsidiaries as at 31 January 2004 and the results of operations and cash flows for the 52 week period ended 31 January 2004 and the 52 week period ended 1 February ~~2003 and the 53 week period ended 2 February 2002 in conformity with accounting~~2003.

Accounting principles generally accepted ~~in the United States of America.~~

As discussed in note 17 to the financial statements, the Company adopted FRS 17 – ‘Retirement Benefits’ resulting in the restatement of the financial position of Signet Group plc and subsidiaries as at 1 February 2003 and the results of operations and cash flows for the 52 week period ended 1 February 2003 and the 53 week period ended 2 February 2002.

~~Generally accepted accounting principles~~ in the United Kingdom vary in certain significant respects from accounting principles generally accepted ~~accounting principles~~ in the United States of America. Information relating to the nature and effect of such differences is presented ~~on pages 94~~in note 31 to ~~102 in~~ the consolidated financial statements.

As discussed in note 31 to the consolidated financial statements, the US GAAP information as at 31 January 2004 and 1 February 2003 and for the 52 week periods ended 31 January 2004 and 1 February 2003 has been restated for corrections related to revenue recognition attributable to extended service agreements and lease accounting.

KPMG Audit Plc
Chartered Accountants ~~Registered Auditor~~
London, England

~~24 March 2004~~6 April 2005


	Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005	*5565*

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Consolidated profit and loss account
for the 52 weeks ended 3129 January ~~2004~~2005

								52 weeks ended		52 weeks ended		52 weeks ended
								29 January 2005		31 January 2004		1 February 2003
										as restated⁽¹⁾		as restated⁽¹⁾
	52 weeks ended 31 January 2004		52 weeks ended 1 February 2003 as restated	⁽¹⁾	53 weeks ended 2 February 2002 as restated	⁽¹⁾		£m		£m		£m		Notes
	£m		£m		£m		Notes

Sales	1,617.2		1,608.0		1,578.1		2	1,614.4		1,604.9		1,593.6		2
Cost of sales	(1,330.9	)	(1,331.6	)	(1,318.3	)		(1,329.6	)	(1,330.7	)	(1,331.2	)


Gross profit	286.3		276.4		259.8			284.8		274.2		262.4
Administrative expenses	(64.0	)	(62.5	)	(61.0	)		(65.9	)	(64.0	)	(62.5	)


Operating profit	222.3		213.9		198.8		2	218.9		210.2		199.9		2
Net interest payable and similar charges	(10.4	)	(14.0	)	(15.0	)	3	(8.6	)	(10.4	)	(14.0	)	3


Profit on ordinary activities before taxation	211.9		199.9		183.8		4	210.3		199.8		185.9		4
Tax on profit on ordinary activities	(74.7	)	(70.8	)	(63.4	)	7	(69.1	)	(70.2	)	(65.7	)	7


Profit for the financial period	137.2		129.1		120.4			141.2		129.6		120.2
Dividends	(43.2	)	(36.1	)	(30.5	)	8	(52.0	)	(43.2	)	(36.1	)	8


Retained profit attributable to shareholders	94.0		93.0		89.9			89.2		86.4		84.1


Earnings per share – basic	8.0p		7.5p		7.1p		9	8.2p		7.5p		7.0p		9
Earnings per share – diluted	7.9p		7.5p		7.1p		9	8.1p		7.5p		7.0p		9

All of the above relate to continuing activities during the current and previous periods.

~~The profit impact of the 53rd week in 2001/02 is analysed on page 28.~~

(1)	Restated for the implementation of the amendment to FRS 175, ‘Application Note G – ~~‘Retirement Benefits’~~Revenue Recognition’ (see note 17).

5666 Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005

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Consolidated balance sheet
at 3129 January ~~2004~~2005


						29 January 2005		31 January 2004
	31 January 2004		1 February 2003 as restated	⁽¹⁾				as restated⁽¹⁾
	£m		£m		Notes	£m		£m		Notes

Fixed assets:
Intangible assets	16.8		19.8		10	15.2		16.8		10
Tangible assets	202.8		205.5		11	226.8		202.8		11

	219.6		225.3			242.0		219.6

Current assets:
Stocks	541.5		539.5		12	578.3		541.5		12
Debtors⁽²⁾	339.5		345.9		13	375.3		365.2		13
Cash at bank and in hand	128.0		89.2		14	102.4		128.0		14

	1,009.0		974.6			1,056.0		1,034.7
Creditors: amounts falling due within one year	(332.0	)	(324.9	)	15	(351.6	)	(365.6	)	15

Net current assets⁽²⁾	677.0		649.7			704.4		669.1

Total assets less current liabilities	896.6		875.0			946.4		888.7
Creditors: amounts falling due after more than one year	(157.2	)	(189.1	)	16	(200.2	)	(208.6	)	16
Provisions for liabilities and charges:
Deferred taxation	(5.4	)	–		18
Other provisions	(6.4	)	(7.5	)	19
Provisions for liabilities and charges: other provisions						(5.8	)	(6.4	)	19
Pension (liability)/asset						(1.3	)	1.2		20

Total net assets	727.6		678.4			739.1		674.9

Capital and reserves – equity:
Called up share capital	8.6		8.6		20	8.7		8.6		21
Share premium account	60.7		53.9		21	68.0		60.7		22
Revaluation reserve	3.1		3.1		21	4.3		3.1		22
Special reserves	142.2		101.7		21	155.9		142.2		22
Profit and loss account	513.0		511.1		21	502.2		460.3		22

Shareholders’ funds	727.6		678.4			739.1		674.9

(1)	Restated for the implementation of the amendment to FRS 175, ‘Application Note G – ~~‘Retirement Benefits’~~Revenue Recognition’ (see note 17).
(2)	Debtors and net current assets include amounts recoverable after more than one year of ~~£1.2~~£4.3 million ~~(2003: £5.2~~(2004: £26.9 million) (see note 13).

These accounts were approved by the Board of Directors on ~~24 March 2004,~~6 April 2005, and were signed on its behalf by:

James McAdam Director

Walker Boyd Director








Signet Group plc Annual Report & Accounts ~~Year Ended 31~~year ended 29 January ~~2004~~2005	*5767*

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Company balance sheet

at 3129 January ~~2004~~2005

31 January 2004 1 February 2003
as restated ⁽¹⁾
£m £m Notes
Fixed assets:
Tangible assets 53.9 51.3 30 (b)
Investments 766.8 803.4 30 (j)

820.7 854.7

Current assets:
Debtors⁽²⁾ 375.3 233.2 30 (c)
Cash at bank and in hand 98.3 45.0 30 (d)

473.6 278.2
Creditors: amounts falling due within one year (536.8 ) (456.1 ) 30 (e)

Net current liabilities⁽²⁾ (63.2 ) (177.9 )

Total assets less current liabilities 757.5 676.8
Creditors: amounts falling due after more than one year (8.3 ) (18.3 ) 30 (f)

Total net assets 749.2 658.5

Capital and reserves - equity:
Called up share capital 8.6 8.6 20 (g)
Share premium account 60.7 53.9 30 (g)
Special reserves 565.1 565.1 30 (g)
Profit and loss account 114.8 30.9 30 (g)

Shareholders’ funds 749.2 658.5

	29 January 2005		31 January 2004
	£m		£m		Notes

Fixed assets:
Tangible assets	65.4		53.9		30(b)
Investments	766.8		766.8		30(j)

	832.2		820.7

Current assets:
Debtors⁽¹⁾	425.5		375.3		30(c)
Cash at bank and in hand	100.2		98.3		30(d)

	525.7		473.6
Creditors: amounts falling due within one year	(600.1	)	(536.8	)	30(e)


Net current liabilities⁽¹⁾	(74.4	)	(63.2	)

Total assets less current liabilities	757.8		757.5
Creditors: amounts falling due after more than one year	–		(8.3	)	30(f)

Total net assets	757.8		749.2

Capital and reserves – equity:
Called up share capital	8.7		8.6		21(g)
Share premium account	68.0		60.7		30(g)
Special reserves	565.1		565.1		30(g)
Profit and loss account	116.0		114.8		30(g)

Shareholders’ funds	757.8		749.2

(1)	~~Restated for the implementation of FRS 17 - ‘Retirement Benefits’.~~
~~(2)~~	Debtors and net current liabilities include amounts recoverable after more than one year of ~~£2.2~~£3.1 million ~~(2002: £1.5~~(2004: £2.2 million) (see note 30(c)).

These accounts were approved by the Board of Directors on ~~24 March 2004,~~6 April 2005, and were signed on its behalf by:

James McAdam Director

Walker Boyd Director








*5868*	Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005

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Consolidated cash flow statement
for the 52 weeks ended 3129 January ~~2004~~2005

	52 weeks ended		52 weeks ended		53 weeks ended				52 weeks ended		52 weeks ended		52 weeks ended
	31 January 2004		1 February 2003		2 February 2002				29 January 2005		31 January 2004		1 February 2003
	£m		£m		Notes		£m			£m		£m		Notes

Net cash inflow from operating activities	203.8		182.2			188.0		25(a	)	172.6		203.8		182.2	25(a)

Returns on investments and servicing of finance:
Returns on investments and servicing of finance
Interest received	0.9		1.1		1.6				1.8		0.9		1.1
Interest paid	(11.9	)	(17.6	)	(19.5	)			(11.6	)	(11.9	)	(17.6	)

Net cash outflow from returns on investments and servicing of finance	(11.0	)	(16.5	)	(17.9	)			(9.8	)	(11.0	)	(16.5	)

Taxation paid	(69.0	)	(57.3	)	(57.9	)			(56.5	)	(69.0	)	(57.3	)

Capital expenditure:
Purchase of tangible fixed assets	(50.9	)	(49.5	)	(60.7	)			(70.5	)	(50.9	)	(49.5	)
Proceeds from sale of tangible fixed assets	0.2		1.3		–				0.2		0.2		1.3

Net cash outflow from capital expenditure	(50.7	)	(48.2	)	(60.7	)			(70.3	)	(50.7	)	(48.2	)

Equity dividends paid	(36.7	)	(30.8	)	(27.7	)			(43.8	)	(36.7	)	(30.8	)

Cash inflow before use of liquid resources and financing	36.4		29.4		23.8
Cash (outflow)/inflow before use of liquid resources and financing									(7.8	)	36.4		29.4

Management of liquid resources:
Increase in bank deposits	(42.4	)	(29.9	)	(27.9	)
Decrease/(increase) in bank deposits									24.5		(42.4	)	(29.9	)

Financing:
Proceeds from issue of shares	6.3		4.3		8.9				7.3		6.3		4.3
Purchase of own shares by ESOT									(9.5	)	–		–
Repayment of bank loans	(12.1	)	(12.1	)	(16.5	)			(8.1	)	(12.1	)	(12.1	)

Cash outflow from financing	(5.8	)	(7.8	)	(7.6	)			(10.3	)	(5.8	)	(7.8	)

Decrease in cash in the period	(11.8	)	(8.3	)	(11.7	)
Increase/(decrease) in cash in the period									6.4		(11.8	)	(8.3	)

Reconciliation of net cash flow to movement in net debt

	52 weeks ended		52 weeks ended		53 weeks ended				52 weeks ended		52 weeks ended		52 weeks ended
	31 January 2004		1 February 2003		2 February 2002				29 January 2005		31 January 2004		1 February 2003
	£m		£m		Notes		£m			£m		£m		Notes

Decrease in cash in the period	(11.8	)	(8.3		)	(11.7	)
Increase/(decrease) in cash in the period									6.4		(11.8	)	(8.3	)
Cash outflow from decrease in debt	12.1		12.1		16.5				8.1		12.1		12.1
Cash outflow from increase in liquid resources	42.4		29.9		27.9
Cash (inflow)/outflow from (decrease)/increase in liquid resources									(24.5	)	42.4		29.9

Change in net debt resulting from cash flows	42.7		33.7		32.7				(10.0	)	42.7		33.7
Translation difference	17.5		27.9		(5.3	)			6.4		17.5		27.9

Movement in net debt in the period	60.2		61.6		27.4				(3.6	)	60.2		61.6
Opening net debt	(140.1	)	(201.7	)	(229.1	)			(79.9	)	(140.1	)	(201.7	)

Closing net debt	(79.9	)	(140.1	)	(201.7	)	25(b	)	(83.5	)	(79.9	)	(140.1	)	25(b)


Signet Group plc Annual Report & Accounts ~~Year Ended 31~~year ended 29 January ~~2004~~2005	*5969*

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Consolidated statement of total recognised gains and losses
for the 52 weeks ended 3129 January ~~2004~~2005

52 weeks ended 52 weeks ended 53 weeks ended
31 January 2004 1 February 2003 2 February 2002
as restated ⁽¹⁾ as restated ⁽¹⁾
£m £m £m

Profit for the financial period 137.2 129.1 120.4
Adjustment to property revaluation – – 2.1
Translation differences (net of tax £nil (2003: £0.7 million credit;
2002: £0.5 million charge)) (96.7 ) (143.2 ) 28.0
Actuarial profit/(loss) arising on pension asset (net of £2.8 million
tax charge (2003: £9.5 million 2002: £6.1 million credit)) 6.4 (22.3 ) (14.3 )

Total recognised gains and losses relating to the period 46.9 (36.4 ) 136.2
Prior year adjustments (note 17) - FRS 17 (adopted in 2003/04) (18.1 ) – –
Prior year adjustments (note 17) - FRS 19 (adopted in 2001/02) – – (6.2 )

Total recognised gains and losses since last Annual Report 28.8 (36.4 ) 130.0

		52 weeks ended		52 weeks ended		52 weeks ended
		29 January 2005		31 January 2004		1 February 2003
				as restated	⁽¹⁾	as restated	⁽¹⁾
		£m		£m		£m

Profit for the financial period		141.2		129.6		120.2
Translation differences (net of £0.3 million tax charge (2004: £nil; 2003: £0.7 million credit))		(33.0	)	(91.0	)	(135.8	)
Actuarial (loss)/gain arising on pension asset (net of £1.7 million tax credit
(2004: £2.8 million charge; 2003: £9.5 million credit))		(3.9	)	6.4		(22.3	)


Total recognised gains and losses relating to the period		104.3		45.0		(37.9	)
Prior year adjustments (note 17)	– amendment to FRS 5 (adopted in 2004/05)	(52.7	)	–		–
	– FRS 17 (adopted in 2003/04)	–		(18.1	)	–

Total recognised gains and losses since last Annual Report		51.6		26.9		(37.9	)

Note of consolidated historical cost profits and losses

52 weeks ended

52 weeks ended

53 weeks ended

52 weeks ended

52 weeks ended

31 January 2004

1 February 2003

2 February 2002

29 January 2005

31 January 2004

1 February 2003

as restated

⁽¹⁾

as restated

⁽¹⁾

as restated

⁽¹⁾

as restated

⁽¹⁾

£m

Profit on ordinary activities before taxation

211.9

199.9

183.8

210.3

199.8

185.9

Realisation of property revaluation deficit

–

(0.1

)

–

(0.1

)

Historical cost profit on ordinary activities before taxation

211.9

199.8

183.8

210.3

199.8

185.8

Historical cost retained profit attributable to equity shareholders

94.0

92.9

89.9

89.2

86.4

84.0

(1)	Restated for the implementation of the amendment to FRS ~~17 - ‘Retirement Benefits’~~5, ‘Application Note G – Revenue Recognition’ (see note 17).


*6070*	Signet Group plc Annual Report & Accounts ~~Year Ended 31~~year ended 29 January ~~2004~~2005

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Consolidated shareholders’ funds

Ordinary

Deferred

Share

Profit

Ordinary

Deferred

Share

Profit

share

premium

Revaluation

Special

and loss

share

premium

Revaluation

Special

and loss

capital

account

reserve

reserves

account

Total

capital

account

reserve

reserves

account

Total

£m

Balance at 27 January 2001

Balance at 2 February 2002

– as previously stated

8.4

0.1

38.3

0.9

51.2

466.5

565.4

8.5

0.1

48.3

3.0

38.3

585.5

683.7

– prior year adjustment (note 17)

–

17.6

–

(49.3

)

(49.3

)

– as restated

8.4

0.1

38.3

0.9

51.2

484.1

583.0

8.5

0.1

48.3

3.0

38.3

536.2

634.4

Retained profit attributable to equity shareholders

–

89.9

Shares issued to QUEST/ESOT

–

2.2

–

(2.2

)

–

Exercise of share options

0.1

–

7.8

–

7.9

Property revaluation

–

2.1

–

2.1

Actuarial loss recognised

–

(14.3

)

(14.3

)

Translation differences

–

(12.9

)

28.0

15.1

Balance at 2 February 2002

8.5

0.1

48.3

3.0

38.3

585.5

683.7

Retained profit attributable to equity shareholders

–

93.0

–

84.1

Shares issued to QUEST/ESOT

–

1.9

–

(1.9

)

–

1.9

–

(1.9

)

–

Exercise of share options

0.1

–

3.7

–

3.8

0.1

–

3.7

–

3.8

Redemption of deferred share capital

–

(0.1

)

–

0.1

–

(0.1

)

–

0.1

–

Transfer on property disposals

–

0.1

–

(0.1

)

–

0.1

–

(0.1

)

–

Actuarial loss recognised

–

(22.3

)

(22.3

)

–

(22.3

)

(22.3

)

Translation differences

–

63.4

(143.2

)

(79.8

)

–

63.4

(135.8

)

(72.4

)

Balance at 1 February 2003

8.6

–

53.9

3.1

101.7

511.1

678.4

8.6

–

53.9

3.1

101.7

460.3

627.6

Retained profit attributable to equity shareholders

–

94.0

–

86.4

Shares issued to QUEST/ESOT

–

1.8

–

(1.8

)

–

1.8

–

(1.8

)

–

Exercise of share options

–

5.0

–

5.0

–

5.0

–

5.0

Actuarial gain recognised

–

6.4

–

6.4

Translation differences

–

40.5

(96.7

)

(56.2

)

–

40.5

(91.0

)

(50.5

)

Balance at 31 January 2004⁽¹⁾

8.6

–

60.7

3.1

142.2

513.0

727.6

Balance at 31 January 2004

8.6

–

60.7

3.1

142.2

460.3

674.9

Retained profit attributable to equity shareholders

–

89.2

Shares issued to QUEST/ESOTs

–

2.5

–

(2.5

)

–

Exercise of share options

0.1

–

4.8

–

1.6

6.5

Purchase of own shares by ESOT

–

(9.5

)

(9.5

)

Transfer on property disposals

–

1.2

–

1.2

Actuarial loss recognised

–

(3.9

)

(3.9

)

Translation differences

–

13.7

(33.0

)

(19.3

)

Balance at 29 January 2005⁽¹⁾

8.7

–

68.0

4.3

155.9

502.2

739.1


(1)	Shareholders’ funds at 3129 January ~~2004~~2005 include cumulative losses of ~~£108.0~~£119.5 million ~~(2003: £51.8~~(2004: £100.2 million losses, ~~2002: £28.0~~2003: £49.7 million ~~profits)~~losses) in respect of translation differences (see note ~~21, page 79)~~22).


	Signet Group plc Annual Report & Accounts ~~Year Ended 31~~year ended 29 January ~~2004~~2005	*6171*

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Notes to the accounts

1. Principal accounting policies
The consolidated accounts of Signet Group plc and its subsidiary companies (“the Group”) are prepared in accordance with generally accepted accounting principles in the UK (“UK GAAP”). These principles differ in certain significant respects from generally accepted accounting principles in the US (“US GAAP”). Application of US GAAP would have affected shareholders’ funds and results of operations at and for the 52 weeks ended 29 January 2005, the 52 weeks ended 31 January 2004 and the 52 weeks ended 1 February 2003 to the extent summarised in note 31. The following accounting policies are applied consistently in dealing with items which are considered material in relation to the accounts of the Group:

~~Principal accounting policies~~

The consolidated accounts of Signet Group plc and its subsidiary companies (“the Group”) are prepared in accordance with generally accepted accounting principles in the UK (“UK GAAP”). These principles differ in certain significant respects from generally accepted accounting principles in the US (“US GAAP”). Application of US GAAP would have affected shareholders’ funds and results of operations at and for the 52 weeks ended 31 January 2004, the 52 weeks ended 1 February 2003 and the 53 weeks ended 2 February 2002 to the extent summarised on pages 97 and 98. The following accounting policies are applied consistently in dealing with items which are considered material in relation to the accounts of the Group:

(a) Basis of preparation
The Group is a speciality jewellery retailer in both the UK and the US.

The consolidated accounts have been prepared in accordance with applicable UK accounting standards and under the UK historical cost convention as modified by the revaluation of freehold and long leasehold properties.

The preparation of consolidated accounts in conformity with UK GAAP and US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the accounts and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The consolidated accounts comply with the Accounting Standards issued by the Accounting Standards Board. The amendment to FRS 175, ‘Application Note G – ~~‘Retirement Benefits’~~Revenue Recognition’ has been implemented during ~~2003/04~~2004/05 which has resulted in a prior year adjustment as described in note 17.

(b) Consolidation
The Group accounts include the accounts of the Company and its subsidiary undertakings made up for the 52 week period ended 3129 January ~~2004~~2005 (the comparatives are for the 52 week period ended ~~1 February 2003~~31 January 2004 and the 5352 week period ended 21 February ~~2002)~~2003). Unless otherwise stated, the acquisition method of accounting has been adopted. Under this method, the results of subsidiary undertakings acquired or disposed of in the year are included in the consolidated profit and loss account from the date of acquisition or up to the date of disposal.

Under section 230(3) of the Companies Act 1985 the Company is exempt from the requirement to present its own profit and loss account.

(c) Goodwill
Purchased goodwill (representing the excess of the fair value of the consideration given and associated costs over the fair value of the separable net assets acquired) arising on consolidation in respect of acquisitions since 1 February 1998 is capitalised. Positive goodwill is amortised to nil by equal annual instalments over its estimated useful life, normally 20 years.

In the Company’s accounts, investments in subsidiary undertakings are stated at cost less any impairment in value.

Impairment reviews are carried out annually to ensure goodwill and intangible assets are not carried at above their recoverable amounts. Wherever events or changes in circumstances indicate that the carrying amount may not be recoverable, the Group performs discounted cash flow analyses to compare discounted estimated future operating cash flows to the net carrying value of goodwill. Any amortisation or impairment write downs identified are charged to the profit and loss account.

(d) Sales
Sales represent sales to customers outside the Group, exclusive of value added and sales taxes. Repair revenues are recognised when the service is complete and the merchandise is delivered to the customer.

Revenue from the sale of warranties in the US, such as extended service plans, is recognised at the date of sale. Provision is made for the estimated cost of future claims arising under these service plans.

6272

Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005

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Revenue from the sale of extended service agreements in the US is deferred and recognised, net of incremental costs arising from the initial sale, in proportion to anticipated claims arising. This period is based on the historical claims experience of the US business, which has been consistent since these products were launched. The Group reviews the pattern of claims at the end of each year to determine any significant trends that may require changes to revenue recognition rates.

Prior to the adoption of the amendment to FRS 5, ‘Application Note G – Revenue Recognition’ in 2004/05, the Group recognised the revenue from such extended service agreements at the date of sale, with provision being made for the estimated cost of future claims arising.

(e) Cost of sales
Cost of sales includes all costs incurred in the ~~cost~~purchase, processing and distribution of ~~goodwill amortisation, distribution~~the merchandise and all costs directly incurred in the operation and ~~selling~~support of the retail outlets. This includes inbound freight charges, purchasing and receiving costs, inspection and internal transfer costs. ~~Advertising costs are expensed as incurred.~~

(f) Foreign currency translation
The results of overseas subsidiary undertakings are translated into pounds sterling at the weighted average rates of exchange during the period and their balance sheets and attributable goodwill at the rates at the balance sheet date. Exchange differences arising from the translation of the net assets and attributable goodwill of overseas subsidiary undertakings and matched foreign currency borrowings less deposits are charged or credited to reserves. Other exchange differences arising from foreign currency transactions are included in profit before taxation.

(g) Depreciation and amortisation
Depreciation is provided on freehold and long leasehold retail premises over an estimated useful life not exceeding 50 years. Long leaseholds relate to leases that have an original and unexpired lease term of greater than 25 years. Freehold land is not depreciated.

Premiums paid to acquire short leasehold properties are amortised over their lease periods (up to 25 years) while incentives received are amortised over the period to the first rent review. Provision is made for future net lease obligations in respect of onerous leases of vacant, partially vacant or sublet properties. Depreciation on other fixed assets is provided on a straight line basis at the following annual rates:

Plant, machinery and vehicles – 10%, 20%, 33¹/₃%,
Shopfronts, fixtures and fittings – rates up to 33¹/₃%.

Where the renewal of a lease is reasonably assured, the depreciation period for shopfronts, fixtures and fittings may exceed the remaining lease term.

Where appropriate, provision is made on assets that have a lower economic value than book value. Potentially impaired assets are identified by reviewing the cash contribution of individual stores where trading since the initial opening of the store has reached a mature stage. Where such stores deliver a low or negative cash contribution, the related store assets are considered for impairment by reference to the higher of net realisable value and value in use. Additionally, provision is made against tangible fixed assets relating to stores planned for closure.

(h) Stocks
Stocks represent goods held for resale and are valued at the lower of cost and net realisable value. Cost is determined using the first-in, first-out method and includes ~~appropriate overheads.~~overheads directly related to bringing stocks to their present location and condition. These include relevant warehousing, distribution and certain buying, security and data processing costs. Provision is made for obsolete, slow moving or defective items.

(i) Vendor contributions
Where vendor contributions are received in respect of identifiable promotional events, these are matched against the costs of these promotions. Vendor contributions which are received as general contributions and not against specific promotional events are allocated against stocks.

Signet Group plc Annual Report & Accounts year ended 29 January 2005

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Notes to the accounts (continued)

(j) Debtors
Full provision is made for debts that are 90 days past their due date on a recency basis. A provision is also made based on the historical performance of the receivables portfolio.

(k) Shares in subsidiary undertakings

Shares in subsidiary undertakings are stated at cost, less amounts written off for any impairment in value.

~~(j)~~(l) Leases

Rentals paid under operating leases are charged to the profit and loss account as incurred. Predetermined rent increases are recognised when they fall due, reflecting that these are generally intended to compensate for the expected cost of inflation. Amounts payable in respect of turnover leases are recognised in the period to which the turnover relates.

Assets held under finance leases, which are leases where substantially all the risks and rewards of the asset have passed to the Group, are capitalised in the balance sheet and depreciated over their estimated useful lives. Future instalments under such leases, net of finance charges, are included within creditors. Rental payments are apportioned between the finance element, which is charged to the profit and loss account, and the capital element which reduces the outstanding obligation for future instalments.

~~Signet Group plc~~ ~~Annual Report & Accounts year ended 31 January 2004~~

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~~Notes to the accounts~~ ~~(continued)~~

~~(k)~~(m) Deferred taxation
Deferred taxation is provided on a full provision basis, without discounting, on all timing differences which have arisen but not reversed at the balance sheet date. Except where otherwise required by UK Accounting Standards no timing differences are recognised in respect of:

	(a)	property revaluation surpluses where there is no commitment to sell the asset; and
	(b)	~~gains on sale of assets where those assets have been rolled over into replacement assets; and~~
	~~(c)~~	additional tax which would arise if profits of overseas subsidiaries were distributed.

~~(l)~~(n) Pension schemes

The Group Scheme, covering one of the executive directors and all participating eligible employees, ~~which~~ provides benefits based on members’ salaries at retirement. The Group Scheme’s assets are held by the trustees ~~of the Group Scheme~~ and are completely separate from those of the Group.

The full service cost of pension provisions relating to the period is charged to ‘administrative expenses’ in the profit and loss account. The expected return on the Group Scheme’s assets is credited and the interest element of the increase in the present value of the Group Scheme’s liabilities is charged to ‘net interest payable and similar charges’ in the profit and loss account.

The difference between the market value of the assets of the Group Scheme and the present value of accrued pension liabilities is shown as an asset or liability on the balance sheet, net of deferred tax. The difference between the expected return on assets and that actually achieved is recognised in the statement of total recognised gains and losses along with any differences that may arise from experience or assumption changes.

The pension cost is assessed in accordance with the advice of independent qualified actuaries. Where appropriate, supplementary pensions and life assurance benefits for UK directors and senior executives are provided through the Signet Group Funded Unapproved Retirement Benefits Scheme. Cash contributions under the Group’s US defined contribution ~~401(k) Retirement Savings Plan~~plans are charged to the profit and loss account as incurred.

~~(m)~~(o) Net interest payable and similar charges

~~Premiums paid in respect of the establishment and maintenance of borrowing facilities or purchased~~Purchased interest rate protection agreements are amortised to interest payable and similar charges over the term of the relevant agreement. All such interest rate protection agreements must be related to an asset or liability and must change the character of the interest rate by converting a variable rate to a fixed rate, or vice versa, to qualify for accrual accounting. In addition the term and notional amount of the swap, cap or floor must not exceed the term and principal amount of the debt or asset. Amounts payable or receivable under such agreements are accrued within net interest payable and similar charges in the profit and loss account and recorded as current assets or liabilities on the balance sheet. ~~If the agreements are terminated early, the gain or loss is spread over the shorter of the remaining term of the original investment or the remaining term of the related debt.~~

74	Signet Group plc Annual Report & Accounts year ended 29 January 2005

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~~(n) Vendor contributions~~
Where vendor contributions are received in respect of identifiable promotional events, these are matched against the costs of these promotions. Vendor contributions which are received as general contributions and not against specific promotional events are allocated against stocks.

~~(o)~~(p) Liquid resources

Liquid resources comprise money market deposits and amounts placed with external fund managers with an original maturity of three months or less, and are carried at cost which approximates to fair value.

(q) Foreign exchange risk management
The Group enters into forward purchases of foreign currencies, principally the US dollar and the Euro in order to limit the impact of movements in foreign exchange rates on its forecast foreign currency purchases.

The forward currency purchases are recognised on the balance sheet when the contracts mature. They are accounted for in line with the forward asset underlining the hedged transition, whereby the gain or loss is recognised within the profit and loss account only when the future transaction is also accounted for through the profit and loss account.

(r) Commodity risk management
In order to ensure that values of assets and revenue protection should not be unnecessarily exposed to significant movements in the price of underlining precious metal raw material, the Group may enter into forward purchase contracts for commodities.

The overall amount and duration of such forward commodity contracts are dependent on the underlying buying needs of the operating companies and prevailing commodity prices. The forward commodity purchases are recognised on the balance sheet when the contracts mature. They are accounted for in line with the forward asset underlying the hedged transaction, whereby the gain or loss is recognised within the profit and loss account only when the future transaction is also accounted for through the profit and loss account.

(s) Share schemes
Options granted to employees to subscribe for the Group’s shares where the exercise price of the option is linked to performance, do not result in any compensation costs being recorded by the Group if the stated exercise price is equal to, or in excess of, the fair value of the underlying shares at the date of grant. The cost of the cash and share award elements of the Long Term Incentive Plan is charged to the profit and loss account evenly over the period from the award date to vesting, based on the level of award that is expected to be achieved.

Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005

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Notes to the accounts (continued)

2. Segment information
2.

~~Segment information~~

The Group’s results derive from one business segment – the retailing of jewellery, watches and gifts. The Group is managed as two operating segments, being the US and UK divisions. Both divisions are managed by executive committees, which report through the Group Chief Executive to the Group Board. Each divisional executive committee is responsible for operating decisions within guidelines set by the Group Board.

		2004		2003		2002		2005		2004		2003
		£m		£m		£m			£m		£m

Sales by origin and destination:
Sales by origin and destination⁽¹⁾:
UK	UK	501.0		473.6			452.1		514.4		501.0		473.6
US	US	1,116.2		1,134.4		1,126.0		1,100.0		1,103.9		1,120.0

		1,617.2		1,608.0		1,578.1		1,614.4		1,604.9		1,593.6

Operating profit⁽¹⁾:	Operating profit⁽¹⁾:
UK	– Trading	76.6		64.7		58.8
	– Group central costs⁽²⁾	(5.7	)	(6.0	)	(5.1	)
UK – Trading								78.2		76.6		64.7
– Group central costs⁽²⁾								(6.6	)	(5.7	)	(6.0	)

		70.9		58.7		53.7		71.6		70.9		58.7
US	US	151.4		155.2		145.1		147.3		139.3		141.2

		222.3		213.9		198.8		218.9		210.2		199.9

Depreciation and amortisation:	Depreciation and amortisation:
UK	UK	15.7		12.5		10.4		17.4		15.7		12.5
US	US	24.7		25.3		24.3		24.9		24.7		25.3

		40.4		37.8		34.7		42.3		40.4		37.8

Net interest payable/(receivable) and similar charges⁽¹⁾:
Net interest payable/(receivable) and similar charges:
UK	UK	(2.3	)	(1.2	)	1.0		(5.6	)	(2.3	)	(1.2	)
US	US	12.7		15.2		14.0		14.2		12.7		15.2

		10.4		14.0		15.0		8.6		10.4		14.0

Additions to tangible fixed assets:	Additions to tangible fixed assets:
UK	UK	17.8		16.4		18.8		28.8		17.8		16.4
US	US	33.1		33.1		41.0		41.7		33.1		33.1

		50.9		49.5		59.8		70.5		50.9		49.5

Tangible fixed assets:	Tangible fixed assets:
UK	UK	72.6		70.5		67.6		84.1		72.6		70.5
US	US	130.2		135.0		146.5		142.7		130.2		135.0

		202.8		205.5		214.1		226.8		202.8		205.5

Total assets⁽¹⁾⁽³⁾:
Total assets⁽³⁾:
UK	UK	446.3		375.3		324.1		449.8		446.3		375.3
US	US	782.3		819.4		897.8		843.9		782.3		819.4

		1,228.6		1,194.7		1,221.9		1,293.7		1,228.6		1,194.7

Net assets⁽¹⁾⁽⁴⁾:	Net assets⁽¹⁾⁽⁴⁾:
UK	UK	209.9		126.2		140.1		222.9		209.9		126.2
US	US	597.6		692.3		745.3		599.7		544.9		641.5
Net debt	Net debt	(79.9	)	(140.1	)	(201.7	)	(83.5	)	(79.9	)	(140.1	)

		727.6		678.4		683.7		739.1		674.9		627.6

(1)	~~2003~~2004 and ~~2002~~2003 restated for the implementation of the amendment to FRS 175, ‘Application Note G – ~~‘Retirement Benefits’~~Revenue Recognition’ (see note 17).
(2)	Group central costs for ~~2002/03~~2005 include a net charge of ~~£0.5~~£0.4 million relating to ~~an increase in the~~a property provision ~~against an onerous lease of a dormant Group property.~~(2004: £nil; 2003: £0.5 million).
(3)	Total assets includes fixed and current assets but excludes current liabilities and debt.
(4)	Net debt has been excluded from the two operating segments.

Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005

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~~Notes to the accounts~~ 3. Net interest payable and similar charges

	2005		2004		2003
	£m		£m		£m

Interest on bank loans and overdrafts	2.1		1.9		4.7
Interest expense of US securitisation facility	7.4		8.2		9.0
Interest on loan notes	0.9		1.7		2.5
Facilities fees and related costs	1.2		0.9		1.4

	11.6		12.7		17.6
Interest receivable	(1.8	)	(1.7	)	(1.1	)

	9.8		11.0		16.5
Net interest credit on defined benefit pension scheme (note 20)	(1.2	)	(0.6	)	(2.5	)

	8.6		10.4		14.0

~~(continued)~~4. Profit on ordinary activities before taxation

	2005	2004	2003
	£m	£m	£m


Profit on ordinary activities before taxation is stated after charging:
Depreciation – owned assets	41.3	37.6	34.8
Depreciation – assets held under finance leases	–	1.7	1.8
Goodwill amortisation	1.0	1.1	1.2
Fees payable to KPMG Audit Plc and their associates:
Audit services⁽¹⁾	0.4	0.4	0.4
Further assurance services⁽²⁾	0.3	0.1	0.1
Tax services	–	–	0.3
Other services	–	–	–
Advertising	78.0	73.7	69.4
UK restructuring cost	1.7	–	–
Operating lease rentals – plant, machinery and vehicles	2.1	2.2	2.1
Operating lease rentals – property	133.9	136.7	135.5

3.(1)

~~Net interest payable~~Audit services include the fee for the statutory audit of the Company and ~~similar charges~~

2004 2003 2002
£m £m £m

Interest on bank loans and overdrafts 1.9 4.7 7.7
Interest expense of US securitisation facility 8.2 9.0 5.9
Interest on loan notes 1.7 2.5 3.0
Facilities fees and related costs 0.9 1.4 2.8

12.7 17.6 19.4
Interest receivable (1.7 ) (1.1 ) (1.5 )

11.0 16.5 17.9
Net interest credit on defined benefit pension scheme (note 22) (0.6 ) (2.5 ) (2.9 )

10.4 14.0 15.0

	of its subsidiaries.
4.	~~Profit on ordinary activities before taxation~~

2004 2003 2002
£m £m £m

Profit on ordinary activities before taxation is stated after charging:
Depreciation – owned assets 37.6 34.8 30.5
Depreciation – assets held under finance leases 1.7 1.8 2.9
Goodwill amortisation 1.1 1.2 1.3
Fees payable to KPMG Audit Plc and their associates:
   Audit services 0.4 0.4 0.4
   Further assurance services⁽¹⁾ 0.1 0.1 0.1
   Tax services – 0.3 0.2
   Other services – – –
Advertising 73.7 69.4 70.1
Operating lease rentals – plant, machinery and vehicles 2.2 2.1 2.2
Operating lease rentals – property 136.7 135.5 130.6

~~(1)~~(2)	Further assurance services were for work carried out in respect of the quarterly reviews and Christmas trading ~~review.~~

5.	~~Foreign currency translation~~review, and, in 2005, includes advice given in respect of work on Section 404 of the Sarbanes-Oxley Act of 2002 and the implementation of International Financial Reporting Standards.

2004 2003 2002

The exchange rates used for translation of US dollar transactions and balances in these accounts are as follows:
Profit and loss (average rate) 1.68 1.53 1.44
Balance sheet (year end rate) 1.82 1.64 1.42

5. Foreign currency translation

The exchange rates used for translation of US dollar transactions and balances in these accounts are as follows:

	2005	2004	2003

Profit and loss (average rate)	1.86	1.68	1.53
Balance sheet (year end rate)	1.89	1.82	1.64

The effect of translation on foreign currency borrowings less deposits in the period was to decrease the Group’s net borrowings by £6.4 million (2004: £17.5 million ~~(2003:~~decrease, 2003: £27.9 million ~~decrease, 2002: £5.3 million increase)~~decrease). The net effect of exchange rate movements on foreign currency investments (excluding goodwill) and foreign currency borrowings less deposits in the period was a loss of ~~£56.2~~£19.3 million ~~(2003: £79.8~~(2004: £50.5 million loss, ~~2002: £15.1~~2003: £72.4 million ~~gain)~~loss). This amount has been taken to reserves in accordance with SSAP 20.


66	Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005		77

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6.	~~Directors and employees~~

2004 2003 2002
£m £m £m

Directors’ emoluments 2.0 2.6 2.6
Directors’ LTIP⁽¹⁾ – cash 0.3 0.4 0.5
– share options (at market value) 0.5 0.6 –
Contributions in respect of Directors’ to pension schemes 0.2 0.2 0.2

Notes to the accounts (continued)

6. Directors and employees

	2005	2004	2003
	£m	£m	£m


Directors’ emoluments	2.3	2.0	2.6
Directors’ LTIP – cash	0.3	0.3	0.4
Directors’ LTIP⁽¹⁾– share options (at market value)	0.4	0.5	0.6
Contributions to pension schemes in respect of directors	0.2	0.2	0.2

(1)

~~For 2004, 50% of the amounts due under the 2000 LTIP is payable in cash and the other 50% consists of a grant of an option to acquire shares in the Company.~~ The market value of those options has been calculated using the share price as at ~~24 March 2004.~~6 April 2005. The amount included for ~~2003~~2004 has been restated to reflect the market value of the option grant at vesting on 15 April ~~2003~~2004 rather than the market value as at 2624 March ~~2003.~~2004.

Details of directors’ emoluments are shown in the Board report on remuneration on page ~~45.~~54.

The aggregate emoluments (excluding amounts due under the ~~2000~~ LTIP) of the highest paid director, Terry Burman, as US Chief Executive and as Group Chief Executive were ~~£1,100,000 (2003: £1,217,000; 2002: £1,055,000)~~£1,199,000 (2004: £1,100,000; 2003: £1,217,000). The amounts due to him under the ~~2000~~ LTIP were ~~£574,000 (2003: £631,000, restated)~~£531,000 (2004: £601,000, restated; 2003: £631,000). ~~In 2002 under a prior LTIP a payment of £520,000 was made to him wholly in cash.~~ For ~~2004,~~2005, 50% of the amount due under the ~~2000~~ LTIP, £239,000, is payable in cash ~~(£201,000;~~(2004: £201,000; 2003: £256,000) and the other 50% consists of the grant of an option to acquire shares in the Company (market value at ~~24 March 2004: £373,000)~~6 April 2005: £292,000). Additionally, pension contributions of ~~£142,000 (2003: £147,000; 2002: £146,000)~~£136,000 (2004: £142,000; 2003: £147,000) were made to money purchase schemes on his behalf. The gain made by him on the exercise of options in the Group was ~~£1,934,651 (2003: £4,364; 2002: £2,132,038)~~£2,090,959 (2004: £1,934,651; 2003: £4,364).

	2004	2003	2002		2005		2004		2003
	Number of	Number of	Number			Number		Number
	persons	persons	of persons			of persons		of persons

Retirement benefits are accruing to the following numbers of directors under:
Money purchase schemes	1	1		1		1		1		1
Defined benefit schemes	1	1		2		1		1		1

The average number of full-time equivalent persons employed (including directors)
during the period, analysed by category and division, was:
Total Group:
Management	530	512	495		562		530		512
Administration	1,314	1,296	1,243		1,391		1,314		1,296
Distribution and sales staff	12,658	12,352	11,787		13,192		12,658		12,352

	14,502	14,160	13,525		15,145		14,502		14,160

UK:
Management	389	377	363		418		389		377
Administration	231	240	220		210		231		240
Distribution and sales staff	3,942	4,129	4,023		3,849		3,942		4,129

	4,562	4,746	4,606		4,477		4,562		4,746

US:
Management	141	135	132		144		141		135
Administration	1,083	1,056	1,023		1,181		1,083		1,056
Distribution and sales staff	8,716	8,223	7,764		9,343		8,716		8,223

	9,940	9,414	8,919		10,668		9,940		9,414


	£m	£m	£m		£m		£m		£m

The aggregate Group staff costs were as follows:
Wages and salaries	276.9	282.5	278.3		281.4		276.9		282.5
Social security costs	22.5	22.1	22.5		23.2		22.5		22.1
Pension costs (restated for the implementation of FRS 17 – ‘Retirement Benefits’)	4.4	4.2	3.5
Pension costs					4.7		4.4		4.2

	303.8	308.8	304.3		309.3		303.8		308.8


78	Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005	67

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~~Notes to the accounts~~ 7. Taxation~~(continued)~~

7. Taxation
2004 2003 ⁽¹⁾ 2002 ⁽¹⁾
£m £m £m

Profit on ordinary activities before taxation:
UK 73.2 59.9 52.7
US 138.7 140.0 131.1

211.9 199.9 183.8

~~(1)~~	~~Restated for the implementation of FRS 17 – ‘Retirement Benefits’ (see note 17).~~

2004 2003 2002 ⁽¹⁾
£m £m £m

Taxes on profit:
UK corporation tax payable 26.2 22.6 19.8
US taxes 36.2 55.6 36.7
Deferred taxation:
UK 0.5 (0.7 ) 0.3
US 11.8 (6.7 ) 6.6

74.7 70.8 63.4

(1) Restated for the implementation of FRS 17 – ‘Retirement Benefits’ (see note 17).

2004 2003 2002
£m £m £m

Sources of deferred taxation are as follows:
Accelerated capital allowances (0.4 ) 0.1 0.2
Other timing differences 12.7 (7.5 ) 6.7

12.3 (7.4 ) 6.9

	2005	2004	⁽¹⁾	2003	⁽¹⁾
	£m	£m		£m

Profit on ordinary activities before taxation:
UK	77.2	73.2		59.9
US	133.1	126.6		126.0

	210.3	199.8		185.9


	2005	2004	⁽¹⁾	2003	⁽¹⁾
	£m	£m		£m

Taxes on profit:
UK corporation tax payable	19.8	26.2		22.6
US taxes	25.9	36.2		55.6
Deferred taxation:
UK	0.5	0.5		(0.7	)
US	22.9	7.3		(11.8	)

	69.1	70.2		65.7


	2005		2004	⁽¹⁾	2003	⁽¹⁾
	£m		£m		£m

Sources of deferred taxation are as follows:
UK fixed assets (capital allowances)	0.4		(0.4	)	0.1
US fixed assets	4.1		7.7		(3.9	)
Stock valuation	2.5		4.3		(0.5	)
Allowances for doubtful debts	(1.0	)	(0.3	)	–
Revenue deferral (extended service agreements)	13.3		(4.5	)	(5.1	)
Other timing differences	4.1		1.0		(3.1	)

	23.4		7.8		(12.5	)

The differences between the standard rate of corporation tax in the UK and the current and effective tax rates for the Group are explained below:

	2004		2003		2002
	%		%		2005			2004	⁽¹⁾	2003	⁽¹⁾
							%		%		%

UK statutory tax rates	30.0		30.0			30.0		30.0		30.0		30.0
Expenditure permanently disallowable for tax purposes, net of permanent undercharges	0.4		0.7		–		0.2		0.4		0.8
Differences between UK and US (including state) standard tax rates	5.3		4.9		5.6		4.8		5.2		4.7
Over provision in respect of previous periods	(0.4	)	(0.2	)	(1.1	)	(2.1	)	(0.4	)	(0.2	)
Differences between capital allowances and depreciation	0.2		(0.1	)	(0.1	)
UK fixed assets (capital allowances)							(0.2	)	0.2		(0.1	)
US fixed assets							(1.9	)	(3.9	)	2.1
Stock valuation							(1.2	)	(2.2	)	0.3
Allowances for doubtful debts							0.4		0.2		–
Revenue deferral (extended service agreements)							(6.3	)	2.2		2.7
Other timing differences	(6.0	)	3.8		(3.7	)	(1.9	)	(0.5	)	1.7


Current tax rate	29.5		39.1		30.7		21.8		31.2		42.0
Deferred tax rate	5.8		(3.7	)	3.8		11.1		3.9		(6.7	)

Effective tax rates in accounts	35.3		35.4		34.5
							32.9		35.1		35.3

(1)	Restated for the implementation of the amendment to FRS 5, ‘Application Note G – Revenue Recognition’ (see note 17).

Signet Group plc Annual Report & Accounts year ended 29 January 2005

Back to Contents

Notes to the accounts (continued)

The effective tax rate for the Group is higher than the UK statutory tax rate because the significant proportion of the Group’s business is conducted in the US where the combined federal and state tax rate approaches 40%. The Group’s future effective tax rate is also dependent on the movement in foreign exchange translation rates. It is anticipated that the effective tax rate for the Group in ~~2004/05~~2005/06 will be ~~marginally below the level for 2003/04.~~approximately 34%.


68	~~Signet Group plc~~ ~~Annual Report & Accounts year ended 31 January 2004~~

~~Back to Contents~~8. Dividends

8. Dividends
2004 2003 2002
£m £m £m

Interim dividend paid of 0.341p per share (2003: 0.310p; 2002: 0.289p) 5.9 5.3 5.0
Final dividend proposed of 2.16p per share (2003: 1.80p; 2002: 1.50p) 37.3 30.8 25.5

43.2 36.1 30.5

	2005	2004	2003
	£m	£m	£m

Interim dividend paid of 0.375p per share (2004: 0.341p; 2003: 0.310p)	6.5	5.9	5.3
Final dividend proposed of 2.625p per share (2004: 2.160p; 2003: 1.800p)	45.5	37.3	30.8

	52.0	43.2	36.1

The interim dividend was paid on 75 November ~~2003.~~2004. Subject to shareholder approval, the proposed final dividend is to be paid on 28 July ~~2004~~2005 to those shareholders on the register of members at close of business on 410 June ~~2004.~~2005.

Signet Group QUEST Limited, the trustee of the Signet Group Qualifying Employee Share Trust, has waived its right to participate in any dividends declared by the Company in respect of shares held by it in the Company. The ~~interim~~trustee has not held any shares since 16 July 2004 and no future dividend ~~paid on 7 November 2003 was not paid in respect of the 45,757 shares then held by the trustee, nor~~ will ~~the final dividend or any future dividend~~ be paid in respect of any shares held by it unless the Company shall have directed the trustee to accept any particular dividend.

~~Under recently enacted US tax legislation the rate of US federal income tax on dividends~~Dividends received by individual US shareholders from qualified foreign corporations isare subject to US federal income tax at a reduced torate of 15%. Dividends paid by the Group to individual US holders of shares or ADSs should qualify for this preferential dividend tax treatment. ~~The change in~~This US tax legislation only applies to individuals subject to US federal income taxes and therefore the tax position of UK shareholders is unaffected. Individual US holders of shares or ADSs are urged to consult their tax advisers regarding the application of this ~~recent~~ US tax legislation to their particular circumstances.

9. Earnings per share
2004 2003 ⁽¹⁾ 2002 ⁽¹⁾
£m £m £m

Profit for the financial period 137.2 129.1 120.4

2004 2003 2002

Basic weighted average number of shares in issue (million) 1,718.4 1,710.7 1,690.2

Dilutive effect of share options (million) 12.5 16.4 12.5

Diluted weighted average number of shares (million) 1,730.9 1,727.1 1,702.7

Earnings per share – basic 8.0p 7.5p 7.1p
Earnings per share – diluted 7.9p 7.5p 7.1p

9. Earnings per share

	2005		2004	⁽¹⁾	2003	⁽¹⁾

Profit for the financial period (£m)	141.2		129.6		120.2




Basic weighted average number of shares in issue (million)	1,731.6		1,718.4		1,710.7
Dilutive effect of share options (million)	6.0		12.5		16.4

Diluted weighted average number of shares (million)	1,737.6		1,730.9		1,727.1


Earnings per share – basic	8.2	p	7.5	p	7.0	p
Earnings per share – diluted	8.1	p	7.5	p	7.0	p

The basic weighted average number of shares in issue excludes those shares held in the QUEST (see note ~~20)~~21).

(1)	Restated for the implementation of the amendment to FRS 175, ‘Application Note G – ~~‘Retirement Benefits’~~Revenue Recognition’ (see note 17).

80
Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005	69

Back to Contents

~~Notes to the accounts~~ 10. Intangible fixed assets~~(continued)~~

~~10.~~	~~Intangible fixed assets~~
	Purchased
	goodwill
	£m

Cost:
At ~~1 February 2003~~31 January 2004	~~22.6~~20.4
Translation differences	(~~2.2~~0.7	)

At 3129 January ~~2004~~2005	~~20.4~~19.7

Amortisation:
At ~~1 February 2003~~31 January 2004	~~2.8~~3.6
Charged in period	~~1.1~~1.0
Translation differences	(~~0.3~~0.1	)

At 3129 January ~~2004~~2005	~~3.6~~4.5

Net book value:

At 3129 January ~~2004~~2005	~~16.8~~15.2

At ~~1 February 2003~~31 January 2004	~~19.8~~16.8

The purchased goodwill above arose on the acquisition of Marks & Morgan on 31 July 2000 and will be amortised over 20 years. Consequently, under current UK GAAP, the amortisation expense iswould be expected to be ~~£1.1~~£1.0 million for each of the ~~next five~~subsequent financial years to ~~2008/09.~~2019/20. This may be affected by movements in exchange rates. An impairment review was performed at 3129 January ~~2004,~~2005, concluding that the carrying value of ~~£16.8~~£15.2 million does not require an impairment adjustment.


70	Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005	81

Back to Contents

Notes to the accounts (continued)

11. Tangible fixed assets

	Land and buildings

							Plant,		Shopfronts,					Land and buildings									Plant,			Shopfronts
			Long		Short																		machinery			fixtures and
	Freehold		leasehold		Total		Freehold									Long leasehold			Short leasehold			and vehicles			fittings			Total
	£m				£m											£m					£m			£m

Cost or valuation:
At 1 February 2003	17.6			1.9		122.7		57.5
At 31 January 2004														17.4			1.9			121.2			60.2			252.8			453.5
Additions	–		–		12.5		7.5			30.9				50.9		–			–			14.2			11.7			44.6			70.5
Disposals	–		–		(1.6	)	(0.4	)		(3.2	)		(5.2	)	–			–			(1.2	)		(0.4	)		(3.2	)		(4.8	)
Translation differences	(0.2	)	–		(12.4	)	(4.4	)	(15.7	)		(32.7	)	–			–			(4.5	)		(1.6	)		(5.7	)		(11.8	)

At 29 January 2005														17.4			1.9			129.7			69.9			288.5			507.4

Amortisation:
At 31 January 2004	17.4		1.9		121.2		60.2		252.8			453.5		1.7			0.1			63.7			43.2			142.0			250.7

Depreciation:
At 1 February 2003	1.5		–		62.9		40.5		130.1			235.0
Charged in period	0.2		0.1		9.0		6.3		23.7			39.3		0.2			–			9.2			6.2			25.7			41.3
Disposals	–		–		(1.6	)	(0.3	)	(3.1	)		(5.0	)	–			–			(1.2	)		(0.3	)		(3.1	)		(4.6	)
Translation differences	–		–		(6.6	)	(3.3	)	(8.7	)		(18.6	)	–			–			(2.4	)		(1.3	)		(3.1	)		(6.8	)

At 31 January 2004	1.7		0.1		63.7		43.2		142.0			250.7
At 29 January 2005														1.9			0.1			69.3			47.8			161.5			280.6

Net book value:

At 29 January 2005														15.5			1.8			60.4			22.1			127.0			226.8

At 31 January 2004	15.7		1.8		57.5		17.0		110.8			202.8		15.7			1.8			57.5			17.0			110.8			202.8

At 1 February 2003	16.1		1.9		59.8		17.0		110.7			205.5

Cost or valuation All fixed assets are stated at cost with the exception of all UK freehold and long leasehold properties which are stated on the basis of their latest professional valuation. An external valuation was undertaken by NAI Gooch Webster, Chartered Surveyors, at 2 February 2002. The valuation was in accordance with the Royal Institute of Chartered Surveyors’ Appraisal and Valuation Manual. A total of 14 were valued on an existing use basis and are stated at net realisable value, and one was valued on an open market basis and is stated on that basis. At 29 January 2005, an internal interim valuation was carried out by a professionally qualified surveyor. The valuation was in accordance with the Royal Institute of Chartered Surveyors’ Appraisal and Valuation Manual. The results of the valuation show no significant differences to the 2002 valuation.

Freehold properties in the consolidated balance sheet include ~~£7.5~~£7.4 million of depreciable assets ~~(2003:~~(2004: £7.5 million). The net book value of shopfronts, fixtures and fittings held under finance leases is £nil (2004: £7.5 ~~million (2003: £8.3~~ million).

	2004		2003		2005		2004
	£m		£m		£m		£m

Freehold and long leasehold land and buildings are stated at:
Cost	1.5		1.6		1.5		1.5
Valuation	17.8		17.9		17.8		17.8

	19.3		19.5		19.3		19.3

The net book value of freehold and long leasehold land and buildings on an historical cost basis would be:
Cost	26.0		26.2		26.0		26.0

Depreciation	(7.7	)	(7.5	)	(7.9	)	(7.7	)

	18.3		18.7		18.1		18.3

Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005

Back to Contents

~~Notes to the accounts~~ ~~(continued)~~

12. Stocks

Stocks constitute goods held for resale.

Subsidiary undertakings held ~~£83.1~~£87.2 million of consignment stocks at 3129 January ~~2004 (2003: £74.4~~2005 (2004: £83.1 million) which is not recorded on the balance sheet. The principal terms of the consignment agreements, which can generally be terminated by either side, are such that the Group can return any or all of the stocks to the relevant suppliers without financial or commercial penalties and the supplier can vary stock prices.

Stock provisions
Balance at Balance at
beginning Charged to end of
of period profit Utilised period
52/53 weeks ended £m £m £m £m

2 February 2002 11.0 20.4 (23.5 ) 7.9
1 February 2003 7.9 19.5 (21.3 ) 6.1
31 January 2004 6.1 16.8 (18.4 ) 4.5

Stock provisions
	Balance at				Balance at
	beginning of	Charged to
	period	profit	Utilised		end of period
52 weeks ended	£m	£m	£m		£m

1 February 2003	7.9	19.5	(21.3	)	6.1
31 January 2004	6.1	16.8	(18.4	)	4.5
29 January 2005	4.5	18.4	(18.0	)	4.9

Stock provisions have been made for obsolete, slow-moving and damaged stock on a consistent basis.

13. Debtors
2004 2003 ⁽¹⁾
£m £m

Trade debtors (net of allowances):
– US receivables programme 292.9 299.2
– Other 8.7 8.3

301.6 307.5
Other debtors 22.5 22.5
Corporation tax recoverable 0.6 0.2
Prepayments and accrued income 13.6 10.5

Debtors recoverable within one year 338.3 340.7
Debtors recoverable after more than one year – deferred taxation (note 18) – 5.2
– pension scheme asset (note 22) 1.2 –

339.5 345.9

13. Debtors

	2005	2004
	£m	£m

Trade debtors (net of allowances):
– US receivables programme	319.0	292.9
– Other	10.8	8.7

	329.8	301.6
Other debtors	25.4	22.5
Corporation tax recoverable	1.1	0.6
Prepayments and accrued income	14.7	13.6

Debtors recoverable within one year	371.0	338.3
Debtors recoverable after more than one year⁽¹⁾– deferred taxation (note 18)	4.3	26.9

	375.3	365.2

(1)	~~Restated~~2004 restated for the implementation of the amendment to FRS 175, ‘Application Note G – ~~‘Retirement Benefits’~~Revenue Recognition’ (see note 17)
	.

Allowances for doubtful debts
52/53 weeks ended Balance at
beginning
of period Charged to
profit Balance at
end of
period
Utilised ⁽¹⁾
£m £m £m £m

2 February 2002 27.0 45.7 (46.4 ) 26.3
1 February 2003 26.3 39.1 (44.1 ) 21.3
31 January 2004 21.3 36.9 (38.4 ) 19.8

Allowances for doubtful debts
52 weeks ended Balance at
beginning of
period
£m Charged to
profit
£m Utilised
£m ⁽¹⁾ Balance at
end of period
£m
1 February 2003 26.3 39.1 (44.1 ) 21.3
31 January 2004 21.3 36.9 (38.4 ) 19.8
29 January 2005 19.8 37.4 (35.6 ) 21.6
(1)
Including the impact of foreign exchange translation between opening and closing balance sheet dates.

Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005

Back to Contents

14. Cash at bank and in hand
2004 2003
£m £m
Bank deposits 127.4 88.6
Other cash 0.6 0.6
128.0 89.2

15. Creditors: amounts falling due within one year
2004 2003
£m £m
Bank overdrafts 51.1 42.9
Loan notes 8.2 9.1
Obligations under finance leases 2.4 3.3
Trade creditors 55.6 58.7
Corporation tax 54.2 58.8
Social security and PAYE 1.4 1.5
Other taxes 23.5 21.8
Other creditors 5.3 6.7
Accruals and deferred income 93.0 91.3
Proposed dividend 37.3 30.8
332.0 324.9

Notes to the accounts (continued)

14. Cash at bank and in hand

	2005	2004
	£m	£m

Bank deposits	101.8	127.4
Other cash	0.6	0.6

	102.4	128.0

15. Creditors: amounts falling due within one year

	2005 £m	2004 as restated £m	⁽¹⁾

Bank overdrafts	42.8	51.1
Bank loans falling due within one year	2.4	–
Loan notes	7.9	8.2
Obligations under finance leases	–	2.4
Trade creditors	41.4	55.6
Corporation tax	43.8	54.2
Social security and PAYE	2.8	1.4
Other taxes	22.1	23.5
Deferred income from extended service agreements	42.1	38.8
Other creditors	4.1	5.3
Accruals and other deferred income	96.7	87.8
Proposed dividend	45.5	37.3

	351.6	365.6

(1)	Restated for the implementation of the amendment to FRS 5, ‘Application Note G – Revenue Recognition’ (see note 17).

The weighted average interest rate on short-term borrowings at 3129 January ~~2004~~2005 was 2.39% (31 January 2004: 1.85% ~~(1 February 2003: 3.48%~~).

16. Creditors: amounts falling due after more than one year
2004 2003 ⁽¹⁾
£m £m
Loan notes falling due between one and two years 8.3 9.1
Loan notes falling due between two and five years – 9.2
Bank loans falling due between one and two years 137.9 153.1
Obligations under finance leases falling due between one and two years – 2.6
Other creditors 11.0 10.4
Pension scheme liability (note 22) – 4.7
157.2 189.1

16. Creditors: amounts falling due after more than one year

	2005 £m	2004 as restated £m	⁽¹⁾

Loan notes falling due between one and two years	–	8.3
Bank loans falling due between one and two years	132.8	137.9
Deferred income from extended service agreements	55.1	51.4
Other creditors	12.3	11.0

	200.2	208.6

(1)	Restated for the implementation of the amendment to FRS 175, ‘Application Note G – ~~‘Retirement Benefits’~~Revenue Recognition’ (see note 17).

In ~~August 2001~~September 2004 the Group entered into an unsecured ~~$410~~$390 million multi-currency revolving credit facility with a syndicate of banks for a period of five years at a variable interest rate at a maximum margin of ~~0.85%~~0.55% above LIBOR. The facility replaced the $410 million facility that was due to expire August 2006. From commencement, the applicable margin has been ~~0.65%~~0.40% above LIBOR. At 3129 January ~~2004~~2005 the amount outstanding under this facility was $nil.

Commitment fees are paid on the undrawn portion of this credit facility at a rate of ~~50.0%~~40.0% of the applicable margin.

Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005

Back to Contents

~~Notes to the accounts~~ ~~(continued)~~

The principal financial covenants on this facility are as follows:

•	The ratio of Consolidated Net Debt to Consolidated EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) shall not exceed 3:1;

•	Consolidated Net Worth (total net assets) must not fall below £400 million; and

•	The ratio of Consolidated EBITARR (Earnings Before Interest, Tax, Amortisation, Rents, Rates and Operating Lease Expenditure) to Consolidated Net Interest Expenditure plus Rents, Rates and Operating Lease Expenditure shall be equal to or greater than 1.4:1.

In July 1998 the Group entered into a $60 million seven year unsecured note issue with a fixed interest rate of 7.25%. This note issue is repayable in four equal annual instalments of $15 million, which commenced in July 2002. At 3129 January ~~2004~~2005 the amount outstanding under this note issue was ~~$30~~$15 million.

~~The principal financial covenants on this note issue are as follows:~~

The principal financial covenants on this note issue are as follows:
•	Gearing (net debt, excluding the US receivables funding, expressed as a percentage of total net assets) must not exceed 60.0%;

•	Consolidated net worth (total net assets) must not fall below £300 million; and

•	Interest cover must not fall below three times.

In the US, in November 2001, the Company refinanced its private label credit card receivables programme through a privately placed receivables securitisation. Under this securitisation, interests in the US receivables portfolio held by a trust were sold principally to institutional investors in the form of fixed-rate Class A, Class B and Class C investor certificates. The certificates have a weighted average interest rate of 5.42% and interest is paid monthly in arrears from the finance charges collections generated by the receivables portfolio. The revolving period of the securitisation ends in December 2005, with a final expected principal payment date in November 2006. The aggregate outstanding principal amount of the certificates amounted to $251 million at 3129 January ~~2004 (1 February 2003:~~2005 (31 January 2004: $251 million).

Undrawn committed borrowing facilities
	2005	2004
	£m	£m

Expiring within one year	–	38.5
Expiring between two and five years	206.4	225.3

	206.4	263.8

~~Also~~17. Prior year adjustments
Adoption of the amendment to FRS 5, ‘Application Note G – Revenue Recognition’
The accounting policy in respect of extended service agreements in the US ~~in January 2002,~~was changed following an amendment to FRS 5 ‘Reporting the Group entered into a $70 million Conduit securitisation facility (“Conduit”). Under this securitisation, interests in the US receivables portfolio held by a trust are sold to Sheffield Receivables Corporation (a US subsidiarySubstance of ~~Barclays Capital Inc.)~~Transactions’ in the form of ~~an unsecured revolving variable rate certificate.~~‘Application Note G – Revenue Recognition’. The ~~Conduit bears a margin~~Group now spreads the revenue arising from the sale of ~~0.375% above~~such agreements, net of incremental costs arising from the initial sale, in proportion to anticipated claims arising. Previously the Group recognised the revenue from such plans at the date of sale with provision being made for the estimated cost of ~~funds paid by Sheffield Receivables Corporation. Commitment fees are paid on~~future claims arising.

As a result of the ~~undrawn portion~~change the Group has restated prior years. Therefore the previously reported 2003/04 results now reflect a decrease in sales of ~~this credit facility at~~£12.3 million (2002/03: £14.4 million) and a ~~rate~~reduction in profit before tax of ~~0.20%~~£12.1 million (2002/03: £14.0 million). AtConsequently, restated profit before tax for the 52 weeks ended 31 January 2004 ~~the amount outstanding under the Conduit was $nil (1 February 2003: $nil)~~is £199.8 million (2002/03: £185.9 million).

~~Undrawn committed borrowing facilities~~

2004 2003
£m £m

Expiring within one year 38.5 42.7
Expiring between one and two years – –
Expiring between two and five years 225.3 250.0

263.8 292.7

~~In October 1999 the Group completed~~ The effect on brought forward reserves at 31 January 2004 is a ~~sale and leaseback agreement in the US. This agreement has been treated as a finance lease in accordance~~reduction of £52.7 million net of deferred tax, with ~~SSAP 21. The nominal interest rate is 8.44% per annum.~~shareholders’ funds at 31 January 2004 therefore restated to £674.9 million.

Signet Group plcAnnual Report & Accounts year ended 3129 January ~~2004~~2005

Back to Contents

Notes to the accounts (continued)

~~17. Prior year adjustments~~
Adoption of FRS 17 – ‘Retirement Benefits’ in 2003/04

It was previously the Group’s policy, in compliance with SSAP 24, to spread the pension valuation surplus arising under its UK defined benefit pension scheme (the “Group Scheme”) over the average service life of the employees. In compliance with this standard, a pension scheme prepayment of £19.1 million was included in the balance sheet at 1 February 2003 within debtors falling due after more than one year. An associated deferred tax liability of £5.7 million was also carried on the balance sheet at 1 February 2003.

The adoption of FRS 17 – ‘Retirement Benefits’ ~~has~~ led to the write-off of the £19.1 million pension asset previously recognised under SSAP 24 and provision for the deficit of £6.7 million in the Group Scheme as at 1 February 2003. This £6.7 million deficit has been classified as a creditor falling due after more than one year. The £5.7 million deferred tax liability associated with the SSAP 24 pension asset has been written back and a £2.0 million deferred tax asset has been recognised in respect of the deficit provided for under FRS 17 at 1 February 2003. The total net adjustment of £18.1 million arising from the adoption of FRS 17 has been accounted for as a prior year adjustment charged directly to shareholders’ funds as at 1 February 2003.

~~Shareholders’ funds at 2 February 2002 and at 27 January 2001 (as detailed on page 61) have been restated to reflect the total net surpluses arising at those dates from the adoption of FRS 17.~~

The consolidated statement of total recognised gains and losses has been restated for the 52 weeks ended 1 February 2003 ~~and the 53 weeks ended 2 February 2002~~ to include the actuarial losses on pension assets arising during ~~those periods~~that period net of deferred tax, calculated in accordance with FRS 17. ~~These~~This amounted to £22.3 ~~million and £14.3 million respectively.~~million.

The profit and loss ~~accounts~~account for the 52 weeks ended 1 February 2003 ~~and for the 53 weeks ended 2 February 2002 have been~~was restated to ~~include the following items, reflecting the requirements~~reflect a reduction in operating profit of ~~FRS 17.~~

2003 2002
£m £m

Operating profit:
As originally reported 216.2 200.7
- Net service cost (2.3 ) (1.9 )

As restated 213.9 198.8

Net interest payable and similar charges:
As originally reported (16.5 ) (17.9 )
- Expected return on Group Scheme assets 7.1 7.5
- Interest on Group Scheme liabilities (4.6 ) (4.6 )

As restated (14.0 ) (15.0 )

Profit on ordinary activities before taxation:
As originally reported 199.7 182.8
- Net impact of FRS 17 adjustments 0.2 1.0

As restated 199.9 183.8

~~Adoption~~£2.3 million, and a non-cash credit of ~~FRS 19 – ‘Deferred Tax’~~
~~Prior~~£2.5 million to ~~2001/02 it was the Group’s policy,~~net interest payable and similar charges resulting in ~~compliance with SSAP 15, to provide for deferred taxation where there was~~ a ~~reasonable probability that a liability would become payable~~net increase in the foreseeable future. FRS 19 – ‘Deferred Tax’, which the Group adopted in 2001/02, requires that a deferred tax liability should be provided or an asset recognised in respect of all timing differences, regardless of whether it is considered that there is a reasonable probability that such timing differences will reverse.

~~The impact of the adoption of FRS 19 in 2001/02 led to an additional provision for deferred~~profit before tax of £6.2 million, which was accounted for as a prior year adjustment charged directly to shareholders’ funds. There was no material effect on the profit and loss account for the period ended 2 February 2002 or the preceding years.£0.2 million.

18. Deferred taxation

29 January 2005

31 January 2004⁽¹⁾

Assets

(Liabilities)

Total

Assets

(Liabilities)

Total

£m

UK fixed assets (capital allowances)

0.8

–

0.8

1.1

–

1.1

US fixed assets

–

(12.4

)

(12.4

)

–

(8.7

)

(8.7

)

Stock valuation

–

(16.3

)

(16.3

)

–

(14.4

)

(14.4

)

Allowances for doubtful debts

7.7

–

7.7

7.0

–

7.0

Revenue deferral (extended service agreements)

17.3

–

17.3

32.3

–

32.3

Other timing differences

7.2

–

7.2

9.6

–

9.6

UK property related, net

1.6

–

1.6

1.9

–

1.9

Value of UK capital losses carried forward

15.8

–

15.8

16.1

–

16.1

Total deferred tax asset/(liability)

50.4

(28.7

)

21.7

68.0

(23.1

)

44.9

Valuation allowance

(17.4

)

–

(17.4

)

(18.0

)

–

(18.0

)

Deferred tax asset/(liability)

33.0

(28.7

)

4.3

50.0

(23.1

)

26.9

3.3

2.6

1.0

24.3

Deferred tax asset

4.3

26.9

The difference on translation in respect of deferred tax posted directly to reserves in the period ended 29 January 2005 was £0.5 million (2004: £0.6 million).

(1)	Restated for the implementation of the amendment to FRS 5, ‘Application Note G – Revenue Recognition’ (see note 17)

Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005

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~~Notes to the accounts~~ ~~(continued)~~

~~18. Deferred taxation~~

31 January 2004 1 February 2003⁽¹⁾
Assets (Liabilities) Total Assets (Liabilities) Total
£m £m £m £m £m £m

Accelerated capital allowances 1.1 – 1.1 0.7 – 0.7
Other timing differences 16.6 (23.1 ) (6.5 ) 18.0 (13.5 ) 4.5
UK property related 1.9 – 1.9 1.8 – 1.8
Value of UK capital losses carried forward 16.1 – 16.1 16.3 – 16.3

Total deferred tax asset/(liability) 35.7 (23.1 ) 12.6 36.8 (13.5 ) 23.3
Valuation allowance (18.0 ) – (18.0 ) (18.1 ) – (18.1 )

Deferred tax asset/(liability) 17.7 (23.1 ) (5.4 ) 18.7 (13.5 ) 5.2

UK 2.6 2.0
US (8.0 ) 3.2

Deferred tax (liability)/asset (5.4 ) 5.2

~~The difference on translation in respect of deferred tax posted directly to reserves in the period ended 31 January 2004 was £0.6 million (2003: £nil).~~

Movement in deferred tax ~~(liability)/~~asset:

	Total
	£m

At ~~1 February 2003~~31 January 2004⁽¹⁾	~~5.2~~26.9
Transfers	~~1.1~~1.3
Charge in the period to the profit and loss account	(~~12.3~~23.4	)
Difference on translation	~~0.6~~(0.5	)

At 29 January 2005	4.3

~~At 31 January 2004~~	~~(5.4~~	)

(1)	Restated for the implementation of the amendment to FRS 175, ‘Application Note G – ~~‘Retirement Benefits’~~Revenue Recognition’ (see note 17).

19. ~~Other~~Provisions for liabilities and charges: other provisions

	Total
	£m

~~At 1 February 2003~~	~~7.5~~
~~Charges for the period in the profit and loss account~~	~~(0.5~~	)
~~Utilisation~~	~~(0.6~~	)

~~At 31 January 2004~~	~~6.4~~

At 31 January 2004	6.4
Charge in the period to the profit and loss account	(0.1	)
Utilisation	(0.5	)

At 29 January 2005	5.8

The provision is for onerous leases and includes the discounted cash flows of future net obligations in respect of vacant ~~and partially vacant~~ properties and the rental shortfall on properties which are sublet at below the current rent.

20. Pension schemes
The Group operates one defined benefit pension scheme in the UK, the Group Scheme, for all eligible employees who meet minimum age and service requirements. The assets of the Group Scheme, which is a funded scheme, are held in a separate trustee administered fund which is independently managed. The trustees of the Group Scheme during the year were Walker Boyd, John Gillum, John Hartwright (to 30 October 2004) and The Law Debenture Pension Trust Corporation p.l.c. (independent trustee). Contributions to the Group Scheme are assessed in accordance with the advice of independent qualified actuaries using the attained age method of valuation. Where appropriate, supplementary pension and life assurance for UK directors and senior executives is provided through the Signet Group Funded Unapproved Retirement Benefits Scheme.

An actuarial valuation of the Group Scheme was carried out as at 5 April 2003. Results of that valuation have been updated to January 2005 by an independent qualified actuary.

As the Group Scheme is closed to new entrants, under the projected unit method the current service cost will increase as a percentage of salaries as its members approach retirement.

In the US, the Group sponsors a defined contribution 401(k) retirement savings plan for all eligible employees who meet minimum age and service requirements. The assets of this plan are held in a separate trust managed by KeyBank and under it, the Group matches 25% of up to the first 6% of employee elective salary deferrals. The Group has also established, in the US, an unfunded, unqualified deferred compensation plan which permits certain management employees to elect annually to defer all or a portion of their remuneration and earn a guaranteed interest rate on the deferred amounts. The plan also provides for a Group matching contribution based on each participant’s annual remuneration deferral. In connection with this plan, the Group has invested in trust owned life insurance policies. In June 2004 the Group introduced a defined contribution plan which replaced the Group Scheme for new UK employees.

Signet Group plc Annual Report & Accounts year ended 29 January 2005

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Notes to the accounts (continued)

	2005		2004		2003
	£m		£m		£m

The Group pension cost for the period comprises:
Charge to operating profit
UK net service cost	(2.9	)	(2.5	)	(2.3	)
US retirement savings plan	(1.8	)	(1.9	)	(1.9	)

	(4.7	)	(4.4	)	(4.2	)
Credit to net interest payable and similar charges
Expected return on Group Scheme assets	6.6		5.3		7.1
Interest on Group Scheme liabilities	(5.4	)	(4.7	)	(4.6	)

	(3.5	)	(3.8	)	(1.7	)

The financial assumptions used by the actuary to calculate the Group Scheme liabilities were:

		2005		2004		2003

Rate of increase in salaries		4.3	%	4.3	%	3.9	%
Rate of increase in deferred pensions during deferment		2.8	%	2.8	%	2.4	%
Rate of increase in pensions in payment⁽¹⁾		2.8	%	2.8	%	2.4	%
Discount rate		5.3	%	5.6	%	5.4	%
Inflation assumption		2.8	%	2.8	%	2.4	%

(1)	For the majority of members.

The assets in the Group Scheme and the expected rates of return (net of administration expenses) were:

	Long-term rate			Long-term rate			Long-term rate
	of return			of return			of return
	expected	Value at		expected	Value at		expected	Value at
	2005	2005		2004	2004		2003	2003
	%	£m		%	£m		%	£m

Equities and property	7.3	74.8		7.5	70.0		7.1	65.4
Bonds	4.7	28.4		4.9	26.3		4.5	15.3
Cash	4.5	3.3		4.0	3.4		3.6	1.5

Total market value of assets		106.5			99.7			82.2
Present value of Group Scheme liabilities		(108.4	)		(97.9	)		(88.9	)

(Deficit)/surplus in the Group Scheme		(1.9	)		1.8			(6.7	)
Related deferred tax asset/(liability)		0.6			(0.6	)		2.0

Net pension (liability)/asset		(1.3	)		1.2			(4.7	)

Analysis of pension costs charged to operating profit

	2005	2004	2003
	£m	£m	£m

Current service cost	2.9	2.5	2.3
Past service cost	–	–	–

Total operating charge	2.9	2.5	2.3

7688

Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005

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Analysis of amounts included in net interest payable and similar charges
	2005		2004		2003
	£m		£m		£m

Expected return on Group Scheme assets	6.6		5.3		7.1
Interest on Group Scheme liabilities	(5.4	)	(4.7	)	(4.6	)

Net return	1.2		0.6		2.5

Analysis of amount recognised in the statement of total recognised gains and losses (“STRGL”)
	2005		2004		2003
	£m		£m		£m

Actual return less expected return on Group Scheme assets	(0.3	)	15.3		(29.0	)
Experienced gains and losses arising on Group Scheme liabilities	–		(3.3	)	–
Changes in assumptions	(5.3	)	(2.8	)	(2.8	)

Actuarial (loss)/gain	(5.6	)	9.2		(31.8	)
Deferred tax	1.7		(2.8	)	9.5

Recognised in STRGL	(3.9	)	6.4		(22.3	)


The movement in the surplus during the year was as follows:
	2005		2004
	£m		£m

Surplus/(deficit) in Group Scheme at beginning of year	1.8		(6.7	)
Current service cost	(2.9	)	(2.5	)
Contributions paid	3.6		1.2
Past service cost	–		–
Interest return	1.2		0.6
Actuarial (loss)/gain	(5.6	)	9.2

(Deficit)/surplus in the Group Scheme at end of year	(1.9	)	1.8


History of experience gains and losses
	2005		2004		2003		2002

Difference between expected and actual return on Group Scheme
assets (£ million)	0.3		15.3		(29.0	)	(19.7	)
Percentage of Group Scheme assets	0%		15%		-35%		-18%
Experience gains and losses on Group Scheme liabilities (£ million)	–		(3.3	)	–		2.1
Percentage of Group Scheme liabilities	0%		-3%		–		3%
Total amount recognised in STRGL – gross (£ million)	(5.6	)	9.2		(31.8	)	(20.4	)
Percentage of Group Scheme liabilities	-5%		9%		-36%		-25%


Signet Group plc Annual Report & Accounts year ended 29 January 2005	89

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Notes to the accounts (continued)

~~20.~~21. Share capital

2004 2003
£m £m

Authorised:
5,929,874,019 Ordinary shares of 0.5p each (2003: 5,929,874,019) 29.6 29.6

Number of shares £m

Allotted, called up and fully paid:
Ordinary shares of 0.5p each
At 1 February 2003 1,713,768,396 8.6
Shares issued to QUEST 226,057 –
Shares issued to ESOT 2,068,812 –
Other share options exercised 10,127,583 –

At 31 January 2004 total allotted, called up and fully paid (2003: £8.6 million) 1,726,190,848 8.6

	2005	2004
	£m	£m

Authorised:
5,929,874,019 Ordinary shares of 0.5p each (2004: 5,929,874,019)	29.6	29.6


	Number of shares	£m

Allotted, called up and fully paid:
Ordinary shares of 0.5p each
At 31 January 2004	1,726,190,848	8.6
Shares issued to QUEST	44,019	–
Shares issued to ESOT	249,485	–
Shares issued to 2004 ESOT	3,053,404	–
Other share options exercised	6,077,396	0.1

At 29 January 2005 total allotted, called up and fully paid	1,735,615,152	8.7

The consideration received in respect of the ~~12.4~~9.4 million shares issued during the year was ~~£6.3~~£4.8 million ~~(2003: £4.3~~(2004: £6.3 million).

The trustee of the QUEST, Signet Group QUEST Limited (a subsidiary of the Company), held ~~110,857~~41,065 shares at ~~1 February 2003.~~31 January 2004. In the year ended 3129 January ~~2004~~2005 the trustee subscribed in cash for ~~132,450~~44,019 shares at ~~75.50p~~113p per share on ~~3 March 2003 and for 93,607 shares at 87.75p per share on 6~~14 June ~~2003. These~~2004. This subscription ~~prices were~~price was the market ~~prices respectively~~price on ~~2 March 2003 and 5~~11 June ~~2003,~~2004, the last business ~~days~~day before the dates on which the respective terms of issue were fixed. These shares were all subscribed for in order to provide shares to satisfy the exercise of options under the Group’s ~~savings related~~savings-related share option scheme for UK employees. In aggregate the subscription monies amounted to ~~£182,140.~~£49,741. In the year ended 3129 January ~~2004~~2005 the trustee transferred ~~981,370~~85,084 shares to holders of ~~savings related~~savings-related options pursuant to the exercise of such options. The trustee held ~~41,065~~nil shares at 3129 January ~~2004~~2005 and ~~35,992~~nil shares at ~~24 March 2004.~~6 April 2005. The aggregate market value of the shares at 3129 January ~~2004~~2005 was £nil (31 January 2004: £0.04 ~~million (1 February 2003: £0.08~~ million). The investment in these shares is recorded as £nil in the Company’s accounts.

~~The~~In the year ended 29 January 2005 the trustee of the ESOT ~~Mourant & Co. Trustees Limited, did not hold any shares at 1 February 2003. In the year ended 31 January 2004 the trustee~~ subscribed in cash for a total of ~~2,068,812~~249,485 shares at an average price of ~~100.00p~~109.94p per share. The subscription prices were the market prices on the last business days before the dates on which the respective terms of issue were fixed and varied between ~~85.25p~~103.00p and ~~103.75p~~114.00p per share. These shares were all subscribed for in order to provide shares to satisfy the exercise of executive share options granted to UK employees. ~~At 31~~In aggregate the subscription monies amounted to £105,000.

In the year ended 29 January ~~2004 and 24 March 2004~~2005 the trustee ~~did not hold any shares.~~of the 2004 ESOT subscribed in cash for a total of 3,053,404 shares at an average price of 112.61p per share. The subscription prices were the market prices on the last business days before the dates on which the respective terms of issue were fixed and varied between 106.25p and 117.25p per share. These shares were all subscribed for in order to provide shares to satisfy the exercise of executive share options granted to US employees. In aggregate the subscription monies amounted to £1,726,499.

On various dates during the year ended 3129 January ~~2004~~2005 a total of ~~10,127,583~~6,077,396 shares were subscribed for in cash by holders of options, at prices between 33.75p and ~~57.00p~~75.25p per share. The subscription prices were the market prices at the various times at which the options were granted. The market prices on the dates of issue varied between ~~73.00p~~102.25p and ~~114.50p~~117.75p and in aggregate the subscription monies amounted to ~~£4,645,381.~~£2,937,537. Details of options in respect of shares are shown in note 27 on page ~~85.~~95.

The trustee of the ESOTs, Mourant & Co. Trustees Limited, did not hold any shares at 31 January 2004. In the year ended 29 January 2005 the trustee subscribed in cash for a total of eight million shares at an average price of 118p per share. These shares were all purchased in the market in order to provide shares to satisfy the exercise of executive share options granted to UK employees. In the year ended 29 January 2005 the trustee transferred 3,389,161 shares to holders of such options. At 29 January 2005 the trustee held 4,610,839 shares and 4,443,869 at 6 April 2005.

Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005

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~~Notes to the accounts~~ 22. Reserves~~(continued)~~

~~21.~~

~~Reserves~~

Share

premium

Revaluation

Special

Profit and

premium

Revaluation

Special

Profit and

account

reserve

reserves

loss account

account

reserve

reserves

loss account

£m

At 1 February 2003 – as previously stated

53.9

3.1

101.7

529.2

At 31 January 2004 – as previously stated

60.7

3.1

142.2

513.0

Prior year adjustment (note 17)

–

(18.1

)

–

(52.7

)

At 1 February 2003

53.9

3.1

101.7

511.1

At 31 January 2004

60.7

3.1

142.2

460.3

Retained profit attributable to equity shareholders

–

94.0

–

89.2

Shares issued to QUEST/ESOT

1.8

–

(1.8

)

Shares issued to QUEST/ESOTs

2.5

–

(2.5

)

Exercise of share options

5.0

–

4.8

–

1.6

Actuarial gain recognised

–

6.4

Purchase of own shares

–

(9.5

)

Transfer on property disposals

–

1.2

–

Actuarial loss recognised

–

(3.9

)

Translation differences

–

40.5

(96.7

)

–

13.7

(33.0

)

At 31 January 2004

60.7

3.1

142.2

513.0

At 29 January 2005

68.0

4.3

155.9

502.2

The revaluation reserve represents the unrealised surplus arising from revaluing freehold and long leasehold properties.

Exchange gains of £0.3 million (2004: £1.6 million ~~(2003: £1.7 million gains)~~gain) on foreign currency loans have been offset in reserves against exchange movements on the net investment in overseas subsidiary undertakings.

Following the 1997 capital reduction, the holding company, Signet Group plc, is permitted to make distributions (including dividends, share buy-backs and other transactions classed as distributions) out of profits earned after 2 August 1997, the end of its 1997/98 half year. The undertakings given to the High Court at the time of the capital reduction included the requirement that the Company transfer to a new special reserve any dividend paid by a subsidiary from profits earned prior to that date. The new special reserve is, for as long as the Company is a public company, treated as a non-distributable reserve for the purposes of section 264 of the Companies Act 1985.

In accordance with undertakings given by the Company to the High Court in connection with previous reductions of the share premium account, an earlier special reserve is available to write-off existing goodwill resulting from acquisitions and otherwise only for purposes permitted in the case of the share premium account. Under English law, dividends can only be paid out of profits available for distribution (generally defined as accumulated realised profits less accumulated realised losses less net unrealised losses) and not out of share capital or share premium (generally equivalent in US terms to paid-in surplus).

At 3129 January ~~2004,~~2005, after taking into account the recommended final dividend of ~~2.16p~~2.625p per share, the holding company had distributable reserves of ~~£114.8~~£116.0 million ~~(1 February 2003: £30.9~~(31 January 2004: £114.8 million). There are additional potentially distributable reserves held in subsidiary companies.

Exchange differences arising on the retranslation of purchased goodwill have been written off against the profit and loss account reserve. This amount has been transferred to the special reserve where the initial purchased goodwill had previously been eliminated. Cumulative goodwill write-offs at underlying foreign currency amounts included in the special reserve amount to ~~£569.8~~£556.1 million ~~(1 February 2003: £610.3~~(31 January 2004: £569.8 million).

The Group’s total recognised gains and losses differ from the net profit for the period (as set out in the Group profit and loss account) in respect of foreign currency translation adjustments amounting to an aggregate loss of ~~£56.2~~£19.3 million for the period ended 3129 January ~~2004 (2003: £79.8~~2005 (2004: £50.5 million loss; ~~2002: £15.1~~2003: £72.4 million ~~gain)~~loss). The foreign currency translation adjustments are set out in the statement of total recognised gains and losses.

Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005

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Notes to the accounts (continued)

The cumulative exchange gains and losses on the translation of foreign currency financial statements into pounds sterling are set out in the table below:

	2004		2003		2002	2005		2004		2003
	£m		£m		£m	£m		£m		£m

Balance at end of previous period	(51.8	)	28.0		12.9	(100.2	)	(49.7	)	22.7
Movement in period	(56.2	)	(79.8	)	15.1	(19.3	)	(50.5	)	(72.4	)


Balance at end of period	(108.0	)	(51.8	)	28.0	(119.5	)	(100.2	)	(49.7	)

The cumulative adjustments to property valuations are ~~£6.9~~£8.1 million ~~(2003:~~(2004: £6.9 million; ~~2002:~~2003: £6.9 million). The tax effect of the cumulative adjustments to property valuations is £nil.

~~22. Pension schemes~~23. Commitments
The Group ~~operates one defined benefit pension scheme in the UK, the Group Scheme, for all eligible employees who meet minimum age~~occupies certain properties and ~~service requirements.~~holds plant, machinery and vehicles under operating leases. The assets of the Group Scheme, which is a funded scheme, are held in a separate trustee administered fund which is independently managed. The trustees of the Group Scheme during the year were Walker Boyd, John Gillum, John Hartwrightproperty leases usually include renewal options and The Law Debenture Pension Trust Corporation p.l.c. (independent trustee). Contributions to the Group Scheme, which are assessed in accordance with the advice of independent qualified actuaries using the attained age method of valuation, are charged to the consolidated profitescalation clauses and loss account so as to spread the cost of pensions over participating employees’ working lives with the Group. Where appropriate, supplementary pension and life assurance for UK directors and senior executives is provided through the Signet Group Funded Unapproved Retirement Benefits Scheme.

An actuarial valuation of the Group Scheme was carried out as at 5 April 2003. The market value of the Group Scheme’s assets at that date was £82.2 million, a deficit of £6.7 million on the Group Scheme’s accrued liabilities. As a result of the valuation, the Group has recommenced contributions to the Group Scheme and in 2003/04 this amounted to £1.2 million.

In the US, the Group sponsors a defined contribution 401(k) retirement savings plan for all eligible employees who meet minimum age and service requirements. The assets of this plan are held in a separate trust managed by KeyBank and under it, the Group matches 25% of up to the first 6% of employee elective salary deferrals. The Group has also established, in the US an unfunded, unqualified deferred compensation plan which permits certain management employees to elect annually to defer all or a portion of their remuneration and earn a guaranteed interest rate on the deferred amounts. The plan also providesgenerally provide for ~~a Group matching contribution~~contingent rentals based on ~~each participant’s annual remuneration deferral. In connection with this plan, the Group has invested in trust owned life insurance policies.~~

2004 2003 2002
£m £m £m

The Group pension cost for the period comprises:
Charge to operating profit
UK net service cost (2.5 ) (2.3 ) (1.9 )
US retirement savings plan (1.9 ) (1.9 ) (1.6 )

(4.4 ) (4.2 ) (3.5 )
Credit to net interest payable and similar charges
Expected return on Group Scheme assets 5.3 7.1 7.5
Interest on Group Scheme liabilities (4.7 ) (4.6 ) (4.6 )

(3.8 ) (1.7 ) (0.6 )

~~Signet Group plc~~ ~~Annual Report & Accounts year ended 31 January 2004~~

~~Back to Contents~~

~~Notes to the accounts~~ ~~(continued)~~a percentage of lease defined revenues.

~~The financial assumptions used by the actuary to calculate the Group Scheme liabilities were:~~

2004 2003 2002

Rate of increase in salaries 4.3% 3.9% 3.9%
Rate of increase in deferred pensions during deferment 2.8% 2.4% 2.4%
Rate of increase in pensions in payment⁽¹⁾ 2.8% 2.4% 2.4%
Discount rate 5.6% 5.4% 5.6%
Inflation assumption 2.8% 2.4% 2.4%

~~(1)~~

~~For the majority of members.~~

~~The assets in the Group Scheme and the expected rates of return (net of administration expenses) were:~~

Long-term Long-term Long-term
rate of return rate of return rate of return
expected Value at expected Value at expected Value at
2004 2004 2003 2003 2002 2002
% £m % £m % £m

Equities and property 7.5 70.0 7.1 65.4 7.3 85.3
Bonds 4.9 26.3 4.5 15.3 4.7 17.4
Cash 4.0 3.4 3.6 1.5 3.8 5.4

Total market value of assets 99.7 82.2 108.1
Present value of Group Scheme liabilities (97.9 ) (88.9 ) (83.2 )

Surplus/(deficit) in the Group Scheme 1.8 (6.7 ) 24.9
Related deferred tax (liability)/asset (0.6 ) 2.0 (7.5 )

Net pension asset/(liability) 1.2 (4.7 ) 17.4

~~Analysis of pension costs charged to operating profit~~

2004 2003 2002
£m £m £m

Current service cost 2.5 2.3 1.9
Past service cost – – –

Total operating charge 2.5 2.3 1.9

~~Analysis of amounts included in net interest payable and similar charges~~

2004 2003 2002
£m £m £m

Expected return on Group Scheme assets 5.3 7.1 7.5
Interest on Group Scheme liabilities (4.7 ) (4.6 ) (4.6 )

Net return 0.6 2.5 2.9

80	~~Signet Group plc~~ ~~Annual Report & Accounts year ended 31 January 2004~~

~~Back to Contents~~

~~Analysis of amount recognised in the statement of total recognised gains and losses (“STRGL”)~~

2004 2003 2002
£m £m £m

Actual return less expected return on Group Scheme assets 15.3 (29.0 ) (19.7 )
Experience gains and losses arising on Group Scheme liabilities (3.3 ) – 2.1
Changes in assumptions (2.8 ) (2.8 ) (2.8 )

Actuarial gain/(loss) 9.2 (31.8 ) (20.4 )
Deferred tax (2.8 ) 9.5 6.1

Recognised in STRGL 6.4 (22.3 ) (14.3 )

~~The movement in the surplus/(deficit) during the year was as follows:~~

2004 2003
£m £m

(Deficit)/surplus in Group Scheme at beginning of year (6.7 ) 24.9
Current service cost (2.5 ) (2.3 )
Contributions paid 1.2 –
Past service cost – –
Interest return 0.6 2.5
Actuarial gain/(loss) 9.2 (31.8 )

Surplus/(deficit) in the Group Scheme at end of year 1.8 (6.7 )

~~History of experience gains and losses~~

2004 2003 2002

Difference between expected and actual return on Group Scheme assets (£ million) 15.3 (29.0 ) (19.7 )
Percentage of Group Scheme assets 15% -35% -18%
Experience gains and losses on Group Scheme liabilities (£ million) (3.3 ) – 2.1
Percentage of Group Scheme liabilities -3% – 3%
Total amount recognised in statement of total recognised gains and losses – gross (£ million) 9.2 (31.8 ) (20.4 )
Percentage of Group Scheme liabilities 9% -36% -25%

~~Signet Group plc~~ ~~Annual Report & Accounts year ended 31 January 2004~~

~~Back to Contents~~

~~Notes to the accounts~~ ~~(continued)~~

~~23.~~	~~Commitments~~
The Group occupies certain properties and holds plant, machinery and vehicles under operating leases. The property leases usually include renewal options and escalation clauses and in the US generally provide for contingent rentals based on a percentage of lease defined revenues.

The minimum payments in respect of operating leases for the 52 weeks to 2928 January ~~2005~~2006 to which the Group was committed as at 3129 January ~~2004~~2005 were as follows:

	Plant,				Plant
	machinery	Leasehold			machinery		Leasehold
	& vehicles	premises		Total	& vehicles		premises		Total
	£m	£m			£m		£m

Operating leases which expire:
Within one year	0.3		4.9		5.2	0.2		4.7		4.9
In the second to fifth years	1.9	25.7		27.6	1.8		30.9		32.7
Over five years	–	87.6		87.6	–		90.3		90.3

At 29 January 2005					2.0		125.9		127.9

At 31 January 2004	2.2	118.2		120.4	2.2		118.2		120.4

At 1 February 2003	2.2	117.0		119.2

The future minimum payments for operating leases having initial or non-cancellable terms in excess of one year are as follows:

	£m	£m

Period ending on or about 31 January:
2005	120.4
2006	114.9	127.9
2007	110.0	122.4
2008	104.2	116.6
2009	99.0	111.3
2010		102.6
Thereafter	563.9	565.0

	1,112.4	1,145.8

Capital commitments at 3129 January ~~2004~~2005 for which no provision has been made in these consolidated accounts were as follows:

2004 2003
£m £m

Contracted 16.8 9.8

	2005	2004
	£m	£m

Contracted	16.1	16.8


*8292*	Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005

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~~24.~~	~~Contingent liabilities~~
The Group is not party to any legal proceedings considered to be material to profit, financial position or cash flow including any bankruptcy, receivership or similar proceedings involving the Group or any of its significant subsidiaries. No director, officer or affiliate of the Group or any associate of any such director, officer or affiliate has been a party adverse to the Group or any of its subsidiaries or has a material interest adverse to the Group or any of its subsidiaries.

The Group has assigned or sub-let UK property leases in the normal course of business. Should the assignees or sub-tenants fail to fulfil any obligations in respect of these leases, the Group may be liable for those defaults. The number of such claims arising to date has been small, and the liability, which is charged to the profit and loss account as it arises, has not been material.

The Group’s US operation gives its customers the option of purchasing a lifetime service plan on most of the products sold. Such service plans cover the costs of repair, subject to certain terms and conditions. An accrual has been made to cover the cost of future expected claims under plans sold up to the balance sheet date.

~~25.~~	~~Notes to the consolidated cash flow statement~~
~~(a)~~	~~Reconciliation of operating profit to operating cash flows~~

2004 2003 ⁽¹⁾ 2002 ⁽¹⁾
£m £m £m
Operating profit 222.3 213.9 198.8
Depreciation and amortisation charges 40.4 37.8 34.7
Increase in stocks⁽²⁾ (44.9 ) (44.9 ) (30.0 )
Increase in debtors⁽²⁾ (31.1 ) (26.5 ) (2.2 )
Increase/(decrease) in creditors⁽²⁾ 18.2 1.4 (13.2 )
(Decrease)/increase in other provisions⁽²⁾ (1.1 ) 0.5 (0.1 )
Net cash inflow from operating activities 203.8 182.2 188.0

24. Contingent liabilities
The Group is not party to any legal proceedings considered to be material to profit, financial position or cash flow including any bankruptcy, receivership or similar proceedings involving the Group or any of its significant subsidiaries. No director, officer or affiliate of the Group or any associate of any such director, officer or affiliate has been a party adverse to the Group or any of its subsidiaries or has a material interest adverse to the Group or any of its subsidiaries.

The Group has assigned or sub-let UK property leases in the normal course of business. Should the assignees or sub-tenants fail to fulfil any obligations in respect of these leases, the Group may be liable for those defaults. The number of such claims arising to date has been small, and the liability, which is charged to the profit and loss account as it arises, has not been material.

The Group’s US operation gives its customers the option of purchasing a lifetime service plan on most of the products sold. Such service plans cover the costs of repair, subject to certain terms and conditions.

25.Notes to the consolidated cash flow statement
(a) Reconciliation of operating profit to operating cash flows

	2005		2004⁽¹⁾		2003⁽¹⁾
	£m		£m		£m

Operating profit	218.9		210.2		199.9
Depreciation and amortisation charges	42.3		40.4		37.8
Increase in stocks⁽²⁾	(52.3	)	(44.9	)	(44.9	)
Increase in debtors⁽²⁾	(44.5	)	(31.1	)	(26.5	)
Increase in creditors⁽²⁾	8.8		30.3		15.4
(Decrease)/increase in other provisions⁽²⁾	(0.6	)	(1.1	)	0.5

Net cash inflow from operating activities	172.6		203.8		182.2

(1)	Restated for the implementation in 2004/05 of the amendment to FRS 175, ’Application Note G – ~~‘Retirement Benefits’~~Revenue Recognition’ (see note 17).
(2)	The change in each year is stated after eliminating the impact of foreign exchange translation between opening and closing balance sheet dates.

(b) Analysis of net debt

	At 31 January				Exchange		Other		At 29 January
	2004		Cash flow		movement		movements		2005
	£m		£m		£m		£m		£m

Cash at bank and in hand	0.6		–		–		–		0.6
Bank overdrafts	(51.1	)	6.4		1.9		–		(42.8	)

	(50.5	)	6.4		1.9		–		(42.2	)

Debt due after more than one year	(146.2	)	–		5.5		7.9		(132.8	)
Debt due within one year	(10.6	)	8.1		0.1		(7.9	)	(10.3	)
Bank deposits	127.4		(24.5	)	(1.1	)	–		101.8

	(29.4	)	(16.4	)	4.5		–		(41.3	)

Total	(79.9	)	(10.0	)	6.4		–		(83.5	)


~~(b)~~	~~Analysis of net debt~~

At At
1 February Cash Exchange Other 31 January
2003 flow movement movements 2004
£m £m £m £m £m
Cash at bank and in hand 0.6 – – – 0.6
Bank overdrafts (42.9 ) (11.8 ) 3.6 – (51.1 )
(42.3 ) (11.8 ) 3.6 – (50.5 )
Debt due after more than one year (174.0 ) – 17.2 10.6 (146.2 )
Debt due within one year (12.4 ) 12.1 0.3 (10.6 ) (10.6 )
Bank deposits 88.6 42.4 (3.6 ) – 127.4
(97.8 ) 54.5 13.9 – (29.4 )
Total (140.1 ) 42.7 17.5 – (79.9 )


	Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005	*8393*

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Notes to the accounts (continued)

26. Financial instruments
The Group may enter into various interest rate protection agreements, particularly interest rate caps and floors, in order to limit the impact of movements in interest rates on its borrowings. It is the policy of the Group to enter into interest rate protection agreements on at least 75% of its forecast US dollar borrowings. The Group does not hold or issue derivative financial instruments for the purpose of trading those instruments. Details of borrowings are shown in note 16 on page 84.

The weighted average interest rate of the fixed rate financial liabilities is 5.5%. The weighted average period for which interest rates on the fixed rate financial liabilities are fixed is 1.7 months. There are no interest-free financial liabilities.

~~26.~~		~~Financial instruments~~
The Group may enter into various interest rate protection agreements, particularly interest rate caps and floors, in order to limit the impact of movements in interest rates on its borrowings. It is the policy of the Group to enter into interest rate protection agreements on at least 75% of its forecast US dollar borrowings. The Group does not hold or issue derivative financial instruments for the purpose of trading those instruments. Details of borrowings are shown in note 16 on page 73.

The weighted average interest rate of the fixed rate financial liabilities is 5.66%. The weighted average period for which interest rates on the fixed rate financial liabilities are fixed is 30 months. There are no interest-free financial liabilities.

The Group also enters into the forward purchase of foreign currencies, principally the US dollar and the Euro, in order to limit the impact of movements in foreign exchange rates on its forecast foreign currency purchases. It is the policy of the Group to ensure that identified foreign currency exposures are hedged to at least the following levels:

100% – for exposures of less than three months;

75% – for exposures of between three and six months; and

50% – for exposures of between six and 12 months.

The Group also enters into the forward purchase of foreign currencies, principally the US dollar and the Euro, in order to limit the impact of movements in foreign exchange rates on its forecast foreign currency purchases. It is the policy of the Group to ensure that identified foreign currency exposures are hedged to at least the following levels:

100% – for exposures of less than three months;
75% – for exposures of between three and six months; and
50% – for exposures of between six and 12 months.

The Group also enters into forward purchase contracts for commodities in order to ensure that values of assets and revenue protection should not be unnecessarily exposed to significant movements in the price of underlying precious metal raw material.

The overall amount and duration of such forward commodity contracts are dependent on the underlying buying needs of the operating companies and prevailing commodity prices.

Fair value of financial instruments
These financial instruments involve varying degrees of off-balance sheet market risk whereby changes in interest rates, foreign currency exchange rates or market values of the underlying financial instruments may result in changes in the value of the financial instrument. The Group is exposed to credit-related losses in the event of non-performance by counterparties to financial instruments. It is the policy of the Group only to transact such financial instruments with financial institutions rated ‘A’ or higher, to ensure that the potential for credit-related losses is minimised. Concentrations of credit risk exist due to the Group operating customer receivables programmes in the US as part of its trading strategy. Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgement, and therefore cannot be determined precisely. Changes in assumptions could significantly affect the estimates. The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value.

Forward purchases of foreign currencies and commodities
The fair value of outstanding forward purchases of foreign currencies was estimated to be a liability of ~~£2.9~~£0.8 million at 3129 January ~~2004 (1 February 2003: £1.4~~2005 (31 January 2004: £2.9 million liability). The net carrying amount of these forward purchases at 3129 January ~~2004~~2005 was £nil ~~(1 February 2003:~~(31 January 2004: £nil). The fair value of outstanding forward purchases of commodities was estimated to be a liability of £0.02 million on 29 January 2005 (31 January 2004: £2.1 million ~~on 31 January 2004 (1 February 2003: £nil)~~liability). The net carrying amount of these forward purchases at 3129 January ~~2004~~2005 was £nil ~~(1 February 2003:~~(31 January 2004: £nil). Fair values are calculated with reference to the contracted commodity prices or foreign currency exchange rates and those prevailing at the balance sheet date.

Cash at bank and in hand, and trade accounts payable
The carrying amount is considered to approximate to fair value because of the short maturity of these instruments.

Accounts receivable
Accounts receivable primarily represent credit card receivables. The carrying value of credit card receivables is considered to approximate to fair value because of their short-term nature and the interest rates being used approximating current market origination rates. Other accounts receivables’ carrying amounts are considered to approximate to fair value because of ~~the~~their short ~~maturity of these instruments.~~maturity.


94	Signet Group plc Annual Report & Accounts year ended 29 January 2005

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Debt
The fair value of the Group’s debt is considered to approximate to carrying value at 3129 January ~~2004~~2005 since the rates associated with the debt at that time are consistent with the facilities agreements entered into in August 2001 and January 2002. The rates in the facilities agreements are deemed to be current market rates.


84	~~Signet Group plc~~ ~~Annual Report & Accounts year ended 31 January 2004~~

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Currency profile
The Group’s net debt includes the following balances denominated in foreign currency:

	2004		2003		2005		2004
	£m		£m			£m

US dollars – cash	67.4			43.4		62.8		67.4
US dollars – debt	(192.9	)	(219.9	)	(180.4	)	(192.9	)

Interest rate protection agreements
No interest rate protection agreements were in place at 3129 January ~~2004~~2005 because more than 75% of the Group’s forecast US dollar borrowings were covered by fixed rate borrowings.

27. Share options
At 29 January 2005 options in respect of 42,602,756 shares were outstanding (including 12,009,124 for directors and officers of the Group) under the Company’s executive share option schemes and sharesave schemes as follows:

Date granted	Number	Exercise
	of shares	price

October 1997	237,036	33.75p
October 1997	80,734	$0.55
April 1998	570,868	43.25p
April 1998	88,704	$0.72
April 1999	2,329,410	49.75p
April 1999	273,013	$0.80
May 2000	1,425,228	57.00p
May 2000	411,036	$0.87
May 2001	1,347,394	75.25p
May 2001	1,406,310	$1.08
October 2001	248,000	62.50p
November 2001⁽¹⁾	379,240	50.00p
November 2001⁽¹⁾	12,723	50.00p
April 2002	1,743,098	120.00p
April 2002	4,358,638	$1.72
November 2002⁽¹⁾	50,970	$1.10
November 2002⁽¹⁾	2,286,958	67.00p
November 2002⁽¹⁾	25,723	67.00p
April 2003	2,723,037	82.25p
April 2003	4,541,986	$1.30
July 2003	397,435	97.50p
July 2003	4,059,156	$1.59
November 2003⁽¹⁾	646,020	$1.60
November 2003⁽¹⁾	1,020,777	90.00p
November 2003⁽¹⁾	8,141	90.00p
April 2004	6,486,983	$2.05
April 2004	2,672,045	111.25p
September 2004	108,489	106.00p
November 2004⁽¹⁾	898,350	$1.64
November 2004⁽¹⁾	1,751,544	86.25p
November 2004⁽¹⁾	13,710	86.25p

	42,602,756

~~27.~~(1)	~~Share options~~
At 31 January 2004 options in respect of 44,717,684 shares were outstanding (including 15,072,944 for directors and officers of the Group) under the Company’s executive share option schemes and sharesave schemes as follows:

Number
Date granted of shares Exercise price

October 1997 1,266,666 33.75 p
October 1997 83,598 $0.55
April 1998 2,518,846 43.25 p
April 1998 429,924 $0.72
April 1999 2,502,214 49.75 p
April 1999 1,610,223 $0.80
May 2000 1,551,597 57.00 p
May 2000 3,091,465 $0.87
November 2000⁽¹⁾ 206,642 42.00 p
November 2000⁽¹⁾ 4,085 42.00 p
May 2001 1,835,366 75.25 p
May 2001 3,699,180 $1.08
October 2001 248,000 62.50 p
November 2001⁽¹⁾ 85,110 $0.77
November 2001⁽¹⁾ 2,114,016 50.00 p
November 2001⁽¹⁾ 12,723 50.00 p
April 2002 1,784,760 120.00 p
April 2002 4,413,193 $1.72
November 2002⁽¹⁾ 746,460 $1.10
November 2002⁽¹⁾ 2,559,685 67.00 p
November 2002⁽¹⁾ 25,723 67.00 p
April 2003 2,826,377 82.25 p
April 2003 4,626,082 $1.30
July 2003 397,435 97.50 p
July 2003 4,059,156 $1.59
November 2003⁽¹⁾ 778,320 $1.60
November 2003⁽¹⁾ 1,226,802 90.00 p
November 2003⁽¹⁾ 14,036 90.00 p

44,717,684

~~(1)~~

The Company has taken advantage of the exception currently permitted under UITF 17 not to take account of the discounts on market price under the sharesave schemes as a charge to the profit and loss account.


	Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005	*8595*

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Notes to the accounts (continued)

The Company’s share option schemes comprise four executive share option schemes (the “1993 Scheme”, the “2003 Approved Plan”, the ~~“2003~~‘’2003 International ~~Plan”~~Plan’’ and the “2003 US Plan”, together the “Executive Schemes”) and three all-employee share option schemes (a savings related share option scheme for the UK employees (the “Sharesave Scheme”), a US Section 423 Plan (the “Employee Stock Savings Plan”) and a savings related share option scheme for employees in the Republic of Ireland (the ~~“Irish~~‘’Irish Sharesave Scheme”), together the “Sharesave Schemes”).

Options granted under the Executive Schemes are generally only exercisable between three and ten years from the date of grant. Performance conditions are attached to all the executive options granted under the Executive Schemes. No further options may be granted under the 1993 Scheme.

Options granted under the Sharesave Scheme and the Irish Sharesave Scheme are generally only exercisable between 36 and 42 months of the commencement of the relevant savings contract. Options granted under the Employee Stock Savings Plan are generally only exercisable between 24 and 27 months of the grant date.

The Executive Schemes and Sharesave Schemes may be operated in conjunction with one or more employee share ownership trusts (the ~~“ESOT”~~“ESOT’’, “2004 ESOT” or “QUEST”) which may acquire shares in the Company for the purposes of satisfying the exercise of options.

Executive directors and some senior executives have also been granted awards under the Signet Group plc 2000 Long Term Incentive Plan (“~~2000~~ LTIP”). The vesting of these awards and the extent of vesting depends on the achievement of specified performance conditions. On vesting, 50% of an award is to be made in cash and the other 50% by the grant of an option to acquire shares for a nominal amount. In the event of an award vesting the number of shares to be placed under option would be calculated by dividing 50% of the value of the vested award by the middle market share price on the London Stock Exchange on the dealing day prior to the grant of the award. As the final value of an award cannot be calculated until it vests, the total number of shares over which options might eventually be granted is at present not known and therefore not shown in the above table. The ~~2000~~ LTIP operates in conjunction with an employee share ownership trust which may be funded by the Group to acquire shares in the Company for the purposes of meeting the Company’s obligation to provide shares on the exercise of options.

Certain provisions of all the share option schemes may be amended by the Board, but certain basic provisions (and in particular most of the limitations on individual participation, the numbers of shares and the percentage of share capital that may be issued thereunder) cannot be altered to the advantage of the participants except with the approval of the shareholders of the Company or in accordance with the adjustment provisions in the schemes.

The following table summarises the status of rights granted under the Company’s share option schemes at 29 January 2005, 31 January 2004 and 1 February 2003, ~~and 2 February 2002,~~ and changes during the years ended on those dates. For the reason explained above the total number of shares which might be placed under option under the ~~2000~~ LTIP is not known.

Number of shares (million)

2004 2003 2002

Outstanding at beginning of period (at prices from 33.75p to 120.00p) 43.9 43.0 59.9
Granted at 82.25p, 90.00p, 97.50p, $1.31, $1.59 and $1.60
(2003: 120.00p, 67.00p, $1.72 and $1.10) 14.0 10.4 10.0
Exercised (including through QUEST and ESOT) (11.8 ) (7.7 ) (23.7 )
Lapsed or forfeited (1.4 ) (1.8 ) (3.2 )

44.7 43.9 43.0

	Number of shares (million)

	2005		2004		2003

Outstanding at beginning of period (at prices from 33.75p to 120.00p)	44.7		43.9		43.0
Granted at 86.25p, 106.00p, 111.25p, $1.64 and $2.05 (2004: 82.25p, 90.00p,
97.50p, $1.31, $1.59 and $1.60)	12.1		14.0		10.4
Exercised (including through QUEST, ESOT and 2004 ESOT)	(12.9	)	(11.8	)	(7.7	)
Lapsed or forfeited	(1.3	)	(1.4	)	(1.8	)

	42.6		44.7		43.9

8696

Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005

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Share ~~Scheme~~scheme limits
The Executive Schemes are subject to the following limits on the number of shares that may be issued:

(a)	the maximum number of shares that have been or may be issued pursuant to options granted under the Executive Schemes and any other discretionary share option scheme adopted by the Company may not exceed 5% of the shares from time to time in issue in any ten year period;

(b)	the maximum number of shares that have been or may be issued pursuant to options granted under the Executive Schemes and any other employees’ share scheme adopted by the Company may not exceed 10% of the shares from time to time in issue in any ten year period; and

(c)	a maximum of 171,376,839 shares (representing 10% of the issued share capital on 8 July 2003) may be issued pursuant to incentive options granted under the US Plan (the equivalent 10% limit for incentive stock options under the US section of the 1993 Scheme as at 8 June 2000 was 167,996,844 shares).

In any ten year period not more than 10% of the issued share capital of the Company from time to time may in aggregate be issued or issuable pursuant to options granted under the Sharesave Schemes or any other employees’ share schemes adopted by the Company.

2000 LTIP limits
The number of shares which may be issued or issuable pursuant to the ~~2000~~ LTIP (including to the ESOT and 2004 ESOT), when aggregated with any shares issued or issuable by the Company in the preceding ten years under any employees’ share scheme, participation in which is at the discretion of the Board, is limited to 5% of the Company’s issued share capital from time to time. The number of shares which may be issued or issuable pursuant to the ~~2000~~ LTIP (including to the ESOT and 2004 ESOT), when aggregated with all shares issued or issuable by the Company in the preceding ten years under any other employees’ share scheme, is limited to 10% of the Company’s issued share capital from time to time.

Outstanding options
The following table summarises certain information concerning options outstanding under the Company’s share option schemes as at 3129 January ~~2004:~~2005:

Outstanding options

Weighted

average

Number of

Range of

exercise

Range of

shares issuable

exercise prices

prices

expiration

upon exercise

per share

dates

Number of

Weighted

shares

Range of

average

Range of

issuable

exercise prices

expiration

upon exercise

per share

dates

1993 Scheme

32,487,491

33.75p – 120.00p

66.59

9/2007 – 4/2013

21,784,492

33.75p – 120.00p

73.40p

10/2007 – 4/2013

$0.55 – $1.72

9/2007 – 4/2013

$0.55 – $1.72

$1.40

10/2007 – 4/2013

2003 Approved Plan

–

474,958

106.00p – 111.25p

110.94p

4/2014 – 9/2014

2003 International Plan

397,435

97.50p

97.50

7/2013

2,703,011

97.50p – 111.25p

109.07p

7/2013 – 9/2014

2003 US Plan

4,059,156

$1.59

7/2013

10,546,139

$1.59 – $2.05

$1.87

7/2013 – 4/2014

Sharesave Scheme

6,107,145

42.00p – 90.00p

64.89

6/2004 – 6/2007

5,438,519

50.00p – 90.00p

76.33p

6/2005 – 6/2008

Employee Stock Savings Plan

1,609,890

$0.77 – $1.60

$1.32

1/2003 – 1/2006

1,595,340

$1.10 – $1.64

$1.61

1/2004 – 1/2007

Irish Sharesave Scheme

56,567

42.00p – 90.00p

67.08

6/2004 – 6/2007

60,297

50.00p – 90.00p

70.90p

6/2005 – 6/2008

Performance criteria

(i) Executive share option schemes
– UK executives
For UK executives the personal performance of participants will be assessed on each occasion that share option grants take place. Grants will be subject to a minimum required annual rate of compound growth in earnings per share above inflation of 3%.

Performance will be measured over three years from the start of the financial year in which the award is made, and may then be measured from the same start point to the end of the fourth and fifth years if not previously satisfied.

Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005

8797

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Notes to the accounts (continued)

– US executives
For US executives there is a pre-grant test based on both personal and corporate performance. In addition there is a post-grant exercise condition that annual compound growth in earnings per share will be more than 3% above inflation. The post-grant performance condition will be measured over three years from the start of the financial year in which the award is made, and may then be measured from the same start point to the end of the fourth and fifth years if not previously satisfied.

(ii) Long term incentive plan
Awards under the plan are subject to the fulfilment of minimum performance conditions set at the time of the award as to:

• compound annual profit growth in the profit before tax of the Group using a constant exchange rate or, as in the case of the Chief Executive of the UK division, the operating profit of the relevant division as appropriate (“Profit Growth”)
• the ROCE of the Group or relevant division as appropriate.

in each case over a fixed period of three successive financial years starting with the one in which the award was made. Nothing is payable under the award unless both minimum performance conditions are achieved. The minimum Profit Growth is set at threshold level after taking account of inflation. The conditions were selected to ensure that awards would only vest provided that growth in profits exceeded the rate of inflation and that the business’s targeted ROCE is achieved.

Fixed share option schemes
The Company has three fixed option schemes, which are the Sharesave Schemes.

A summary of the status of the Company’s fixed share option schemes at 29 January 2005, 31 January 2004 and 1 February 2003 ~~and 2 February 2002~~ and changes during the years ended on those dates is presented below:

	31 January 2004			1 February 2003				2 February 2002				29 January 2005				31 January 2004				1 February 2003

Fixed options	Number of shares		Weighted average exercise price			Weighted				Weighted
						average
				Number		exercise		Number		exercise
										Weighted					Weighted				Weighted
														average				average				average
												Number of		exercise		Number of		exercise		Number of		exercise
Fixed options	Number of shares		Weighted average exercise price	of shares				price				of shares		price		shares		price		shares		price		shares	price

				million	pence			million	pence		million			pence			million		pence		million		pence

Outstanding at beginning of period	8.4		56	8.0			44		12.5			32				7.8		67		8.4		56		8.0	44
Granted	2.0		89	3.8			67		3.5			51				2.7		86		2.0		89		3.8	67
Exercised	(1.8	)	41	(2.6	)	36		(6.2	)	24		(2.6	)	51		(1.8	)	41		(2.6	)	36
Lapsed	–		–	–		–		(0.3	)	97		–		–		–		–		–		–
Forfeited	(0.8	)	57	(0.8	)	42		(1.5	)	33		(0.8	)	73		(0.8	)	57		(0.8	)	42

Outstanding at end of period	7.8		67	8.4		56		8.0		44		7.1		78		7.8		67		8.4		56

Options exercisable at end of period	0.2		42	0.4		40		0.6		21		0.4		51		0.2		42		0.4		40

The following table summarises the information about fixed stock options outstanding at 3129 January ~~2004:~~2005:

Range of exercise prices Weighted
average Weighted
remaining average
Number contractual exercise
of shares life price

million years pence

1p to 45p 0.3 0.2 42
46p to 90p 7.5 1.8 68

1p to 90p 7.8 1.7 67

		Weighted
		average	Weighted
		remaining	average
	Number	contractual	exercise
Range of exercise prices	of shares	life	price

	million	years	pence

50p – 80p	2.8	0.6	64
81p – 90p	4.3	3.3	116

50p – 90p	7.1	2.2	96

8898

Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005

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Performance-based share option schemes
In addition to the ~~2000~~ LTIP, the Company has four performance-based share option schemes (the Executive Schemes).

A summary of the status of the Company’s ~~performance based~~performance-based shares options at 29 January 2005, 31 January 2004 and 1 February 2003 ~~and 2 February 2002~~ and changes during the years ended on those dates is presented below:

	31 January 2004			1 February 2003				2 February 2002			29 January 2005			31 January 2004			1 February 2003

			Weighted				Weighted			Weighted			Weighted			Weighted			Weighted
			average				average				average			average			average
	Number		exercise		Number		exercise	Number		exercise	Number of		exercise	Number of		exercise	Number of		exercise
Performance-based options	of shares		price		of shares		price	of shares		price	shares		price	shares		price	shares		price

	million		pence		million		pence		million		pence		million	pence		million	pence		million	pence

Outstanding at beginning of period	35.5		62		35.0		56	47.4		46	36.9		69	35.5		62	35.0		56
Granted	12.0		80		6.6		110	6.5		75	9.4		109	12.0		80	6.6		110
Exercised	(10.0	)	44		(5.1	)	45	(17.5	)	39	(10.3	)	47	(10.0	)	44	(5.1	)	45
Lapsed	–		–		–		–	–		–	–		–	–		–	–		–
Forfeited	(0.6	)	65		(1.0	)	87	(1.4	)	54	(0.5	)	87	(0.6	)	65	(1.0	)	87


Outstanding at end of period	36.9		69		35.5		62	35.0		56	35.5		85	36.9		69	35.5		62

Options exercisable at end of period	13.1		46		15.1		45	10.2		44	8.4		55	13.1		46	15.1		45

The following table summarises the information about performance-based share options outstanding at 3129 January ~~2004:~~2005:

Weighted
average Weighted
remaining average
Number contractual exercise
Range of exercise prices of shares life price

million years pence

1p to 60p 16.7 5.7 49
61p to 120p 20.2 8.8 86

1p to 120p 36.9 7.4 69

		Weighted
		average	Weighted
		remaining	average
	Number	contractual	exercise
Range of exercise prices	of shares	life	price

	million	years	pence

33.75p to 60p	6.8	4.8	51
60p to 120p	28.7	8.3	92


33.75p to 120p	35.5	7.6	84

Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005

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Notes to the accounts (continued)

~~28. Principal subsidiary undertakings~~

28.

Principal subsidiary undertakings

	Share capital
	issued and
	fully paid
	£m

Retail jewellers
Ernest Jones Limited	70.8
H.Samuel Limited	23.3
Leslie Davis Limited	14.5
Signet Trading Limited	162.1
Sterling Inc. (US)	–
Sterling Jewelers Inc. (US)	–
Sterling Jewelers LLC (US)	–

Intermediate holding companies
Signet Holdings Limited	656.5
Signet US Holdings, Inc. (US)	0.5

Property holding company
Checkbury Limited⁽¹⁾	16.4

(1)	Holds only UK freehold and long leasehold retail and warehouse premises.

All these companies are wholly owned subsidiary undertakings and are included in the consolidation.
The information given in this note is only with respect to such undertakings as are described in section 231(5) of the Companies Act 1985. Unless otherwise stated, all companies are domiciled in the UK.

29.	Related party transactions
There are no related party transactions which require disclosure in these accounts.

~~29. Related party transactions~~
~~There~~

30.	Company balance sheet
(a)	Profit for the financial period
The profit attributable to shareholders dealt with in the accounts of the Company is £61.2 million (2004: £127.1 million; 2003: £37.3 million). The profit is stated after foreign exchange losses of £2.6 million, net of tax, (2004: £3.9 million gains; 2003: £1.7 million losses).

Audit and non-audit fees are ~~no related party transactions which require disclosure in these accounts.~~borne by the Group on behalf of the Company.

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(b)	Tangible fixed assets

	Short leasehold		Plant,		Shop front
	land and		machinery		fixtures and
	buildings		and vehicles		fittings		Total
	£m		£m		£m		£m

Cost:
At 31 January 2004	4.3		19.5		102.9		126.7
Additions	0.1		3.7		24.5		28.3
Disposals	(0.1	)	(0.3	)	(1.9	)	(2.3	)

At 29 January 2005	4.3		22.9		125.5		152.7

Depreciation:
At 31 January 2004	1.6		13.2		58.0		72.8
Charged in period	0.3		2.7		13.8		16.8
Disposals	(0.1	)	(0.3	)	(1.9	)	(2.3	)

At 29 January 2005	1.8		15.6		69.9		87.3

Net book value:

At 29 January 2005	2.5		7.3		55.6		65.4

At 31 January 2004	2.7		6.3		44.9		53.9


(c)	Debtors

			2005	2004
			£m	£m

Debtors recoverable within one year	– amounts owed by subsidiary undertakings		421.4	372.6
	– corporation tax recoverable		1.0	0.5
Debtors recoverable after more than one year		– deferred taxation	3.1	2.2

			425.5	375.3


(d)	Cash at bank and in hand

	2005	2004
	£m	£m

Bank deposits	100.2	98.3


(e)	Creditors: amounts falling due within one year

	2005	2004
	£m	£m

Bank overdrafts	10.5	1.6
Loan notes	7.9	8.2
Amounts owed to subsidiary undertakings	529.7	485.3
Corporation tax	5.9	3.1
Accruals and deferred income	0.6	1.3
Proposed dividend	45.5	37.3

	600.1	536.8

~~30.~~ ~~Company balance sheet~~
~~(a) Profit for the financial period~~
The ~~profit attributable to shareholders dealt with in the accounts~~number of the Company is £127.1 million (2003: £37.3 million; 2002: £29.4 million). The profit is stated after foreign exchange gains of £3.9 million, net of tax, (2003: £1.7 million losses; 2002: £1.1 million gains).days’ purchases outstanding at 29 January 2005 was nil.

~~(b) Tangible fixed assets~~

Short
leasehold Plant, Shopfront,
land and machinery fixtures and
buildings and vehicles fittings Total
£m £m £m £m

Cost:
At 1 February 2003 4.5 16.7 90.5 111.7
Additions 0.3 3.0 14.4 17.7
Disposals (0.5 ) (0.2 ) (2.0 ) (2.7 )

At 31 January 2004 4.3 19.5 102.9 126.7

Depreciation:
At 1 February 2003 1.8 10.2 48.4 60.4
Charged in period 0.3 3.1 11.7 15.1
Disposals (0.5 ) (0.1 ) (2.1 ) (2.7 )

At 31 January 2004 1.6 13.2 58.0 72.8

Net book value:

At 31 January 2004 2.7 6.3 44.9 53.9

At 1 February 2003 2.7 6.5 42.1 51.3

(c) Debtors
2004 2003
£m £m

Debtors recoverable within one year – amounts owed by subsidiary undertakings 372.6 231.7
Debtors recoverable within one year – corporation tax recoverable 0.5 –
Debtors recoverable after more than one year – deferred taxation 2.2 1.5

375.3 233.2

(d) Cash at bank and in hand
2004 2003
£m £m

Bank deposits 98.3 45.0

Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005

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Notes to the accounts (continued)

(e) Creditors: amounts falling due within one year
2004 2003
£m £m
Bank overdrafts 1.6 11.6
Loan notes 8.2 9.1
Amounts owed to subsidiary undertakings 485.3 401.1
Corporation tax 3.1 3.1
Accruals and deferred income 1.3 0.4
Proposed dividend 37.3 30.8
536.8 456.1

~~The number of days’ purchases outstanding at 31 January 2004 was nil.~~

(f) Creditors: amounts falling due after more than one year
2004 2003
£m £m
Loan notes falling due between one and two years 8.3 9.1
Loan notes falling due between two and five years – 9.2
8.3 18.3

(f)	Creditors: amounts falling due after more than one year

	2005	2004
	£m	£m

Loan notes falling due between one and two years	–	8.3

Details of loan notes are shown in note 16 on page ~~73.~~

(g) Reserves
Share
premium Special Profit and
account reserves loss account
At 1 February 2003 53.9 565.1 30.9
Retained profit attributable to equity shareholders – – 83.9
Shares issued to QUEST/ESOT 1.8 – –
Exercise of share options 5.0 – –
At 31 January 2004 60.7 565.1 114.8

92	~~Signet Group plc~~ ~~Annual Report & Accounts year ended 31 January 2004~~

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~~(h) Commitments~~
~~The Company does not occupy any property or hold any plant, machinery and vehicles under operating leases.~~

~~Capital commitments at 31 January 2004 for which no provision has been made in these accounts were as follows:~~

2004 2003
£m £m
Contracted 5.4 1.5

~~(i) Contingent liabilities~~
The Company is not party to any legal proceedings considered to be material to its profit, financial position or cash flow including any bankruptcy, receivership or similar proceedings involving the Company or any of its significant subsidiaries. No director, officer or affiliate of the Company or any associate of any such director, officer or affiliate has been a party adverse to the Company or any of its subsidiaries or has a material interest adverse to the Company or any of its subsidiaries.

The Company has assigned or sub-let UK property leases in the normal course of business. Should the assignees or sub-tenants fail to fulfil any obligations in respect of these leases, the Company may be liable for those defaults. The number of such claims arising to date has been small, and the liability, which is charged to the profit and loss account as it arises, has not been material.84.

~~(j) Investments~~(g)	Reserves

	Share premium	Special	Profit and loss
	account	reserves	account
	£m	£m	£m

At 31 January 2004	60.7	565.1	114.8
Retained profit attributable to equity shareholders	–	–	9.1
Shares issued to QUEST/ESOTs	2.5	–	–
Exercise of share options	4.8	–	1.6
Purchase of own shares	–	–	(9.5	)

At 29 January 2005	68.0	565.1	116.0


(h)	Commitments
The Company does not occupy any property or hold any plant, machinery and vehicles under operating leases.

Capital commitments at 29 January 2005 for which no provision has been made in these accounts were as follows:

	2005	2004
	£m	£m

Contracted	3.7	5.4

(i)	Contingent liabilities
The Company is not party to any legal proceedings considered to be material to its profit, financial position or cash flow including any bankruptcy, receivership or similar proceedings involving the Company or any of its significant subsidiaries. No director, officer or affiliate of the Company or any associate of any such director, officer or affiliate has been a party adverse to the Company or any of its subsidiaries or has a material interest adverse to the Company or any of its subsidiaries.

The Company has assigned or sub-let UK property leases in the normal course of business. Should the assignees or sub-tenants fail to fulfil any obligations in respect of these leases, the Company may be liable for those defaults. The number of such claims arising to date has been small, and the liability, which is charged to the profit and loss account as it arises, has not been material.

(j)	Investments

	Shares in
	subsidiary
	undertakings
	£m

~~Cost at 1 February 2003~~	~~803.4~~
~~Disposals~~	~~(33.2~~	)
~~Translation difference~~	~~(3.4~~	)

Cost at 29 January 2005 and 31 January 2004	766.8

Principal subsidiaries are shown in note 28 on page 100.

~~Principal subsidiaries are shown in note 28 on page 90.~~


*102*	Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005	93

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31. Summary of differences between UK and US generally
accepted accounting principles

The Group’s consolidated accounts are prepared in accordance with generally accepted accounting principles in the United Kingdom (“UK GAAP”), which differ in certain respects from generally accepted accounting principles in the United States (“US GAAP”). Differences which have a significant effect on the consolidated net profit and shareholders’ funds of the Group are set out below. While this is not a comprehensive summary of all differences between UK and US GAAP, other differences would not have a significant effect on the consolidated net profit or shareholders’ funds of the Group.

~~In accordance with best practice the~~The differences have been shown as gross of tax with the related taxation shown separately.

Cost of sales
Under UK GAAP, selling costs have been included in cost of sales. Under US GAAP, gross profit is determined before deducting selling costs, as they are not included in cost of sales. Selling costs which have been included under UK GAAP for the ~~53 weeks ended 2 February 2002 were £371.8 million, for the~~ 52 weeks ended 1 February 2003 were £361.5 million, ~~and~~ for the 52 weeks ended 31 January 2004 were £366.5 million and for the 52 weeks ended 29 January 2005 were £360.3 million.

Goodwill

Under UK GAAP the Group has implemented FRS 10 in respect of acquisitions since 1 February 1998, amortising goodwill by equal annual instalments over its estimated useful ~~life.~~life, normally 20 years. Prior to the issue of FRS 10, in the Group’s consolidated accounts prepared under UK GAAP, goodwill arising on the acquisition of a subsidiary was written off against reserves in the consolidated balance sheet in the year in which the acquisition was made.

Under US GAAP, prior to the issue of Statement of Financial Accounting Standards (“FAS”) 142, such goodwill was capitalised and amortised through the consolidated profit and loss account over its estimated useful life (not to exceed 40 years). FAS 142, effective for the Group from 3 February 2002, requires that goodwill be tested annually for impairment in lieu of amortisation.

Additionally, UK GAAP requires that on subsequent disposal or closure of a previously acquired subsidiary, any goodwill previously taken directly to shareholders’ funds is then charged to the profit and loss account as part of profit or loss on disposal or closure. Under US GAAP the appropriate balance to be written off on the disposal of the business is the remaining unamortised balance for goodwill.

~~For the purposes of calculating the effect of capitalising the goodwill on the consolidated balance sheet and its amortisation~~

~~through the consolidated profit and loss account, a life of 20 years has been assumed. However, the value of the~~Under UK GAAP, impairment reviews are carried out annually to ensure goodwill is ~~reviewed periodically by comparing~~not carried at above its recoverable level. Whenever events or changes in circumstances indicate that the ~~undiscounted~~carrying amount may not be recoverable, the Group performs discounted cash flow analyses to compare discounted estimated future operating cash flows ~~from operating activities with~~to the net carrying value of goodwill. ~~An additional charge~~Any amortisation or impairment write downs identified are charged to the ~~consolidated~~ profit and loss ~~account is made where a permanent diminution in net book value is identified.~~account.

In the Group’s consolidated balance sheet, goodwill written off on the acquisition of Sterling Jewelers has been calculated based upon consideration valued at $17.00 per share of the US convertible preference shares issued to the shareholders of Sterling Jewelers. Under US GAAP, asannual impairment reviews are performed by comparing the carrying amount of goodwill with its fair value of the consideration received by the shareholders is more clearly evident than the fair value of the consideration given, the former is used for determining fair value. The fair value of the US convertible preference shares for the purposes of US GAAP has been taken as the initial trading price of the convertible shares upon issuance of $11.125.on an undiscounted basis.

In the years ended 29 January 2005, 31 January 2004 and 1 February 2003, ~~and 2 February 2002,~~ the goodwill arising on the acquisition of Marks & Morgan has been capitalised in line with UK GAAP and is amortised through the consolidated profit and loss account over a life of 20 years.

At 3129 January ~~2004~~2005 the Group had goodwill on its balance sheet of ~~£16.8~~£15.2 million under UK GAAP and ~~£299.2~~£290.9 million under US GAAP. Net income for the year ended 3129 January ~~2004~~2005 includes a charge for goodwill amortisation of ~~£1.1~~£1.0 million under UK GAAP and £nil under US GAAP.

Sale and leaseback transactions

In the Group’s consolidated accounts prepared under UK GAAP, sale and leaseback transactions of freehold and long leasehold properties are accounted for by including in profit before taxation the full gain arising in the financial year in which the transaction took place. Under US GAAP the gain arising is credited to the consolidated profit and loss account in equal instalments over the life of the lease. Adjustments to the amortisation are reflected in periods when the leases are disposed of.

~~Extended service plans~~
Under UK GAAP revenue from the sales of extended service plans is recognised at the date of sale and provision is made for the estimated costs of future claims. Under US GAAP, revenues from such sales are deferred and recognised in profit over the expected claim period.

Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005

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Notes to the accounts (continued)

Extended service agreements
Prior to the adoption of the amendment to FRS 5 ‘Application Note G – Revenue Recognition’, the Group recognised for UK GAAP purposes all revenue arising from the sale of extended service agreements in the US at the date of sale with provision being made for the estimated cost of future claims arising under these warranties.

Following the adoption of the above, under UK GAAP revenue from the sale of extended service agreements in the US is now deferred and recognised, net of incremental costs arising from the initial sale, in proportion to anticipated claims arising. This period is based on the historical claims experience of the US business, which has been consistent since these products were launched. The Group reviews the pattern of claims at the end of each year to determine any significant trends that may require changes to revenue recognition rates.

Under US GAAP, the Group historically recognised revenue immediately on a proportion of contracts where analysis of past experience showed that no claim or cost arose, and deferred the balance of revenue over the estimated period of future claims. The Group’s US GAAP policy has now been corrected so that the policies applied under UK and US GAAP are now consistent, with no future GAAP differences expected to arise.

Pensions
FRS 17 – ‘Retirement Benefits’ was adopted by the Group for 2003/04. For ~~defined benefit schemes such as~~ the UK Group Scheme, a defined benefit scheme, the current service cost is charged to operating profit and the interest on ~~scheme~~Group Scheme liabilities and the expected return on ~~scheme~~Group Scheme assets are included within the interest cost in the profit and loss account.

Movements in ~~a scheme’s~~the Group Scheme’s funding position arising from changes in actuarial assumptions, in the expected scheme liabilities and between the actual and expected return on the ~~scheme’s~~Scheme’s assets are recognised in the statement of total recognised gains and losses. The ~~scheme~~Scheme surplus or deficit is carried on the Group’s consolidated balance sheet.

Under US GAAP, the pension cost for the period is determined based on an actuarial valuation at the start of the financial period. The current service cost, the interest cost and the expected return on assets (based on a smoothed market value of assets) are all included within operating profit. The cumulative amounts arising from changes in actuarial assumptions and those arising between the actual and expected return on ~~scheme~~Group Scheme assets are amortised through operating profit over the average service lives of the employees. If the ~~scheme~~Group Scheme is in surplus, consolidated net assets will include the difference between the cumulative profit and loss account charges and cumulative cash contributions made to the ~~scheme. A~~Group Scheme. The Group recognises a pension liability ~~will only be included~~ in ~~consolidated net assets~~the financial statements when the ~~accrued (rather than the projected) scheme liability is higher than~~accumulated benefit obligation exceeds the fair value of the ~~assets.~~plan assets, less the unrecognised net actuarial gain/loss and the unrecognised prior service costs. The Group Scheme does not currently have such a liability under US GAAP.

An unrecognised prior service cost arises from the 15% and 5% benefit increases granted in November 1996 and November 1999 respectively. The cost is being amortised on a straight line basis over the average remaining employee service life which was 10.76 years at 29 January 2005.

Additional disclosures are now required under FAS 132 and are included on pages ~~100~~111 to ~~102.~~113.

Under US GAAP, the estimated accumulated benefit obligation of the ~~UK defined benefit pension scheme~~Group Scheme was higher than the fair value of the assets at 1 February 2003. The difference between the two, plus the balance sheet prepayment as defined under US GAAP, is disclosed as an accrued benefit liability and written off to Other Comprehensive Income. An intangible asset is recognised on the balance sheet under US GAAP, reflecting the unrecognised prior service cost element of the prepaid pension cost.

As set out in note 20 on page 87, the Group has established, in the US, an unfunded, unqualified deferred compensation plan. Under US GAAP the plan is accounted for as a defined contribution plan in accordance with SFAS 87, ‘Employers’ Accounting for Pensions’. The accounting for the deferred compensation plan is consistent under both UK and US GAAP.

Recognition of lease expense
US GAAP requires that where operating leases include clauses in respect of predetermined rent increases, those rents are charged to the profit and loss account on a straight line basis over the lease term, including any construction period or other rental holidays. Such clauses are more commonly found in US leases. This will generally result in an acceleration of lease expenses from the later to the earlier years of the lease term.

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Under UK GAAP predetermined rent increases are recognised when they fall due, reflecting that these are generally intended to compensate for the expected cost of inflation and are equivalent to UK periodic rent reviews.

Stock compensation
Under UK GAAP, options granted to employees by the Group to subscribe infor the Group’s shares where the exercise price of the option is linked to performance, do not result in any compensation costs being recorded by the Group if the stated exercise price is equal to, or in excess of, the fair value of the underlying shares at the date of grant.

Under US GAAP, athe Group can account for employee stock options in accordance with Accounting Principles ~~Bulletin~~Board Opinion No. 25 (“APB 25”) ‘Accounting for Stock Issued to Employees’ or FAS 123, ‘Accounting for Stock-Based Compensation’ as amended by FAS 148 ‘Accounting for Stock-Based Compensation – Transition and Disclosure’. Under APB 25, there are two types of stock option schemes, fixed plans or variable plans. Fixed plans have terms which fix and provide means for determining, at the date of grant or award, both the number of shares or stock that may be acquired by or awarded to an employee and the cash, if any, to be paid by the employee. Variable plans have characteristics which prevent the determination of either the number of shares or stock that may be acquired by or awarded to an employee and the cash, if any, to be paid by the employee, or both. For fixed plans, compensation cost must be recognised at the grant date to the extent that the fair value is greater than the exercise price. Compensation expense, the amount by which the fair value exceeds the exercise price for variable plan awards, shall be measured using terms the employee is most likely to receive based upon the facts available each period over the vesting period. All executive share option plans receive variable plan accounting treatment under APB 25.

The Group’s share option plans are described in note 27 on page ~~85.~~95. The Group recognises compensation cost for US GAAP purposes in accordance with the requirements of APB 25.

Revaluation of properties
Under UK GAAP, properties may be restated on the basis of appraised values in consolidated accounts prepared in all other respects in accordance with the historical cost convention. Increases in value are credited directly to the revaluation reserve. When revalued properties are sold the gain or loss on sale is calculated based on revalued carrying amounts. Under US GAAP, properties are only revalued if a permanent impairment is deemed to have occurred. Upward revaluations are not permitted.

Depreciation of properties
Following the adoption of FRS 15 in the year ended 29 January 2000, under UK GAAP depreciation is charged on freehold buildings and long leasehold properties based on the revalued amounts. Under US GAAP, depreciation is calculated based on the historic cost of the assets.

Securitised customer receivables
Under UK GAAP securitised US ~~customer~~Customer receivables of £132.8 million (2004: £137.9 ~~million (2003:~~million; 2003: £153.1 ~~million; 2002: £176.8~~ million) are included within trade debtors and bank loans, as the related financing is of a revolving nature and ~~does~~therefore not ~~represent~~considered to be an outright sale of such accounts receivable.

Under US GAAP these amounts ~~would~~ qualify for ~~off balance~~off-balance sheet treatment. This is because the receivables were first sold to a special purpose qualifying entity, Sterling Jewellers Receivables Corporation (“the Transferor”), which then sold-on the receivables to a special purpose unconsolidated qualifying trust, Sterling Jewellers Receivables Master Note Trust. The trust has been legally isolated from the Group; the majority of the interests in the US receivables portfolio held by the trust were principally sold on to institutional investors in the form of fixed-rate investor certificates; and the Group does not maintain control over the receivables portfolio transferred to the trust.

As defined in the Transfer and Servicing Agreement, the Group may, through the exercise by the Transferor of a Return on Accounts Provision, remove random accounts from the trust on a restricted basis. This ability is limited to one removal per month and the amount of accounts that can be removed is restricted to the principal amount of the total Transferor’s Interest that is in excess of the Required Transferor Interest.

The Group receives servicing fees of £2.9 million (2004: £3.1 million; 2003 £3.4 million) which offset its costs of fulfilling its servicing responsibilities to the trust.

The main commercial terms of the securitisation are disclosed in summary within the Financial Review and in note 16 on page 85.

Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005

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~~Summary of differences between UK and US generally accepted~~
~~accounting principles~~Notes to the accounts (continued)

~~Deferred taxes~~
FRS 19 – ‘Deferred Tax’ requires that a deferred tax liability should be provided or an asset recognised in respect of all timing differences, regardless of whether it is considered that there is a reasonable probability that such timing differences will reverse. UK and US GAAP now both require full provision for deferred tax. There can still be valuation allowance differences.

Dividends

Under UK GAAP, dividends are provided for in the year in respect of which they are declared or proposed. Under US GAAP, dividends are given effect only in the period in which they are formally ~~declared.~~approved.

Earnings per share (“EPS”)/ADS
Following the adoption of FRS 14 in the UK and FAS 128 in the US, the computation of the weighted average number of shares and adjusted weighted average number of shares outstanding is generally consistent. The calculation of fully diluted EPS for the year ended 29 January 2005 excludes options to purchase 5,800,831 shares (2004: 7,237,016 excluded; 2003: 6,293,903 excluded) under share options on the basis that their effect on basic EPS was anti-dilutive.

Effect on profit for the financial period of differences between UK and US GAAP

	52 weeks ended		52 weeks ended		52 weeks ended
	29 January 2005		31 January 2004		1 February 2003
			as restated		as restated
	£m		£m		£m

Profit for the financial period in accordance with UK GAAP⁽¹⁾	141.2		129.6		120.2

US GAAP adjustments:
Goodwill amortisation	1.0		1.1		1.2
Sale and leaseback transactions	1.0		0.8		0.8
Pensions	(0.9	)	(1.9	)	(0.5	)
Leases	(3.5	)	(3.5	)	(3.4	)
Depreciation of properties	–		–		0.2
Stock compensation	(3.9	)	0.7		1.3

US GAAP adjustments before taxation	(6.3	)	(2.8	)	(0.4	)
Taxation	2.6		0.6		(0.3	)

US GAAP adjustments after taxation	(3.7	)	(2.2	)	(0.7	)

Retained profit attributable to shareholders in accordance with US GAAP	137.5		127.4		119.5

Earnings per ADS in accordance with US GAAP – basic	79.4p		74.1p		69.9p
Earnings per ADS in accordance with US GAAP – diluted	79.1p		73.6p		69.2p
Weighted average number of ADSs outstanding (million) – basic	173.2		171.8		171.1
Weighted average number of ADSs outstanding (million) – diluted	173.8		173.1		171.2

(1)	2004 and 2003 restated under UK GAAP for the implementation of the amendment to FRS 5, ’Application Note G – Revenue Recognition’ (see note 17).

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Effect on shareholders’ funds of differences between UK and US GAAP

	29 January 2005		31 January 2004		1 February 2003
			as restated		as restated
	£m		£m		£m

Shareholders’ funds in accordance with UK GAAP⁽¹⁾	739.1		674.9		627.6

US GAAP adjustments:
Goodwill in respect of acquisitions (gross)	476.8		490.5		531.2
Adjustment to goodwill	(56.1	)	(58.2	)	(64.5	)
Accumulated goodwill amortisation	(145.0	)	(149.9	)	(162.6	)
Sale and leaseback transactions	(7.9	)	(8.9	)	(9.7	)
Pensions	28.2		21.5		12.0
Depreciation of properties	(2.5	)	(2.5	)	(2.5	)
Leases	(17.9	)	(14.9	)	(12.9	)
Revaluation of properties	(4.3	)	(3.1	)	(3.1	)
Dividends	45.5		37.3		30.8

US GAAP adjustments before taxation	316.8		311.8		318.7
Taxation	0.6		1.8		1.2

US GAAP adjustments after taxation	317.4		313.6		319.9

Shareholders’ funds in accordance with US GAAP⁽²⁾	1,056.5		988.5		947.5

Shareholders’ funds in accordance with US GAAP at beginning of period	988.5		947.5		978.2
Net income in accordance with US GAAP	137.5		127.4		119.5
(Purchase)/issue of shares, net	(3.1	)	4.9		3.8
Increase/(decrease) in additional paid-in capital	2.5		(0.5	)	(0.8	)
Dividends paid	(43.8	)	(36.7	)	(30.8	)
Other comprehensive income⁽³⁾	1.4		17.3		(15.7	)
Translation differences	(26.5	)	(71.4	)	(106.7	)

Shareholders’ funds in accordance with US GAAP at end of period	1,056.5		988.5		947.5

(1)	2004 and 2003 restated under UK GAAP for the implementation of the amendment to FRS 5, ‘Application Note G – Revenue Recognition (see note 17).
(2)	Debtors recoverable after more than one year of £4.3m as at 29 January 2005 and £26.9m as at 31 January 2004, would be classified as non-current under US GAAP.
(3)	Other comprehensive income relates only to the Group’s defined benefit pension scheme.

Prior year restatements
The Group has identified two errors in its US GAAP reconciliation relating to revenue recognition attributable to extended service agreements in the US and lease accounting for predetermined rent increases which are commonly found in the US. The US GAAP reconciliation for prior years has been restated as the cumulative effect on shareholders’ funds of these corrections, if taken in 2004/05, would have been material. The impact on retained profit attributable to shareholders, earnings per ADS and shareholders’ funds is shown overleaf:

Signet Group plc Annual Report & Accounts year ended 29 January 2005

107

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Notes to the accounts (continued)

Impact on profit attributable to shareholders

	52 weeks ended		52 weeks ended
	31 January 2004		1 February 2003
	£m		£m

Retained profit attributable to shareholders in accordance with US GAAP – as previously reported	135.0		128.3
Revenue recognition – net of tax	(5.4	)	(6.7	)
Lease accounting – net of tax	(2.2	)	(2.1	)

As restated	127.4		119.5

Impact on earnings per ADS – basic

	pence		pence

As previously reported	78.6		75.0
Effect of restatements	(4.5	)	(5.1	)

As restated	74.1		69.9

Impact on earnings per ADS – diluted

	pence		pence

As previously reported	78.0		74.3
Effect of restatements	(4.4	)	(5.1	)

As restated	73.6		69.2

Impact on shareholders’ funds

	£m		£m

As previously reported	1,034.8		995.3
Effect of restatements	(46.3	)	(47.8	)

As restated	988.5		947.5

Revenue recognition
The Group has corrected its accounting policy to spread the revenue arising from extended service agreements in the US in proportion to anticipated claims arising, net of incremental costs arising from the initial sale. Previously the revenue from such agreements was recognised immediately on a proportion of contracts where analysis of past experience showed no claim or cost arose, and deferred the balance of revenue over the estimated period of future claims. As a consequence of this correction and the change in accounting policy for UK GAAP (see note 17), the previously reported 2003/04 and 2002/03 US GAAP adjustments are restated as follows:

	52 weeks ended		52 weeks ended
	31 January 2004		1 February 2003
	£m		£m

UK GAAP prior period adjustment	(12.1	)	(14.1	)
US GAAP adjustment – as previously reported	3.5		3.5

	(8.6	)	(10.6	)
Tax	3.2		3.9

US GAAP adjustment – as restated	(5.4	)	(6.7	)

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Impact on profit and loss account US GAAP differences

	52 weeks ended		52 weeks ended
	31 January 2004		1 February 2003
	£m		£m

As previously reported – before tax	(3.5	)	(3.5	)
Adjustment required – before tax	3.5		3.5

As restated – before tax	–		–

The policies applied under UK and US GAAP are now consistent and no future GAAP differences are expected to arise. There is no impact on cash flow.

Lease accounting
Following the letter by the Securities and Exchange Commission on 7 February 2005 to the American Institute of Certified Public Accountants, the Group has reviewed its lease accounting policy and corrected it for predetermined rent increases and any construction period or other rental holidays. For operating leases that include clauses in respect of predetermined rent increases, it is required that those rents are charged to the profit and loss account on a straight line basis over the lease term. Also, inducements to enter into a lease are required to be recognised over the lease term. Previously, predetermined lease increases were recognised when they fell due and lease inducements were recognised over the period to the next rent review. As a result, the previously reported 2003/04 and 2002/03 US GAAP adjustments are restated to reflect a reduction in US GAAP retained earnings attributable to shareholders of £2.2 million (£3.5 million before tax) and £2.1 million (£3.4 million before tax) respectively. There is no impact on cash flow.

Impact on profit and loss account US GAAP differences

	52 weeks ended		52 weeks ended
	31 January 2004		1 February 2003
	£m		£m

As previously reported – before tax	–		–
Adjustment required – before tax	(3.5	)	(3.4	)

As restated – before tax	(3.5	)	(3.4	)

The Group did not amend its previously filed Annual Report on Form 20-F or its Form 6-K containing interim financial information, and the financial statements and related financial information contained in those reports should no longer be relied upon.

Cash flows
Under UK GAAP the Group complies with ‘Financial Reporting Standard (Revised 1996) Cash Flow Statements’ (FRS 1 (Revised)). Its objective and principles are similar to those set out in FAS 95 ‘Statement of Cash Flows’. The principal difference between the standards is in respect of classification. Under FRS 1 (Revised), the Group presents its cash flows for (a) operating activities; (b) returns on investments and servicing of finance; (c) taxation; (d) capital expenditure and financial investment; (e) management of

liquid resources; and (f) financing activities. FAS 95 requires only three categories of cash flow activity (a) operating; (b) investing; and (c) financing.

Cash flows arising from taxation and returns on investments and servicing of finance under FRS 1 (Revised) would be included as operating activities and cash flows arising from management of liquid resources would be included as cash and cash equivalents under FAS 95. In addition, under FRS 1 (Revised) cash includes only cash in hand plus deposits repayable on demand, less overdrafts repayable on demand. Under FAS 95 cash and cash equivalents include all highly liquid short term investments with original maturities of three months or less.

~~Earnings per share/ADS (“EPS”)~~
Following the adoption of FRS 14 in the UK and FAS 128 in the US, the computation of the weighted average number of shares and adjusted weighted average number of shares outstanding is generally consistent. The calculation of fully diluted EPS for the year ended 31 January 2004 excludes 7,237,016 shares (2003: 6,293,903 excluded; 2002: none excluded) under share options on the basis that their effect on basic EPS was anti-dilutive.

96	~~Signet Group plc~~ ~~Annual Report & Accounts year ended 31 January 2004~~

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~~Estimated effect on profit for the financial period of differences between UK and US GAAP~~

52 weeks ended
31 January 2004
52 weeks ended
1 February 2003
as restated 53 weeks ended
2 February 2002
as restated

⁽¹⁾ ⁽¹⁾
£m £m £m

Profit for the financial period in accordance with UK GAAP 137.2 129.1 120.4

US GAAP adjustments:
Goodwill amortisation and write-offs 1.1 1.2 (13.4 )
Sale and leaseback transactions 0.8 0.8 0.7
Extended service plan revenues (3.5 ) (3.5 ) (2.0 )
Pensions (1.9 ) (0.5 ) (1.3 )
Depreciation of properties – 0.2 0.2
Stock compensation 0.7 1.3 (2.2 )

US GAAP adjustments before taxation (2.8 ) (0.5 ) (18.0 )
Taxation 0.6 (0.3 ) (0.7 )

US GAAP adjustments after taxation (2.2 ) (0.8 ) (18.7 )

Retained profit attributable to shareholders in accordance with US GAAP 135.0 128.3 101.7

Earnings per ADS in accordance with US GAAP – basic 235.7p 225.0p 180.5p
Earnings per ADS in accordance with US GAAP – diluted 234.0p 222.9p 179.2p
Weighted average number of ADSs outstanding (million) – basic 57.3 57.0 56.3
Weighted average number of ADSs outstanding (million) – diluted 57.9 57.6 56.8

~~(1)~~

~~Restated under UK GAAP for the implementation of FRS 17 – ‘Retirement Benefits’ (see note 17).~~

Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005

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~~Summary of differences between UK and US generally accepted~~
~~accounting principles~~Notes to the accounts (continued)

~~Estimated effect on shareholders’ funds of differences between UK and US GAAP~~

31 January 2004
1 February 2003
as restated 2 February 2002
as restated
⁽¹⁾ ⁽¹⁾
£m £m £m

Shareholders’ funds in accordance with UK GAAP 727.6 678.4 683.7

US GAAP adjustments:
Goodwill in respect of acquisitions (gross) 490.5 531.2 594.7
Adjustment to goodwill (58.2 ) (64.5 ) (74.7 )
Accumulated goodwill amortisation (149.9 ) (162.6 ) (181.8 )
Sale and leaseback transactions (8.9 ) (9.7 ) (10.5 )
Extended service plan revenues (18.2 ) (16.6 ) (15.3 )
Pensions 21.5 12.0 (2.2 )
Depreciation of properties (2.5 ) (2.5 ) (2.7 )
Revaluation of properties (3.1 ) (3.1 ) (3.0 )
Dividends 37.3 30.8 25.6

US GAAP adjustments before taxation 308.5 315.0 330.1
Taxation (1.3 ) 1.9 10.4

US GAAP adjustments after taxation 307.2 316.9 340.5

Shareholders’ funds in accordance with US GAAP 1,034.8 995.3 1,024.2

Shareholders’ funds in accordance with US GAAP at beginning of period 995.3 1,024.2 916.3
Net income in accordance with US GAAP 135.0 128.3 101.7
Issue of shares 4.9 3.8 7.8
(Decrease)/increase in additional paid in capital (0.5 ) (0.8 ) 3.9
Dividends paid (36.7 ) (30.8 ) (27.7 )
Other comprehensive income 17.3 (15.7 ) –
Translation differences (80.5 ) (113.7 ) 22.2

Shareholders’ funds in accordance with US GAAP at end of period 1,034.8 995.3 1,024.2

~~(1)~~	~~Restated under UK GAAP for the implementation of FRS 17 – ‘Retirement Benefits’ (see note 17).~~

98	~~Signet Group plc~~ ~~Annual Report & Accounts year ended 31 January 2004~~

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	52 weeks ended		52 weeks ended		52 weeks ended
	29 January 2005		31 January 2004		1 February 2003
	£m		£m		£m

Net cash flow from operating activities under UK GAAP	172.6		203.8		182.2
Returns on investment and servicing of income	(9.8	)	(11.0	)	(16.5	)
Taxation	(56.5	)	(69.0	)	(57.3	)

Net cash flow from operating activities under US GAAP	106.3		123.8		108.4

Cash flow from financing under UK GAAP	(10.3	)	(5.8	)	(7.8	)
Dividends	(43.8	)	(36.7	)	(30.8	)

Cash flow from financing under US GAAP	(54.1	)	(42.5	)	(38.6	)

Movement in cash in the period under UK GAAP	6.4		(11.8	)	(8.3	)
Management of liquid resources	(24.5	)	42.4		29.9

Movement in cash in the period under US GAAP	(18.1	)	30.6		21.6

Employee share schemes
A description of the terms of the Group’s employee share schemes is set out in note 27 on ~~page 85.~~pages 95 to 99.

For the year ended 3129 January ~~2004,~~2005, in compliance with the disclosure requirements of FAS 123, ~~’Accounting~~‘Accounting for Stock-Based Compensation’ as amended by FAS 148, ~~’Accounting~~‘Accounting for Stock Based Compensation-Transition and Disclosure’, the fair value of options granted during the year has been computed. FAS 123 as amended by FAS 148 sets out an alternative methodology for recognising the compensation expense based on the fair value at grant date. Had the Group adopted this methodology, earnings per ADS and earnings per share under US GAAP would have been decreased/increased to the pro forma amounts indicated below for the financial periods ended 29 January 2005, 31 January 2004 and 1 February ~~2003 and 2 February 2002:~~2003:

2004 2003 2002
£m £m £m

Net income in accordance with US GAAP:
As reported 135.0 128.3 101.7
(Deduct)/add: Stock-based employee compensation (expense)/income
included in reported net income (0.7 ) (1.3 ) 2.2
Deduct: Stock-based employee compensation expense determined under
fair value based method for all awards (1.7 ) (1.8 ) (1.7 )

Pro forma 132.6 125.2 102.2

2004 2003 2002
pence pence pence

Earnings per ADS in accordance with US GAAP:
As reported – basic 235.7 225.0 180.5
As reported – diluted 234.0 222.9 179.2
Pro forma – basic 231.5 219.6 181.4
Pro forma – diluted 229.8 217.5 180.1

	2005		2004		2003
	£m		£m		£m
			as restated	⁽¹⁾	as restated	⁽¹⁾

Net income in accordance with US GAAP:
As reported	137.5		127.4		119.5
Add/(deduct): Stock-based employee compensation expense included in reported net income – net of tax	3.2		(0.7	)	(1.3	)
Deduct: Stock-based employee compensation expense determined under fair value based method for all awards – net of tax	(2.6	)	(1.7	)	(1.8	)

	138.1		125.0		116.4

	2005	2004		2003
	pence	pence		pence
		as restated	⁽¹⁾	as restated	⁽¹⁾

Earnings per ADS in accordance with US GAAP:
As reported – basic	79.4	74.1		69.9
As reported – diluted	79.1	73.6		69.2
Pro forma – basic	79.8	72.7		68.0
Pro forma – diluted	79.5	72.2		67.4

(1)	Restated under UK GAAP for the implementation of the amendment to FRS 5, ‘Application Note G – Revenue Recognition’ (see note 17) and restated under US GAAP as set out on pages 107-109.

These pro forma amounts may not be representative of future results as they are subjective in nature and involve uncertainties and matters of judgement, and therefore cannot be determined precisely. Changes in assumptions could affect the estimates.

110

Signet Group plc Annual Report & Accounts year ended 29 January 2005

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The fair value of options granted which, in determining the pro forma impact, is assumed to be amortised in the profit and loss account over the option vesting period, is estimated on the date of grant using the Black-Scholes option-pricing model using the following weighted average assumptions for the financial periods ended 29 January 2005, 31 January 2004 and 1 February ~~2003 and 2 February 2002.~~2003.

2004

2003

2002

2005

2004

2003

Weighted average price of options whose exercise price equals

the market price on the grant date

88p

120p

75p

Weighted average price of options whose exercise price equals the market price on

the grant date

111p

88p

120p

Weighted average assumptions:

Risk free interest rate

4.0%

3.75%

4.0%

4.75%

4.0%

3.75%

Expected life of options

4 years

4 years

4 years

4 years

Expected volatility

19%

31%

32%

14%

19%

31%

Dividend yield

2.6%

2.8%

1.7%

2.7%

2.6%

2.8%

Weighted average grant date fair value of option over one share

20p

37p

22p

23p

20p

37p

~~Signet Group plc~~ ~~Annual Report & Accounts year ended 31 January 2004~~

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~~Summary of differences between UK and US generally accepted~~
~~accounting principles~~ ~~(continued)~~

2004

2003

2002

2005

2004

2003

Weighted average price of options whose exercise price is less than

the market price on the grant date

89p

67p

51p

Weighted average price of options whose exercise price is less than
the market price on the grant date

86p

89p

67p

Weighted average assumptions:

Risk free interest rate

4.0%

3.75%

4.0%

4.75%

4.0%

3.75%

Expected life of options

3 years

3 years

3 years

3 years

Expected volatility

19%

31%

32%

14%

19%

31%

Dividend yield

2.6%

2.8%

1.7%

2.7%

2.6%

2.8%

Weighted average grant date fair value of option over one share

34p

29p

21p

31p

34p

29p

Post employment benefits
The following table shows a reconciliation of the opening and closing balances of the projected benefit obligation under the Group Scheme:

	2004		2003		2005		2004
	£m		£m		£m		£m

At beginning of period	88.9		83.2		97.9		88.9
Service cost	2.7		2.3		3.1		2.7
Interest cost	4.7		4.5		5.3		4.7
Members’ contributions	0.6		0.5		0.6		0.6
Actuarial gain	5.9		2.9		5.4		5.9
Benefits paid	(4.9	)	(4.5	)	(3.9	)	(4.9	)

At end of period	97.9		88.9		108.4		97.9

~~The following tables show the change in Group Scheme assets:~~

The following tables show the change in Group Scheme assets:
	2004		2003		2005		2004
	£m		£m		£m		£m

At beginning of period	82.2		108.1		99.6		82.2
Actual return on assets	20.6		(21.9	)	6.6		20.6
Employer contributions	1.1		–		3.6		1.1
Members’ contributions	0.6		0.5		0.6		0.6
Benefits paid	(4.9	)	(4.5	)	(3.9	)	(4.9	)

At end of period	99.6		82.2		106.5		99.6



	2004		2003
	£m		£m

Funded status	1.8		(6.7	)
Unrecognised prior service cost	6.5		7.1
Unrecognised net actuarial loss	16.9		27.5

Net amount recognised	25.2		27.9

~~100~~

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111

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Notes to the accounts (continued)

	2005		2004
	£m		£m

Funded status	(1.9	)	1.8
Unrecognised prior service cost	5.9		6.5
Unrecognised net actuarial loss	22.3		16.9

Net amount recognised	26.3		25.2

~~The amounts recognised in the statement of financial position consist of:~~

The amounts recognised in the statement of financial position consist of:
	2004	2003		2005	2004
	£m	£m		£m	£m

Prepaid pension cost	25.2	–		26.3	25.2
Accrued pension liability	–	(1.8	)	–	–
Intangible asset	–	7.1		–	–
Accumulated other comprehensive income	–	22.6		–	–

Net amount recognised	25.2	27.9		26.3	25.2

The accumulated benefit obligation of the Group Scheme at 3129 January ~~2004~~2005 was ~~£92.9~~£102.3 million ~~(2003: £84.0~~(2004: £92.9 million).

The components of pension expense which arise under FAS 87 for the Group’s pension plans are estimated to be as follows:

2004 2003 2002
£m £m £m

Service cost 2.7 2.3 2.3
Interest cost 4.7 4.5 4.8
Expected return on Group Scheme assets (5.5 ) (7.1 ) (9.2 )
Amortisation of transition assets – – (1.8 )
Amortisation of prior service cost 0.6 0.6 0.6
Recognised actuarial gain 1.4 – (0.7 )

Net periodic pension cost 3.9 0.3 (4.0 )

2004 2003
£m £m

Increase in minimum liability included in other comprehensive income (22.6 ) 22.6
Actual return/(loss) on Group Scheme assets 20.6 (21.9 )

	2005		2004		2003
	£m		£m		£m

Service cost	3.1		2.7		2.3
Interest cost	5.3		4.7		4.5
Expected return on Group Scheme assets	(6.9	)	(5.5	)	(7.1	)
Amortisation of transition assets	–		–		–
Amortisation of prior service cost	0.6		0.6		0.6
Recognised actuarial loss	0.5		1.4		–

Net periodic pension cost	2.6		3.9		0.3

~~Assumptions used to determine benefit obligations (at the end of the year):~~

2004 2003

Discount rate 5.6% 5.4%
Consumer price index 2.8% 2.4%
Salary increases 4.3% 3.9%

	2005	2004
	£m	£m

Increase in minimum liability included in other comprehensive income	–	(22.6	)

~~Assumptions used to determine net periodic pension costs (at the start of the year):~~

Assumptions used to determine benefit obligations (at the end of the year):
	2004	2003	2005	2004

Discount rate	5.4%	5.6%	5.3%	5.6%
Long-term rate of return on assets	6.9%	6.7%
Consumer Price Index			2.8%	2.8%
Salary increases	3.9%	3.9%	4.3%	4.3%
Consumer Price Index	2.4%	2.4%

Assumptions used to determine net periodic pension costs (at the start of the year):
	2005	2004

Discount rate	5.6%	5.4%
Long term rate of return on assets	7.0%	6.9%
Salary increases	4.3%	3.9%
Consumer Price Index	2.8%	2.4%


*112*	Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005	*~~101~~*

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~~Summary of differences between UK and US generally accepted accounting principles~~ ~~(continued)~~

The composition of the assets in the Group Scheme was as follows:

2004 2003

Equities 70% 80%
Bonds 26% 19%
Cash 4% 1%

Total 100% 100%

~~The long term target allocation for the Group Scheme’s assets are equities 70%, bonds 30% and cash 0%.~~

	2005	2004

Equities	70%	70%
Bonds	27%	26%
Cash	3%	4%

Total	100%	100%

The long term target allocation for the Group Scheme’s assets are: equities 70% and bonds 30%.

The Trustees’ investment strategy is set out in their Statement of Investment Principles. To guide them in their management of the assets and control of the risks to which the Group Scheme is exposed, the Trustees have adopted the following objectives:

•	To make sure that obligations to the beneficiaries of the Group Scheme can be met;

•	To maintain funds above the level required to meet the Minimum Funding Requirement of the Pensions Act 1995; and

•	To acknowledge the Group’s interest on the size and incidence of its contribution payments.

To develop the long term rate of return on assets assumption, the Trustees considered the historical returns and the future expected returns for each asset class, as well as the target asset allocation of the pension portfolio. This resulted in the selection of the 6.9% per annum long term rate of return on assets assumption from 2 February 2003, and 7.0% per annum from 1 February 2004.

The Group expects to make contributions of ~~£3.7~~some £3.8 million to the Group Scheme in ~~2004/05.~~2005/06.

Projected benefit payments are as follows:
	£m

2005/06	4.1
2006/07	4.2
2007/08	4.3
2008/09	4.5
2009/10	4.7
2010/11 to 2014/15	4.9

See note 2220 for further information on the Group’s pension plans. For US GAAP purposes, the pension fund asset included in the Group’s consolidated balance sheet would be classified as a non-current asset.

New US accounting standards not yet adopted
~~Interpretation 46 ‘Consolidation of Variable Interest Entities,~~FAS 151, ‘Inventory Costs – an ~~Interpretation of~~amendment to ARB 51’, issued in January 2003, addresses how a business enterprise should evaluate whether it has a controlling financial interest in an entity through means other than voting rights and accordingly should consolidate the entity. FIN 46R, whichNo. 43’ was issued in ~~December 2003, replaces FAS Interpretation 46. FIN 46R~~November 2004 to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs and wasted material. This statement requires that those items be recognised as current period charges and that the allocation of fixed production overheads to the costs of conversion is ~~to be applied for~~based on the ~~first reporting period ending after 15 March 2004.~~normal capacity of the production facilities. The Group believes that the adoption of ~~FIN 46R~~FAS 151 will not have a significant impact on its consolidated accounts.

FAS ~~150,~~152 ‘Accounting for ~~Certain Financial Instruments with Characteristics~~Real Estate Time-sharing Transaction’ amends FAS 66 ‘Accounting for Sale of ~~Both Liabilities~~Real Estate’ to state that the guidance for (a) incidental operations and ~~Equity’, was issued in May 2003 and establishes standards for how certain financial instruments with characteristics of both liabilities and equity are classified.~~(b) costs incurred to sell real estate projects does not apply to real estate time-sharing transactions. This statement is effective for ~~the Group from 1 February 2004. Staff Position 150-3 has deferred the effective date of FAS 150 for certain mandatory controlling interests.~~fiscal year beginning after 15 June 2005. The Group believes that the adoption of FAS ~~150~~152 will not have a significant ~~impact~~effect on its consolidated accounts.

~~102~~

Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005

113

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Notes to the accounts (continued)

FAS 153 ‘Exchanges of Non-monetary Assets – an amendment of APB Opinion No. 29’. This statement eliminates the exception for non-monetary exchanges of similar productive assets and replaces it with a general exception for exchanges of non-monetary assets that do not have commercial substance. This statement is effective for fiscal years beginning after 15 June 2005. The Group believes that the adoption of FAS 153 will not have a significant effect on its consolidated accounts.

FAS 123 (revised 2004), ‘Share-Based Payment’ requires that the compensation cost relating to share-based payment transactions be recognised in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. The impact on the Group’s US GAAP financial statements is not expected to be material, but the adoption of IFRS reporting in the UK is expected to reduce the stock compensation adjustment from the UK/US GAAP reconciliation. This statement is effective for fiscal years beginning after 15 June 2005.

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Signet Group plc Annual Report & Accounts year ended 29 January 2005

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Social, ethical and environmental matters

Introduction
Signet recognises that many different stakeholders have an interest in its activities, and that the Group’s success is dependent on the strength and effectiveness of its relationship with those stakeholders. Signet’s approach to the governance of social, ethical and environmental (“SEE”) matters, its framework of principles and policies, its relationship with key stakeholder groups and major initiatives that have occurred in ~~2003/04~~2004/05 are set out below.

Governance of SEE matters
The Group has a formal SEE governance framework with SEE matters being included in the schedule of matters reserved for the Board. The Group Chief Executive has been designated as the director responsible for SEE matters and reports to the Board on SEE issues on a regular basis.

A SEE Committee, chaired by the Group Company Secretary, ~~is in place~~and consisting ~~of a team~~ of senior managers from the UK and US, ~~with key~~has responsibilities for the implementation of the various aspects of the SEE principles and policies. The Committee members are drawn from the merchandising and buying, human resource, corporate communication, finance and internal control functions. It meets at least four times a year. The Group Company Secretary reports to the Group Chief Executive regarding the Committee’s work in implementing the SEE programme that has been approved by the Board.

Matters for which the SEE Committee has responsibility include:

•	identification of significant risks to the Company’s short and long term value arising from SEE matters;

•	ensuring that the Board has adequate information to take account of material SEE matters;

•	development of relevant SEE principles and policies for consideration and approval by the Board;

•	implementation of the SEE programme agreed by the Board;

•	reviewing systems for managing significant SEE risks;

•	benchmarking the SEE performance and report of the Group against other general retail sector companies; and

•	preparation, for review and approval by the Board, of public SEE disclosures and reporting.

The procedures for SEE risk management are embedded within the management structure of the Group. SEE risks are discussed on pages 2935 to 3340 ‘Risk and other factors’.

Signet has important relationships with a wide range of different stakeholders, including shareholders, customers, employees, suppliers and ~~shareholders.~~communities. The Group engages with these stakeholders in a number of ways, including consumer research, customer

service facilities, employee attitude surveys, supplier relationship management systems, ~~and~~ investor relations ~~programmes.~~programmes and participation in civic and community activities. In addition, Jewelers Of America (the US speciality jewellery retail trade association) engages with stakeholders in the industry, including non-governmental organisations, trade unions, producers and manufacturers, governments and consumer groups, on major issues. The Group Chief Executive is on the Board of Jewelers of America and chairs its Ethical Initiatives ~~Committee.~~and Executive Committees.

Principles and policies framework
The Board has a Statement of SEE Principles (“Principles”) outlining the Group’s policy to operate as a profitable and reputable speciality jewellery retailer, the Group’s responsibilities to various stakeholders and the SEE principles by which it operates. The Principles cover the following areas:

•	accountability to ~~stakeholders~~
	stakeholders;
•	business ~~integrity~~
	integrity;
•	human ~~rights~~
	rights;
•	labour ~~standards~~
	standards;
•	health and ~~safety~~
	safety;
•	the ~~environment~~
	environment; and
•	~~community~~community.

The Group ~~also~~ has a Supplier Code of Conduct (“Supplier Code”) which was reviewed and updated in 2004 and policies on business integrity, health and safety, the environment and labour standards. The Principles, Supplier Code and other policies are now incorporated, as appropriate, into the Group’s staff induction process and operational procedures within the business. More detailed information is available on the Group’s web site (www.signetgroupplc.com).

Signet’s principles and policies are intended to provide a framework with which the divisional policies and procedures conform. They do not replace ~~existing~~ detailed divisional policies and procedures.

~~Developments in 2003/04~~
~~During the year the Group:~~

•	~~implemented the revised requirements of the Kimberley Process which was designed to eliminate conflict diamonds from the legitimate diamond trade;~~

•	~~improved its environmental management systems; and~~

•	~~reviewed its communications with stakeholders.~~

~~The Group has also worked closely with Jewelers of America to establish industry working groups considering environmental and supply chain issues.~~


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Social, ethical and environmental matters (continued)

Developments in 2004/05
During the year the Group:

•	enhanced the controls around the Kimberley Process which was designed to eliminate conflict diamonds from the legitimate diamond trade, details of which are set out on page 37;
•	improved its environmental management systems; and
•	reviewed its communications with stakeholders.

The Group has continued to work closely with Jewelers of America to establish industry working groups, where the Group believes it can be most effective considering environmental and supply chain issues and with other industry constituents to promote responsible business practices in order to maintain customer confidence and the integrity of the product.

Our stakeholders

Signet’s commitments to various stakeholders are articulated in the Principles. These are summarised below:

Shareholders

Signet’s aim is to deliver an acceptable growth in value to shareholders which is sustainable, thereby protecting shareholders’ short and longer term interests. The Group’s responsibilities to shareholders are set out in more detail in the Corporate governance statement on page ~~37.~~45. The Group is committed to maintaining open dialogue with its shareholders on SEE and other matters. Signet has been a member of the FTSE4Good UK Index since its launch and endeavours to meet the changing criteria of the Index. During 2004/05 the Group again met the enhanced requirements of inclusion by strengthening its environmental management systems and data collection processes.

Customers
Signet’s mission is to meet, and where possible exceed, customer expectations through a high standard of customer service, high store standards, and by offering real choice and value. In doing so the Group endeavours to maintain product integrity by ensuring the quality of Signet’s products and by offering merchandise that is responsibly sourced, and is in compliance with the Kimberley Process.

The Group’s policy is that all customers should be treated with respect and warmth. Sales training programmes include modules on treating all customers with ~~respect.~~respect generally. The Group has customer service departments, complaint resolution processes, mystery shopper programmes and conducts market research to better understand customer requirements.

Employees

Employees are key to Signet’s ability to achieve its objectives and mission. Therefore teamwork, integrity, communication, and fair treatment of employees all play an important part in the way the Group operates. Furthermore, Signet’s ability to operate in accordance with its Principles is dependent on its employees’ understanding of them and the way in which the Principles impact on their respective roles and responsibilities.

Signet considers its relationship with its employees to be excellent and values honest, open and constructive ~~“two way”~~“two-way” communication throughout the organisation. This is achieved through store, area and regional management meetings ~~together with~~in addition to staff opinion surveys, ~~and~~ feedback reports and staff meetings. These procedures facilitate consultation during which the views of employees can be expressed and taken into account in decisions likely to affect their interests. Staff are kept informed of the Group’s performance and objectives through management contact supplemented by staff publications in both the UK and US. The involvement of employees in the Group’s performance is encouraged through participation in performance-related

incentive payment schemes and savings-related share option schemes which cover all Group employees subject to minimum employment requirements. The Group does not restrict or discriminate against employees who wish to be covered by collective bargaining agreements.

The Group’s policy is not to tolerate any form of unlawful discrimination on any grounds or at any level. In respect of people with disabilities, full and fair consideration is given to employment, opportunities for training, career development and promotion according to their skills and capacity. The services of any existing employees who become disabled are, where possible, retained and appropriate training is arranged for them wherever possible.

The Group assigns responsibility for human resource matters, including health and safety, to the divisional executive management committees. Both the UK and US operations have established systems which include the provision of training and development opportunities at all levels of the organisation. See pages 119 and 1718 for further details.

Suppliers
The Group recognises that stakeholders expect companies to exert influence, where they can, over suppliers to ensure that SEE standards are upheld throughout the supply chain. The Supplier Code outlines Signet’s commitment to its suppliers, and the expectations it has of them. The Supplier Code applies to suppliers and agents with whom Signet deals directly and Signet

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regularly discusses its implementation with them. Those suppliers and agents are encouraged to ensure that this Supplier Code is communicated throughout the supply chain.

Most of the raw and processed materials for the merchandise sold by Signet are traded on commodity exchanges or through multiple brokers and traders making the original source difficult to trace. Signet believes that SEE risks at the mining, trading and secondary processing phases of the supply chain are more effectively managed through ~~collaboration with~~co-operation within the industry. Signet therefore actively participates in Jewelers of America ~~(the US speciality jewellery retail trade association)~~ in considering what action Jewelers of America can take on behalf of its members to set SEE standards and influence matters throughout the supply chain. In 2002 Jewelers of America adopted a Statement of Principles relating to SEE matters and adopted a programme to communicate those principles to its members. Jewelers of America has developed a Supplier Code for the industry that was launched in the first quarter of 2004. ~~The industry will develop an implementation strategy during 2004 through further engagement with stakeholders and analysis of the issues in key sourcing countries.~~

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Signet is also working, where appropriate, with other trade bodies such as the Jewelers Vigilance Committee to be better able to respond to SEE issues at an industry level.

One of the specific issues facing the Group and the diamond sector is conflict diamonds, which are diamonds ~~being~~ sold by rebel movements to fund military campaigns. The Group is a non-voting member of the World Diamond Council which, together with Jewelers of America, has worked with the United Nations, government bodies, commercial interests and civil society to introduce a workable system for the certification of the source of uncut diamonds. This system, known as the Kimberley Process, and Kimberley Process Certification System (“KPCS”) was formally adopted in November 2002 and came into operation during 2003. Details regarding the Kimberley Process are available at ~~www.worlddiamondcouncil.com~~www.kimberleyprocess.com.

Following the adoption of the KPCS process, Signet ~~sent a letter~~wrote to all its trade diamond and diamond jewellery suppliers. The text, based on the Jewelers of America guidance, requires them to supply the Group with merchandise that complies with the KPCS. Signet has amended its systems, procedures and documentation to take account of the KPCS so that only diamonds that are warranted to comply with the KPCS on invoices, annual agreements, or both are accepted from trade suppliers. The Group also trained its buying staff with regard to the KPCS requirements and briefed its sales associates on its operation. During the year an internal audit of these procedures was carried out, confirming the Group’s compliance with Jewelers of America’s recommendations even though Signet is not directly governed by the KPCS.

Since the formal adoption of the KPCS in November 2002, ~~two subsequent KPCS plenary meetings have taken a series of decisions~~further steps to assist in ~~its implementation. These include procedures:~~the implementation have included:

•	~~Establishing~~establishing formal rules of procedure for KPCS operation, enabling formal confirmation of participant status of the initial group of participant countries;

•	~~Enabling~~enabling a system of peer review of adherence to requisite provisions of national legislation and import/export controls;

•	~~Enabling~~enabling collection of statistics from all participant countries in accordance with standard formats and procedures;

•	~~Enabling~~enabling annual peer review of comprehensive reporting of information and statistical data that must be submitted by all participant countries;

•	~~Enabling~~enabling the dispatch of review visits to any participant country on a voluntary basis;

•	~~Enabling~~enabling the dispatch of special review missions where there are credible indications of significant non-compliance with the KPCS;

•	~~Dispatching~~dispatching the first special review mission to the Republic of Congo (formerly Central African ~~Republic~~Republic) in order to assess the effectiveness of the control measures; and

•	~~Confirming~~confirming review of the entire KPCS is to take place not later than July 2006.

In 2004 over 40 countries (including the European Union as a single entity) were participants in the KPCS and participants accounted for over 99% of world diamond production. While the overwhelming trade in rough diamonds was between participants in the KPCS, it is difficult to assess the precise level of participation. However anecdotal evidence suggests that the unscrupulous diamond dealers are finding it increasingly difficult to sell non-certified stones.

The first voluntary peer review visit took place in March 2004 annual reports having been received from all participants and by the end of 2004 review visits were made covering nearly two thirds of global rough diamond production, more than 80% of global exports and more than 90% of global imports. The Republic of Congo (Congo-Brazzaville) was suspended from membership in 2004 following the visit by a special review mission, and the Kimberley Process Participation Committee addressed issues relating to three other countries. A comprehensive statistical database is now available and general baselines for the identification of anomalies have been established. While the quality of data has substantially improved, further progress needs to be made and steps to do so are being implemented.

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Social, ethical and environmental matters (continued)

While Signet is the world’s largest speciality jeweller, its share of the worldwide jewellery and watch market amounts only to about 2% of the total. Therefore it is the Group’s belief that it can be most effective in influencing improvements to the supply chain by working together with other industry representatives, who together can by concentration into a single industry voice be representative of many aspects of the supply chain, and use their combined influence in working to improve it as a whole.

During the year the Group worked actively with other companies representative of the industry and was one of the signatories to a Statement of Intent that formed the basis of an agreement for further co-operation to promote increased consumer confidence and integrity in the product by promoting responsible business practices throughout the industry.

In respect of supplier payment, Group policy is that the operating businesses are responsible for agreeing the terms and conditions under which business transactions with their suppliers are conducted, rather than following any particular code or standard on payment practice (see note 30(e) on page 92101 regarding the number of days purchases outstanding). Accordingly suppliers are aware of the terms of payment and it is Group policy to ensure that payments to suppliers are made in accordance with these agreed terms.

Environment
Whilst the direct environmental impact of its operations is judged to be relatively low compared to many business sectors and to other retailers, Signet recognises that there may be opportunities to improve its performance. ~~The~~An environmental impact review confirmed that:

(a)	Jewellery has a very long life and is highly recyclable. Recycling takes place in respect of trade-ins, obsolete inventory, used watch batteries and certain packaging.

(b)	Jewellery and watches have an extremely high value to weight ratio and value to volume ratio making transportation through the supply chain relatively low impact. The Group makes use of third party distributors and reusable containers for merchandise distribution.

(c)	The ~~Group’s ratio of sales to square feet of occupied~~Group occupies relatively little space ~~in stores or warehouse accommodation is high~~ compared to other retailers of a similar market capitalisation and its sales density is above the jewellery sector average, and therefore ~~given~~ the ~~Group’s size it~~Group has ~~less of~~ a smaller physical ~~impact.~~impact on the environment.

(d)	Signet’s supply chain originates with the producers of the raw materials with whom the Group does not have a direct relationship but it is recognised that the extraction of minerals has an environmental impact that requires careful management by mining companies.

During 2003/04 Signet ~~has~~ developed and tested data collection systems for its energy usage, greenhouse gas emissions and water usage in both the US and the UK. ~~This data has then been~~

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~~Social, ethical and environmental matters~~ ~~(continued)~~

~~benchmarked against other general retailers. As part of the process to strengthen Signet’s~~Signet strengthened its environmental management systems during 2004/05 by further developing its data collection process of key performance indicators for the purpose of validating the previous year’s results and then benchmarked the results against published data from UK competitors. The benchmarking process showed that when compared with its peers, the Group has a broadly similar impact in terms of energy usage, emission of greenhouse gases and water consumption.

For 2005/06 the Board has endorsed environmental performance targets for the UK and US divisions and approved the following environmental ~~targets for 2004/05:~~work programme:

1.•	~~Complete~~continue to collect baseline data ~~collection and validation~~ for energy usage and greenhouse gas emissions, and validate existing data for water ~~usage and waste materials.~~usage;
•	undertake an energy audit in representative stores in the US; and
2.•	~~Benchmark results against published data from UK competitors.~~

3.	~~Where possible develop~~undertake a ~~data collection system for~~review of the energy ~~usage that includes third party distribution services.~~

4.	~~Identify if there is any variation~~efficiency opportunities of the new model store designs in ~~energy usage between store types.~~the UK.

Further, Signet will continue to work with Jewelers of America who are currently exploring ways in which the jewellery industry can use its influence to improve environmental performance related to mining of minerals, in particular of gold. The Group will also continue with the work commenced in 2004/05 to enhance consumer confidence and credibility of the product working together with industry constituents, through the initiatives described above.

Community
Signet’s prime benefit to society is through the contribution it makes to the success and efficiency of the economies in which it operates, through the employment it generates both within the business and throughout its supply chain, the taxes it pays and the value it creates for shareholders.

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The Group is committed to the support of charitable organisations. Signet believes it is best to give support to a small number of specific charities rather than fragment its charitable giving. In the

US support is primarily given to The United Way, St. Jude Children’s Research Hospital and The Jeweler’s Charity Fund. In the UK the Group primarily supports the Princess Royal Trust for Carers. During the period the Group made provision for total charitable givings of ~~£1,305,000 (2002/03: £1,032,000)~~£1,467,000 (2003/04: £1,305,000). This included direct charitable contributions of ~~£338,000 (2002/03: £243,000)~~£478,000 (2003/04: £338,000); of which ~~£177,000 (2002/03: £152,000)~~£279,000 (2003/04: £177,000) was in the UK and ~~£161,000 (2002/03: £91,000)~~£199,000 (2003/04: £161,000) was in the US and marketing initiatives on both sides of the Atlantic which resulted in additional charitable contributions of ~~£967,000 (2002/03: £789,000)~~£989,000 (2003/04: £967,000). In January 2005 a donation of £100,000 was made to the Tsunami Appeal Fund. Support is also given to the management of Carer Centres operated by the Princess Royal Trust for Carers. Assistance is also given to organisations that help the disadvantaged into employment in the vicinity of the Group’s

US administrative and distribution centre in Northeast Ohio, such as United Disabilities Services, Mature Services and the Urban League.

No political donations were made in the US or the UK by the Group in the period ~~(2002/03:~~(2003/04: £nil).

Human rights

Signet supports the Fundamental Conventions of the International Labour Organisation and the UN Declaration of Human Rights. The Group encourages the support and respect for the protection of human rights within its sphere of influence. The Supplier Code sets out the Group’s expectation that suppliers should respect the Fundamental Conventions of the International Labour Organisation and the UN Declaration of Human Rights. Signet is working at a senior executive level ~~through Jewelers of America~~ to address human rights in the jewellery supply chain on an ~~industry-wide basis.~~industry wide basis, through the initiative described above.

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Shareholder information

History

Signet Group plc, an English public limited company, has operations in the US and the UK. The Company was incorporated in England and Wales on 27 January 1950 under the name Ratners (Jewellers) Limited. The name of the Company was changed on 10 December 1981 to Ratners (Jewellers) Public Limited Company, on 9 February 1987 to Ratners Group plc and

on 10 September 1993 to Signet Group ~~plc. A summary of~~ plc and is governed by

the ~~Company’s~~Companies Act 1985 (as amended). The Company‘s Memorandum and Articles of Association, which were adopted on 13 June 2002, are available on the Group’s web site and a summary of them was filed with the SEC on a form 6-K on 30 July 2002. The Company’s registered number is 477692. The Company’s registered office is Zenith House, The Hyde, London NW9 6EW.

Significant events that have occurred in the last five years are detailed below:

~~30 Mar 1999~~	~~Announcement of resumption of dividends with a final dividend of 1.0p being recommended in respect of the year 1998/99 for payment on 1 July 1999.~~

~~15 Apr 1999~~	~~Laurence Cooklin resigned from the Board and as Chief Executive Officer of the UK jewellery division.~~

~~1 Oct 1999~~	~~Ian Dahl was appointed to the Board and as Chief Executive Officer of the UK jewellery division.~~

~~28 Mar 2000~~	Terry Burman was appointed Group Chief Executive. He retained his existing role of Chief Executive Officer of the Group’s US division. James McAdam was asked by the Board to remain as Executive Chairman.


31 Jul 2000	Acquisition of Marks & Morgan completed.

	Marks & Morgan, a privately owned company, was the ninth largest speciality retail jeweller in the US. The business consisted of 137 stores predominantly positioned in prime mall locations in the southeast region of the US.

	Signet paid $161.3 million (£107.5 million) in cash to acquire all the outstanding share capital and to repay outstanding debt.

	The acquisition substantially increased Signet’s presence in a key geographic area of the US where it had been under-represented. Approximately 81 stores ~~have been~~were converted to either the Kay Jewelers brand or regional brands. The remaining stores ~~continue~~continued to trade as Marks & Morgan and ~~have been~~were integrated into Signet’s division of regional mall stores.

31 Mar 2001	James McAdam continued as Chairman but ceased to be a full-time executive.

30 Aug 2001	The Group entered into a $410 million unsecured multi-currency five year revolving credit facility agreement.
	This replaced the $250 million and the $100 million facilities that were due to expire in July 2003. The terms of this agreement were broadly similar to those of the facilities being replaced (see note 16 on page ~~73)~~84).

2 Nov 2001	The Group put in place a five year facility of $251 million secured on its US credit card receivables at a fixed rate of 5.42%. The terms were similar to the previous facility of $191.5 million which amortised during the year and had a fixed rate of 7.26% (see note 16 on page ~~74)~~84).

13 Jun 2002	David Wellings retired as a non-executive director.

1 Aug 2002	Russell Walls was appointed to the Board as a non-executive director.

30 Sep 2002	Ian Dahl resigned from the Board and as Chief Executive Officer of the UK ~~jewellery~~ division.

9 Jan 2003	~~Rob~~Robert Anderson was appointed as Chief Executive Officer of the UK ~~jewellery~~ division.

1 Sept 2003	Dale Hilpert was appointed to the Board as a non-executive director.

8 Jan 2004	Lee Abraham retired from the Board as a non-executive director.


28 Sept 2004	The Group entered into a $390 million unsecured multi-currency five year revolving credit facility agreement. This replaced the $410 million facility that was due to expire in August 2006. The terms of this agreement were broadly similar to those of the facility being replaced.

8 Oct 2004	Announcement of change in American Depositary Share Ratio from 30:1 to 10:1 to become effective from 18 October 2004.

18 Oct 2004	The Group announced its intention to list its ADSs on the NYSE from 16 November 2004, under the ticker symbol SIG. It was confirmed that the ADS ratio change had become effective on 18 October and that Deutsche Bank had recently been appointed as the depositary bank for Signet’s ADSs.

1 Nov 2004	Robert Walker was appointed to the Board as a non-executive director.

6 Apr 2005	James McAdam announced his intention to retire from the Board no later than at the conclusion of the annual general meeting in 2006.
	Robert Anderson was appointed to the Board.

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~~Shareholder information~~ ~~(continued)~~

Nature of trading market

The shares of the Company are traded on the London Stock Exchange (symbol: SIG) and the American Depositary Shares (“ADSs”) representing the shares are quoted on the NYSE (symbol: SIG). Prior to 16 November 2004 the ADSs were traded on the Nasdaq ~~National Market~~ (symbol: SIGY). The ADSs are evidenced by ~~American Depositary Receipts (“ADRs”)~~ADRs issued pursuant to an Amended and Restated Deposit Agreement, dated 423 September ~~1997,~~2004, and made between the Company, ~~The~~Deutsche Bank ~~of New York,~~Trust Company Americas, as depositary (the “Depositary”) and the holders from time to time of the ADRs. Each ADS represents 30ten shares. Prior to 18 October 2004 the ratio of shares per ADS had been 30:1 and prior to 4 September 1997 the ratio of shares per ADS had been ~~three to one.~~3:1.

The table below sets out, for the calendar years and quarters indicated, (i) the reported high and low middle market

quotations for the shares of the Company based on the Daily Official List of the London Stock Exchange and (ii) the reported high and low closing sales prices of the ADSs on the Nasdaq ~~National Market~~or the NYSE, as applicable, as reported by ~~Bloomberg.~~

Datastream.

At ~~24 March 2004, 32,172~~6 April 2005, 28,467 shares and ~~1,777,322~~5,729,993 ADSs (representing ~~53,319,660~~57,299,930 shares) were held of record in the US. These shares and ADSs were held by 3128 record holders and ~~675~~715 record holders, respectively and collectively represented approximately ~~3.1%~~3.3% of the total numbers of shares outstanding. Since certain of the shares and ADSs are held by brokers or other nominees, the number of record holders in the US is not representative of the number of beneficial holders or of where the beneficial holders are resident.

		London Stock Exchange pence per share				Nasdaq US dollars per ADS					London Stock Exchange				Nasdaq/NYSE
											pence per share				US dollars per ADS
		High		Low		High		Low
											High		Low		High		Low
Calendar 1999		70	¹/₄	38	³/₄	31	³/₄	15	⁵/₈

Calendar 2000	Calendar 2000	60	³/₄	43		34	¹/₈	21		Calendar 2000	60	³/₄	43		11	³/₈	7

Calendar 2001	Calendar 2001	95	¹/₂	51		40	¹/₂	22		Calendar 2001	95	¹/₂	51		13	¹/₂	7	¹/₄

Calendar 2002	Calendar 2002									Calendar 2002	132	¹/₄	65		19	¹/₄	10	¹/₄

Calendar 2003										Calendar 2003
First quarter	First quarter	120		97		51		41	¹/₈	First quarter	82	¹/₂	66		13		10	³/₄
Second quarter	Second quarter	132	¹/₄	94	³/₄	57	³/₈	44	¹/₈	Second quarter	93		73	¹/₂	16		11	³/₄
Third quarter	Third quarter	99		77		46		35		Third quarter	113	³/₄	89	³/₄	19		14	³/₄
Fourth quarter	Fourth quarter	94	³/₄	65		44		30	⁷/₈	Fourth quarter	114	¹/₂	96		19	⁷/₈	17	¹/₄

Calendar 2003
Calendar 2004										Calendar 2004
First quarter	First quarter	82	¹/₂	66		39	¹/₄	32		First quarter	110		93	³/₄	20	³/₈	17	¹/₄
Second quarter	Second quarter	93		73	¹/₂	48	¹/₈	35		Second quarter	119	³/₄	107		22	¹/₄	19	¹/₄
Third quarter –	July	102		89	³/₄	50	¹/₂	44	¹/₈	July	115	¹/₂	103	³/₄	21	¹/₄	19	¹/₂
	Aug	110	³/₄	97		53	¹/₈	47	¹/₄	Aug	110		102	¹/₄	20	¹/₂	18	⁵/₈
	Sept	113	³/₄	105	¹/₂	57		52	¹/₄	Sept	114	¹/₂	102	¹/₂	20	³/₄	18	⁵/₈
Fourth quarter –	Oct	114	¹/₂	103	¹/₄	59	³/₈	52	⁵/₈	Oct	119	¹/₂	103	¹/₄	21	¹/₄	19	¹/₂
	Nov	109	³/₄	100	³/₄	56		52	¹/₂	Nov	109		104		20	³/₄	19	¹/₂
	Dec	104	³/₄	96		56		51	¹/₂	Dec	110	³/₄	104		21	³/₄	20	³/₈

Calendar 2004
Calendar 2005										Calendar 2005
First quarter –	Jan	104	¹/₄	93	³/₄	57	¹/₂	52		Jan	112		106	¹/₄	21	⁵/₈	20	¹/₂
	Feb	103		94	¹/₂	59		53		Feb	115	³/₄	111	¹/₄	22		21	¹/₂
	Mar (up to 24 March)	109	³/₄	103	¹/₂	61	¹/₈	57		Mar	112	¹/₂	107	¹/₂	22		20	³/₄
Second quarter –										(up to 6 April)	114	³/₄	108		22		20	¹/₂

(1)

Following the change in the ADS ratio from thirty ordinary shares per ADS to ten ordinary shares per ADS on 18 October 2004, prior figures have been restated.

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Shareholder information (continued)

Dividends
Under English law, dividends can only be paid out of profits available for distribution (generally defined as accumulated realised profits less accumulated realised losses less net unrealised losses) and not out of share capital or share premiums (generally equivalent in US terms to paid-in surplus). At 3129 January ~~2004,~~2005, after taking into account the subsequently recommended final dividend of ~~2.16p~~2.625p per share, the holding company had a distributable reserves balance of ~~£114.8~~£116.0 million ~~(1 February 2003: £30.9~~(31 January 2004: £114.8 million).

In order to make further distributions in excess of this figure, the holding company would first need to receive dividends from its subsidiaries. In addition to restrictions imposed at the time of the 1997 capital reduction on the distribution of dividends received from subsidiaries, the payments of dividends from other tax jurisdictions, such as the US, may not be tax efficient. Furthermore, there may be other reasons why dividends may not be paid by subsidiaries to the holding company.

If declared by the Board (and, in the case of a final dividend, if approved by shareholders in general meeting) dividends are paid to holders of shares as at record dates that are decided by the Board.

Substantial shareholdings and control of the Company
So far as the Company is aware, it is neither directly nor indirectly owned by or controlled by one or more corporations or by any government.

As at ~~24 March 2004~~6 April 2005 the interests in the issued shares set out in the table on page ~~110~~123 had been notified to the Company in accordance with sections 198 to 208 of the Companies Act 1985 (including interests represented by the ADSs). Shareholders are obliged to notify the Company of their interests in such shares if they hold 3.0% or more beneficially or 10.0% or more in the case of certain shareholders, such as investment managers.

The Company’s major shareholders as listed in the table on page ~~110~~123 do not have different voting rights per share than other holders of the Company’s shares.

The following shareholders had significant changes in their percentage ownership of the Company’s issued share capital since ~~27 January 2001.~~2 February 2002. This is based on disclosure made in the accounts for each of the three years since ~~27 January 2001~~2 February 2002 and notification received by the Company.

•	~~Deutsche Bank AG had a non-beneficial holding of 10.5% at 27 January 2001 and fell below 10.0% on 1 March 2001.~~

•	AMVESCAP PLC had a non-beneficial holding of ~~10.0% at29 January 2001, 10.0% at 28 March 2001,~~ 11.0% on10 April 2002, 12.0% on 26 March 2003, and fell below 10.0% on 14 August 2003. These figures include the interest of its subsidiary, INVESCO Perpetual High Income Fund, which had a non-beneficial holding of ~~6.0% on 21 September 2001,~~ 6.0% on 10 April 2002, 5.8% on 26 March 2003 and fell below 3.0% on 14 August 2003.

•	The Capital Group Companies, Inc. had a beneficial holding, of ~~10.1% at 28 March 2001,~~ 13.3% on 10 April 2002, 14.0% on 26 March 2003, 12.2% on 24 March 2004 and, as stated in the table on page ~~110, 12.2%~~123, 12.97% on ~~24 March 2004.~~
	6 April 2005.
•	FMR Corp. and Fidelity International Limited had a non-beneficial holding of 3.3% ~~at 28 March 2001, and fell below 3.0%~~ on 24 ~~August 2001. On 17~~ March 2004 and, as stated in the table on page ~~110, they had a non-beneficial holding of 3.3%.~~
	123, 5.98% on 6 April 2005.
•	Standard Life Group had a beneficial holding of ~~4.1% at28 March 2001,~~ 3.7% ~~on 10~~on10 April 2002, and fell below 3.0% on 8 November 2002.

•	Government of Singapore Investment Corporation Pte Ltd had a beneficial holding of 4.1% on 26 March 2003 and fell below 3.0% on 29 May 2003.

•	Legal & General Investment Management Limited had a beneficial holding of 3.1% on 26 March 2003, 3.1% on24 March 2004 and, as stated in the table on page ~~110,~~123, 3.1% on ~~24 March 2004.~~
	6 April 2005.
•	Harris Associates L.P. had a beneficial holding of 3.0% on14 April 2003, 4.0% on 24 March 2004 and, as stated in the table on page ~~110, 4.0%~~123, 6.03% on 246 April 2005.
•	Schroder Investment Management Limited had a non-beneficial holding of 10.157% on 3 December 2004, and fell below 10.0% on 10 March ~~2004.~~2005.
•	Aviva plc and Morley Fund Management Limited had a beneficial holding of 3.12% on 8 November 2004 and, as stated in the table on page 123, 3.12% on 6 April 2005.
•	Lloyds TSB Group Plc had a beneficial holding of 3.11% on14 March 2005 and, as stated in the table on page 123, 3.11% on 6 April 2005.

At ~~24 March 2004,~~6 April 2005, the total amount of the Company’s voting securities owned by directors of the Company as a group was ~~1,171,809,~~1,498,544, all of which securities were shares.

The Company does not know of any arrangements, the operation of which, might result in a change of control of the Company.


*122*	Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~ 2005	*~~109~~*

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~~Shareholder information~~ Substantial shareholdings~~(continued)~~

Substantial shareholdings
Percentage
Number of of issued
shares shares

The Capital Group Companies, Inc⁽¹⁾ 211,324,782 12.2
Harris Associates L.P. 69,562,600 4.0
FMR Corp. and Fidelity International Limited 56,536,627 3.3
Legal & General Investment Management Limited 53,017,838 3.1

	Number of	Percentage of
	shares	issued shares

The Capital Group Companies, Inc.⁽¹⁾	225,130,421	12.97
Harris Associates L.P.	104,581,400	6.03
FMR Corp. and Fidelity International Limited	103,753,777	5.98
Aviva plc and Morley Fund Management Limited	54,066,150	3.12
Lloyds TSB Group Plc	54,062,844	3.11
Legal & General Investment Management Limited	53,017,838	3.10

(1)	Includes interest of Capital International Limited in ~~183,175,446~~203,773,985 of such shares, notified on their behalf by the Capital Group Companies, Inc.

Exchange controls and other limitations affecting
security holders
There are currently no UK laws, decrees or regulations restricting the import or export of capital or (save as to taxation) affecting the remittance of dividends or other payments to holders of shares or ADSs who are non residents of the UK, subject to a few limited exceptions. Such exceptions apply where there are sanctions or similar orders issued by the United Nations, the European Union or the UK Government.

Subject to those exceptions, under English law and the Company’s Memorandum and Articles of Association, persons who are neither residents nor nationals of the UK may freely hold, vote and transfer shares (or other securities) in the same manner as UK residents or nationals. The Articles of Association provide that a shareholder with a registered address outside the UK is not entitled to receive notice of any general meeting of the Company unless the shareholder has provided the Company with a UK address, or (in the case of any notice issued electronically) an appropriate electronic address, at which notices may be delivered.

Taxation
Taxation for US residents
The following summary sets out the principal US federal and UK tax consequences of the purchase, ownership and disposition of the Company’s shares or ADSs in respect of such shares by a ~~“US~~”US Holder” (as defined below) and is not intended to be a complete analysis or listing of all the possible tax consequences of such purchase, ownership or disposition.

As used herein, a US holder means a beneficial owner of the Company’s shares or ADSs that is: a citizen or resident of the US; a corporation (or other entity taxable as a corporation for US federal income tax purposes) created or organised in or under the laws of the US, or any state thereof; an estate whose income is includible in gross income for US federal income tax purposes regardless of its source; or a trust, if a court within the US is able

to exercise primary supervision over the administration of the trust and one or more US persons have the authority to control all substantial decisions of the trust.

This summary deals only with shares and ADSs held as capital assets and does not address any special tax consequences that may be applicable to US holders who are subject to special treatment under the current income tax convention between the US and the UK which came into effect on 31 March 2003 (the ‘New Convention’), the income tax convention between the US and UK which entered into force in 1980 (the ‘Prior Convention’) or the US Internal Revenue Code of 1986, as amended, such as dealers in securities or foreign currency, traders who elect mark-to-market accounting, financial institutions or financial services entities, insurance companies, persons subject to the alternative minimum tax, tax-exempt entities or private foundations, persons that hold the shares or ADSs as part of a straddle, hedge, conversion or constructive sale transaction or other integrated financial transaction, persons whose functional currency is other than the US dollar, certain expatriates or former long-term residents of the US, persons who alone, or together with one or more associated persons, control or controlled (directly, indirectly or constructively) 10% or more of the voting shares of the Company or persons who acquire shares or ADSs as ~~compensation.~~compensation for services.

Prospective investors are advised to consult their tax advisers with respect to the tax consequences of the purchase, ownership and disposition of shares or ADSs, including specifically the consequences under state and local tax laws. The statements regarding US and UK tax laws set out below are based on US federal and UK tax laws and UK Inland Revenue practice in force on the date of this Annual Report and are subject to change after that date. This summary does not address the tax consequences to partnerships, other pass-through entities or persons who hold shares or ADSs through a partnership or other pass-through entity.

US holders of ADSs will be treated as the owners of the underlying shares for purposes of the double taxation conventions relating to income and estate and gift taxes between the US and the UK and for the purposes of the US Internal Revenue Code of 1986, as amended.


*~~110~~*	Signet Group plc Annual Report ~~and~~& Accounts year ended 3129 January ~~2004~~2005	*123*

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Shareholder information (continued)

In addition, the following summary assumes that US holders are residents of the US for purposes of the ~~New Convention~~current convention relating to income taxes between the US and the UK (“the Convention”) and are entitled to the benefits of the ~~New~~ Convention.

Taxation of dividends
The New Convention between the US and the UK applies in respect of dividends paid by UK companies from 1 May 2003. US holders can elect, by notifying the US Internal Revenue Service and the UK Inland Revenue, to be taxed for all purposes under the provisions of the Prior Convention for a further period of 12 months ending on 30 April 2004. US holders can make such an election if they feel that the provisions of the Prior Convention, taken as a whole, are more beneficial to them.

A US holder who is a US person for US federal income tax purposes and who was eligible for benefits under the Prior Convention (each such US holder, an “eligible US holder”) may elect to continue to apply the provisions of the Prior Convention with respect to dividends paid up to and including 30 April 2004. The Prior Convention also will apply to dividends paid prior to 1 May 2003 to eligible US holders that did not elect to extend the Prior Convention. An eligible US holder electing to apply the provisions of the Prior Convention with respect to the Company’s dividends will be required to apply all of the provisions of the Prior Convention for an entire twelve month period ending on 30 April 2004 (or the UK taxable year ending in 2004 with respect to income, capital gains and corporation taxes). Under the Prior Convention, an electing eligible US holder who is a beneficial owner of an ADS or a share and of any cash dividend paid with respect thereto should be entitled to a foreign tax credit for UK withholding tax in an amount equal to one-ninth of any dividend paid up to and including 30 April 2004, which, subject to applicable limitations as discussed below, would be creditable against such US holder’s US federal income tax liability. This additional tax credit amount would give rise to additional dividend income. Thus, for example, an eligible US holder that elects for treatment under the Prior Convention and receives an £80 dividend (which amount has been selected for illustrative purposes only) should be considered to receive a dividend of £88.89 (£80 dividend plus a £8.89 gross tax credit) and to have paid £8.89 of UK tax.

An eligible US holder can make an election to apply the provisions of the Prior Convention with respect to a dividend by indicating on Line 5 of US Internal Revenue Service Form 8833 (Treaty Based Return Disclosure Under Section 6114 or 7701(b)). The completed Form 8833 should be filed with the US holder’s US federal income tax return for the relevant year. Such US holder should also write to the UK Inland Revenue Centre for Non-Residents stating that an election, under Article 29(3) of the

New Convention, is being made to apply the provisions of the Prior Convention with respect to such dividend. Pursuant to this election, the US holder will be treated as having paid the UK tax on the date of the distribution. US holders should consult their tax advisers concerning their eligibility and the procedures for claiming the UK tax credit amount under the Prior Convention.

Any dividend paid by the Company will generally be included in the gross income of a US holder as dividend income for US federal income tax purposes to the extent made from the Company’s current or accumulated earnings and profits, as determined under US federal income tax principles. Distributions in excess of such current and accumulated earnings and profits will be applied against and will reduce the US holder’s tax basis in the shares or ADSs and to the extent in excess of such tax basis will be treated as a gain from the sale or exchange of the shares or ADSs. For dividends paid prior to 1 May 2003 (or 1 May 2004, if as described above the US holder has elected to extend the Prior Convention), the amount of dividend includible in income of a US holder includes any UK tax withheld from the dividend payment and amounts in respect of the UK tax credit (as discussed above).

The amount of any dividend paid in pounds sterling will equal the US dollar value of the pounds sterling received calculated by reference to the exchange rate in effect on the day that the dividend is received by the US holder, in the case of shares, or by the Depositary (or its Custodian), in the case of ADSs, regardless of whether the dividend payment is converted into US dollars. Foreign currency exchange gain or loss, if any, realised on a subsequent sale or other disposition of pounds generally will be treated as US source ordinary income or loss to the US holder.

Dividends received on the shares or ADSs generally will be foreign source passive income for US foreign tax credit purposes and generally will not be eligible for the dividends received deduction allowed to US corporations under Section 243 of the US Internal Revenue Code.

~~Under recently enacted US federal income tax legislation generally applicable for 2003, an individual~~A non-corporate US holder’s “qualified dividend income” is subject to tax at a reduced rate of tax of 15%. For this purpose, qualified dividend income includes dividends from foreign corporations paid prior to 1 January 2009 if (a) the shares of such corporation with respect to which such dividend is paid are readily tradeable on an established securities market in the US, ~~including Nasdaq,~~ or (b) such corporation is eligible for the benefits of a comprehensive tax treaty with the US that includes an information exchange programme and is determined to be satisfactory to the US Secretary of the Treasury. The US Secretary of the Treasury has indicated that the ~~New~~


~~Signet Group plc~~ ~~Annual Report & Accounts year ended 31 January 2004~~	*~~111~~*

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~~Shareholder information~~ ~~(continued)~~

Convention is satisfactory for this purpose. Dividends will not however qualify for the reduced rate if such corporation is treated for the tax year in which dividends are paid (or in the prior year) as a “foreign investment company”, a “foreign personal holding company”, or a “passive foreign investment company” for US federal income tax purposes. Based on the nature of the Company’s operations

and/or its ownership, the Company does not believe that it would be treated as a foreign investment company or a foreign personal holding company. In addition, the Company does not believe it is a passive foreign investment company. Accordingly, dividend distributions with respect to the Company’s shares or ADSs should be treated as qualified dividend income and, subject to the US holder’s satisfaction of the requirements described below, should be eligible for the reduced 15% US federal income tax rate. A US holder will not be entitled to the reduced rate: (a) if the US holder has not held the shares or ADSs for at least 61 days of the ~~120-day~~121-day period beginning on the date which is 60 days before the ex-dividend date; (b) to the extent the US holder is under an obligation to make related payments on substantially similar or related property; or (c) if the US holder elects to treat the dividend income as “investment income” pursuant to Section 163(d)(4) of the US Internal Revenue Code. Any days during which a US holder has diminished its risk of loss on the shares or ADSs are not counted towards meeting the 61-day holding period required by the statute. Based on US Internal Revenue Service News Release 2004-22, the US Internal Revenue Service intends to give current effect to proposed legislation changing the forementioned 120-day period to a 121-day period.

The UK does not currently apply a withholding tax on dividends under its internal laws. If the UK were to impose a withholding tax, as permitted under the ~~New~~ Convention, the rate of such withholding tax will not exceed 15% of the dividend paid to a US holder. In such circumstances, subject to applicable limitations, a US holder who was subject to any withholding should be entitled to claim a deduction for withheld tax or, subject to the holding period requirements mentioned below, a credit for such withholding tax, against the US holder’s federal income tax liability. The US foreign tax credit limitation may be reduced to the extent that dividends are eligible for the reduced rate described above. Special rules apply to foreign tax credits relating to qualified dividend income. US holders should consult their tax advisers as to the method of claiming such foreign tax credit or deduction and compliance with special tax return disclosure requirements that apply to US holders who claim the benefit of the foreign tax credit on such US holders’ US federal income tax returns.

A US holder will be denied a foreign tax credit (and instead allowed a deduction) for foreign taxes imposed on a dividend if the US holder has not held the shares or ADSs for at least 16 days in the ~~30-day~~31-day holding period beginning 15 days before the ex-dividend date. Any days during which a US holder has substantially diminished its risk of loss on the shares or ADSs are not counted towards meeting the 16-day holding period required by statute. A US holder that is under an obligation to make related payments with respect to the shares or ADSs (or substantially similar or related property) also is not entitled to claim a foreign tax credit with respect to a foreign tax imposed on a dividend.

~~US information reporting and US backup withholding tax~~

~~Under US Treasury regulations, dividends paid on shares or ADSs may be subject~~

124

Signet Group plc Annual Report & Accounts year ended 29 January 2005

Back to US information reporting requirements and backup withholding tax (currently 28%). In addition, under US Treasury regulations, the payment of the proceeds of a sale, exchange or redemption of shares or ADSs to a US holder or non-US holder in the US, or through US or US-related persons, may be subject to US information reporting requirements and backup withholding tax (currently 28%).Contents

US holders can avoid the imposition of backup withholding tax by reporting their taxpayer identification number to their broker or paying agent on US Internal Revenue Service Form W-9. Non-US holders can avoid the imposition of backup withholding tax by providing a duly completed US Internal Revenue Service Form W-8BEN, W-8ECI or W-8IMY, as appropriate, to their broker or paying agent. Any amounts withheld under the backup withholding rules from a payment to a holder will be allowed as a refund or a credit against such holder’s US federal income tax liability, provided that the required returns are filed with US Internal Revenue Service on a timely basis.

Taxation of capital gains

Upon a sale, exchange or other disposition of shares or ADSs, a US holder will recognise a gain or loss for US federal income tax purposes in an amount equal to the difference between the US dollar value of the amount realised and the US holder’s tax basis (determined in US dollars) in such shares or ADSs. Generally, such gain or loss will be a capital gain or loss and will be a long-term capital gain or loss if the US holder’s holding period for such shares or ADSs exceeds one year. Any such gain or loss generally will be income or loss from sources within the US for foreign tax credit limitation purposes. Long-term capital gains of a non-corporate US holder are generally subject to a maximum tax rate of 15%. The deductibility of a capital loss recognised on the sale or exchange of shares or ADSs is subject to limitations.


*~~112~~*	~~Signet Group plc~~ ~~Annual Report & Accounts year ended 31 January 2004~~

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If the shares or ADSs are publicly traded, a disposition of such shares or ADSs will be considered to occur on the “trade date”, regardless of the US holder’s method of accounting. A US holder that uses the cash method of accounting calculates the US dollar value of the proceeds received on the sale on the date that the sale settles. However, a US holder that uses the accrual method of accounting is required to calculate the value of the proceeds of the sale on the “trade date” and, therefore, may realise a foreign currency gain or loss, unless such US holder has elected to use the settlement date to determine its proceeds of sale for purposes of calculating such foreign currency gain or loss. In addition, a US holder that receives foreign currency upon the sale or exchange of the shares or ADSs and converts the foreign currency into US dollars subsequent to receipt will have a foreign exchange gain or loss based on any appreciation or depreciation in the value of the foreign currency against the US dollar. A foreign exchange gain or loss will generally be US source ordinary income or loss.

Generally a US holder who is neither resident nor ordinarily resident for tax purposes in the UK will not be liable for UK tax on capital gains realised on the sale or other disposal of shares or ADSs unless, in the year of assessment in which the gain accrues to such holder, that US holder has a permanent establishment in the UK and the shares or ADSs are or have been used by, held by, or acquired for use by, or for the purpose of, such permanent establishment. However, a US holder who has been resident in the UK for at least four years and held shares or ADSs at that time may, in certain circumstances, become liable to UK capital gains tax on his return to the UK following a disposal of such shares or ADSs. Any US holders whose circumstances are such that they may fall within such provisions are advised to consult their tax adviser.

The New Convention applies in respect of capital gains in the UK from 6 April 2003 and in the US from 1 January 2004. US holders who have made the election to apply the provisions of the Prior Convention described above will be taxed on capital gains under the Prior Convention. Otherwise, US Holders will be taxed on capital gains under the New Convention.

Under the New Convention, a US holder who is resident or ordinarily resident for tax purposes in the UK, a US corporation which is resident in the UK by reason of being managed and controlled in the UK, or a US holder who, or a US corporation which, has a permanent establishment in the UK, where shares or ADSs are or have been acquired, used or held for the purposes of such permanent establishment, should only be liable for either UK tax or US federal income tax on a gain on the disposal of the shares

~~or ADSs. The residence of such US holders is determined under the New Convention. Such US holders will then be taxed by their country of residence as determined under the New Convention.~~

~~Under the Prior~~ Convention, a US holder who is resident or ordinarily resident for tax purposes in the UK, a US corporation which is resident in the UK by reason of being managed and controlled in the UK, or a US holder who, or a US corporation which, has a permanent establishment, where shares or ADSs are or have been acquired, used or held for the purposes of such permanent establishment, may be liable for both UK tax and US federal income tax on a gain on the disposal of the shares or ADSs. Such US holders are advised to consult their tax adviser.

US information reporting and US backup withholding tax
Under US Treasury regulations, dividends paid on shares or ADSs may be subject to US information reporting requirements and backup withholding tax (currently 28%). In addition, under US Treasury regulations, the payment of the proceeds of a sale, exchange or redemption of shares or ADSs to a US holder ~~generally~~or non-US holder in the US, or through US or US-related persons, may be subject to US information reporting requirements and backup withholding tax (currently 28%).

US holders can avoid the imposition of backup withholding tax by reporting their taxpayer identification number to their broker or paying agent on US Internal Revenue Service Form W-9. Non-US holders can avoid the imposition of backup withholding tax by providing a duly completed US Internal Revenue Service Form W-8BEN, W-8ECI or W-8IMY, as appropriate, to their broker or paying agent. Any amounts withheld under the backup withholding rules from a payment to a holder will be ~~entitled to offset~~allowed as a refund or a credit ~~for UK tax~~ against ~~its~~such holder’s US federal income tax liability, ~~in respect of such gain.~~provided that the required returns are filed with US Internal Revenue Service on a timely basis.

Inheritance tax

Shares or ADSs held by an individual who is domiciled in the US for the purposes of the double taxation convention relating to estate and gift taxes between the US and the UK, and for the purposes of the convention is not a national of the UK, will not be subject to UK inheritance tax on the individual’s death or on a lifetime transfer of shares or ADSs, except in certain cases where the shares or ADSs are placed in trust (other than by a settlor domiciled in the US who is not a national of the UK) and, in the exceptional case, where the shares or ADSs are part of the business property of a UK permanent establishment of an enterprise or pertains to a UK fixed base of an individual used for the performance of independent personal services.

The convention generally provides a credit for the amount of any tax paid in the UK against the US federal tax liability in a case where the shares or ADSs are subject both to UK inheritance tax and to US federal gift or estate tax. However, the terms of the US/UK estate and gift tax convention are currently being

Signet Group plc Annual Report & Accounts year ended 29 January 2005

125

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Shareholder information (continued)

reviewed and possibly renegotiated. Further advice should be sought by any holder who is likely to need to rely upon the provisions of the convention.

UK stamp duty and stamp duty reserve tax

Stamp duty is (subject to certain exceptions including for charities) currently payable on any instrument transferring shares to the Custodian of the Depositary at the rate of 1.5% on the value of such shares. In accordance with the terms of the Deposit Agreement relating to the shares, any tax or duty payable by the Depositary or the Custodian of the Depositary on future deposits of shares will be charged by the Depositary to the party to whom ADSs are delivered against such deposits.


~~Signet Group plc~~ ~~Annual Report & Accounts year ended 31 January 2004~~	*~~113~~*

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~~Shareholder information~~ ~~(continued)~~

No UK stamp duty will be payable on transfer of an ADS, provided that the ADS (and any separate instrument of transfer) is executed and retained at all times outside the UK. A transfer of an ADS in the US will not give rise to UK stamp duty provided the instrument of transfer is not brought into the UK. A transfer of an ADS in the UK may attract stamp duty at a rate of 0.5% of the consideration. Any transfer (which will include a transfer from the Depositary to an ADS holder) of the shares, including shares underlying an ADS, may result in a stamp duty liability at the rate of 0.5% of the consideration. There is no charge to ad valorem stamp duty on gifts. On a transfer of shares from a nominee to the beneficial owner (the nominee having at all times held the shares on behalf of the transferee) under which no beneficial interest passes and which is neither on sale, nor arises under or following a contract of sale, nor is in contemplation of sale, a fixed stamp duty of £5 will be payable.

Stamp duty reserve tax generally at a rate of 0.5% of the consideration is currently payable on any agreement to transfer shares or any interest therein unless: (i) an instrument transferring the shares is executed; (ii) stamp duty, generally at a rate of 0.5%, is paid; and (iii) generally the instrument is stamped on or before the accountable date for stamp duty reserve tax. The duty will, however, be refundable if within six years the agreement is completed by an instrument which has been duly stamped, generally at the rate of 0.5%. Stamp duty reserve tax will not be payable on any agreement to transfer ADSs which represent interests in depositary receipts.


*~~114~~126*	Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005

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Selected financial data

		2003/04		2003/04	⁽¹⁾	2002/03		2001/02		2000/01		1999/00							2003/04		2002/03		2001/02		2000/01
					as restated	⁽²⁾	as restated	⁽²⁾⁽³⁾	as restated	⁽²⁾	as restated	⁽²⁾		2004/05		2004/05	⁽¹⁾	as restated	⁽²⁾	as restated	⁽²⁾	as restated	⁽²⁾⁽³⁾	as restated	⁽²⁾
		£m		$m		£m		£m		£m		£m			£m		$m		£m		£m		£m		£m

Amounts under UK GAAP:	Amounts under UK GAAP:													Amounts under UK GAAP:
Profit and loss account	Profit and loss account													Profit and loss account
Sales	Sales	1,617.2		2,943.3		1,608.0		1,578.1		1,387.3		1,136.5		Sales	1,614.4		3,051.2		1,604.9		1,593.6		1,562.4		1,373.3
Cost of sales⁽⁴⁾	Cost of sales⁽⁴⁾	(1,330.9	)	(2,422.2	)	(1,331.6	)	(1,318.3	)	(1,158.9	)	(952.3	)	Cost of sales⁽⁴⁾	(1,329.6	)	(2,512.9	)	(1,330.7	)	(1,331.2	)	(1,317.9	)	(1,157.9	)

Gross profit	Gross profit	286.3		521.1		276.4		259.8		228.4		184.2		Gross profit	284.8		538.3		274.2		262.4		244.5		215.4
Administrative expenses	Administrative expenses	(64.0	)	(116.5	)	(62.5	)	(61.0	)	(51.6	)	(46.9	)	Administrative expenses	(65.9	)	(124.6	)	(64.0	)	(62.5	)	(61.1	)	(51.6	)

Operating profit	Operating profit	222.3		404.6		213.9		198.8		176.8		137.3		Operating profit	218.9		413.7		210.2		199.9		183.4		163.8
Net interest payable	Net interest payable	(10.4	)	(18.9	)	(14.0	)	(15.0	)	(12.7	)	(8.7	)	Net interest payable	(8.6	)	(16.3	)	(10.4	)	(14.0	)	(15.0	)	(12.7	)

Profit before tax	Profit before tax	211.9		385.7		199.9		183.8		164.1		128.6		Profit before tax	210.3		397.4		199.8		185.9		168.4		151.1
Taxation	Taxation	(74.7	)	(136.0	)	(70.8	)	(63.4	)	(52.5	)	(38.6	)	Taxation	(69.1	)	(130.5	)	(70.2	)	(65.7	)	(57.9	)	(48.4	)

Profit for the period	Profit for the period	137.2		249.7		129.1		120.4		111.6		90.0		Profit for the period	141.2		266.9		129.6		120.2		110.5		102.7

Earnings per share	– basic	8.0p		$0.15		7.5p		7.1p		6.7p		5.4p		– basic	8.2p		$0.15		7.5p		7.0p		6.5p		6.1p
	– diluted	7.9p		$0.14		7.5p		7.1p		6.6p		5.3p		– diluted	8.1p		$0.15		7.5p		7.0p		6.5p		6.1p
Earnings per ADS	– basic	240.0p		$4.37		225.0p		213.0p		201.0p		162.0p		– basic	81.5p		$1.54		75.4p		70.3p		65.4p		61.2p
	– diluted	237.0p		$4.31		225.0p		213.0p		198.0p		159.0p		– diluted	81.3p		$1.54		74.9p		69.6p		64.9p		60.7p

Balance sheet data (at period end)	Balance sheet data (at period end)													Balance sheet data (at period end)
Working capital⁽⁵⁾	Working capital⁽⁵⁾	675.8		1,230.0		644.2		663.1		405.8		457.2		Working capital⁽⁵⁾	700.1		1,323.2		642.2		613.0		635.4		383.8
Total assets	Total assets	1,228.6		2,236.1		1,194.7		1,221.9		1,114.2		848.0		Total assets	1,293.7		2,445.1		1,228.6		1,194.7		1,221.9		1,114.2
Total debt	Total debt	207.9		378.4		229.3		268.2		266.6		182.9		Total debt	185.9		351.4		207.9		229.3		268.2		266.6
Long-term debt	Long-term debt	146.2		266.1		174.0		215.3		51.5		143.5		Long-term debt	132.8		251.0		146.2		174.0		215.3		51.5
Cash at bank and in hand	Cash at bank and in hand	128.0		233.0		89.2		66.5		37.5		91.3		Cash at bank and in hand	102.4		193.5		128.0		89.2		66.5		37.5
Shareholders’ funds (as restated)⁽²⁾	Shareholders’ funds (as restated)⁽²⁾	727.6		1,324.2		678.4		683.7		583.0		470.4		Shareholders’ funds (as restated)⁽²⁾	739.1		1,396.9		674.9		627.6		634.4		544.5

Store data:	Store data:													Store data:
Store numbers
Store numbers (at end of period):														Store numbers (at end of period):
US	US	1,103				1,050		1,025		999		827		US	1,156				1,103		1,050		1,025		999
UK	UK	604				610		606		605		606		UK	602				604		610		606		605
Percentage increase in like for like sales:	Percentage increase in like for like sales:													Percentage increase in like for like sales:
US	US	5%				5%		1%		6%		11%		US	6%				5%		5%		1%		6%
UK	UK	6%				5%		9%		9%		5%		UK	3%				6%		5%		9%		9%
Average sales per store (£’000s)⁽⁶⁾:	Average sales per store (£’000s)⁽⁶⁾:													Average sales per store (£’000s)⁽⁶⁾:
US	US	1,040				1,088		1,125		1,117		939		US	976				1,028		1,074		1,095		1,078
UK	UK	824				747		735		665		613		UK	866				824		747		735		665

Amounts under US GAAP:	Amounts under US GAAP:													Amounts under US GAAP:
Profit and loss account data	Profit and loss account data													Profit and loss account data
Operating income	Operating income	218.7		398.0		215.1		183.0		164.1		123.8		Operating income	211.5		399.7		206.6		198.7		163.3		151.8
Net income	Net income	135.0		245.7		128.3		101.7		97.1		64.3		Net income	137.5		259.9		127.4		119.5		90.9		89.2p
Income per share	– basic	7.9p		$0.14		7.5p		6.0p		5.8p		3.8p		– basic	7.9p		$0.15		7.4p		7.0p		5.4p		5.3p
	– diluted	7.8p		$0.14		7.4p		6.0p		5.7p		3.8p		– diluted	7.9p		$0.15		7.4p		6.9p		5.3p		5.3p
Income per ADS	– basic	235.7p		$4.29		225.0p		180.5p		173.7p		115.0p		– basic	79.4p		$1.50		74.1p		69.9p		53.8p		53.2p
	– diluted	234.0p		$4.26		222.9p		179.2p		172.2p		113.8p		– diluted	79.1p		$1.49		73.6p		69.2p		53.4p		52.8p

Balance sheet data (at period end)	Balance sheet data (at period end)													Balance sheet data (at period end)
Total assets	Total assets	1,417.9		2,580.6		1,370.1		1,433.4		1,380.3		1,081.7		Total assets	1,477.0		2,791.5		1,417.8		1,353.8		1,417.0		1,363.9
Total debt	Total debt	70.0		127.4		76.3		91.4		161.3		64.7		Total debt	53.1		100.4		70.0		76.3		91.4		161.3
Long-term debt	Long-term debt	8.3		15.1		24.2		38.7		51.5		48.6		Long-term debt	–		–		8.3		24.2		38.7		51.5
Cash at bank and in hand	Cash at bank and in hand	128.0		233.0		89.2		66.5		37.5		91.3		Cash at bank and in hand	102.4		193.5		128.0		89.2		66.5		37.5
Shareholders’ funds	Shareholders’ funds	1,034.8		1,883.3		995.3		1,024.2		916.3		782.3		Shareholders’ funds	1,056.0		1,995.8		988.5		947.5		977.5		881.1

Explanatory notes referred to in the above table are on page ~~116.~~128.


	Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005	*~~115~~127*

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Selected financial data (continued)

The selected consolidated financial data set out on the preceding page for ~~1999/00,~~ 2000/01, 2001/02, 2002/03, 2003/04 and ~~2003/04~~2004/05 has been derived, in part, from the audited consolidated accounts for such periods included elsewhere in this Annual Report & Accounts. The selected consolidated financial data should be read in conjunction with the accounts, including the notes thereto, and the Financial review included on pages 2124 to 2834 of this Annual Report & Accounts.

The accounts of the Group have been prepared in accordance with UK GAAP which differ in certain respects from US GAAP.

See pages 94103 to ~~102~~114 for information on the material differences between UK ~~GAAP~~ and US GAAP that affect the Group’s profit and shareholders’ funds.

Results of operations
The following table sets out certain consolidated financial data as a percentage of reported sales:

	Percentage of sales						Percentage of sales

	2003/04		2002/03		2001/02		2004/05		2003/04	⁽²⁾	2002/03	⁽²⁾
	%		%		%		%		%		%

Sales	100.0		100.0		100.0		100.0		100.0		100.0
Cost of sales⁽⁴⁾	(82.3	)	(82.8	)	(83.5	)	(82.4	)	(82.9	)	(83.5	)

Gross profit	17.7		17.2		16.5		17.6		17.1		16.5
Administrative expenses	(4.0	)	(3.9	)	(3.9	)	(4.1	)	(4.0	)	(3.9	)

Operating profit	13.7		13.3		12.6		13.5		13.1		12.6
Net interest expense	(0.6	)	(0.9	)	(1.0	)	(0.5	)	(0.7	)	(0.9	)

Profit before taxation	13.1		12.4		11.6		13.0		12.4		11.7
Taxation	(4.6	)	(4.4	)	(4.0	)	(4.3	)	(4.3	)	(4.2	)

Net profit	8.5		8.0		7.6		8.7		8.1		7.5

(1)	Amounts in pounds sterling are translated into US dollars solely for the convenience of the reader, at a rate of £1.00 to ~~$1.82,~~$1.89, the Noon Buying Rate on 3029 January ~~2004.~~2005.
(2)	During ~~2003/04~~2004/05 the Group adopted the amendment to FRS 175, ‘Application Note G – ~~‘Retirement Benefits’ and in 2001/02 FRS 19 – ‘Deferred Tax’~~Revenue Recognition’. The adoption of these standards has resulted in prior year adjustments affecting UK GAAP shareholders’ funds for ~~1999/00,~~ 2000/01, 2001/02, 2002/03 and ~~2002/03~~2003/04 (see note 17).
(3)	53 week year.
(4)	Cost of sales includes all costs incurred in the purchase, processing and distribution of the merchandise and all costs directly in the operation and support of ~~goods sold, rental expense and non-headquarters’ selling, general and administrative expenses.~~the retail outlets.
(5)	Working capital represents current assets (excluding amounts recoverable after more than one year) less current liabilities.
(6)	Includes only stores operated for the full financial year.

~~116~~128

Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005

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Quarterly results (unaudited)

For the 52 week period ended 3129 January ~~2004~~2005

13 weeks ended 13 weeks ended 13 weeks ended 13 weeks ended 52 weeks ended
3 May 2003 2 August 2003 1 November 2003 31 January 2004 31 January 2004
£m £m £m £m £m
Sales 342.9 324.5 289.4 660.4 1,617.2
Operating profit 27.2 26.7 8.3 160.1 222.3
Net interest payable and similar charges (3.1 ) (3.0 ) (3.2 ) (1.1 ) (10.4 )
Profit on ordinary activities before taxation 24.1 23.7 5.1 159.0 211.9
Tax on profit on ordinary activities (8.6 ) (8.4 ) (1.8 ) (55.9 ) (74.7 )
Profit for the financial period 15.5 15.3 3.3 103.1 137.2

~~For the 52 week period ended 1 February 2003~~⁽¹⁾

13 weeks ended 13 weeks ended 13 weeks ended 13 weeks ended 52 weeks ended
4 May 2002 3 August 2002 2 November 2002 1 February 2003 1 February 2003
£m £m £m £m £m
Sales 354.8 328.0 278.9 646.3 1,608.0
Operating profit 27.9 27.4 6.7 151.9 213.9
Net interest payable and similar charges (4.0 ) (3.7 ) (3.1 ) (3.2 ) (14.0 )
Profit on ordinary activities before taxation 23.9 23.7 3.6 148.7 199.9
Tax on profit on ordinary activities (8.5 ) (8.4 ) (1.3 ) (52.6 ) (70.8 )
Profit for the financial period 15.4 15.3 2.3 96.1 129.1

	13 weeks ended		13 weeks ended		13 weeks ended		13 weeks ended		52 weeks ended
	1 May 2004		31 July 2004		30 October 2004		29 January 2005		29 January 2005
	£m		£m		£m		£m		£m

Sales	342.4		326.1		287.6		658.3		1,614.4

Operating profit	28.6		26.8		6.8		156.7		218.9
Net interest payable and similar charges	(2.1	)	(2.6	)	(2.9	)	(1.0	)	(8.6	)

Profit on ordinary activities before taxation	26.5		24.2		3.9		155.7		210.3
Tax on profit on ordinary activities	(9.1	)	(8.2	)	(1.2	)	(50.6	)	(69.1	)

Profit for the financial period	17.4		16.0		2.7		105.1		141.2

For the 52 week period ended 31 January 2004⁽¹⁾
	13 weeks ended		13 weeks ended		13 weeks ended		13 weeks ended		52 weeks ended
	3 May 2003		2 August 2003		1 November 2003		31 January 2004		31 January 2004
	£m		£m		£m		£m		£m

Sales	340.3		322.6		287.4		654.6		1,604.9

Operating profit	25.3		24.9		6.3		153.7		210.2
Net interest payable and similar charges	(3.1	)	(3.0	)	(3.2	)	(1.1	)	(10.4	)

Profit on ordinary activities before taxation	22.2		21.9		3.1		152.6		199.8
Tax on profit on ordinary activities	(7.9	)	(7.7	)	(0.9	)	(53.7	)	(70.2	)

Profit for the financial period	14.3		14.2		2.2		98.9		129.6

(1)	Restated for the implementation of the amendment to FRS 175, ‘Application Note G – ~~‘Retirement Benefits’~~Revenue Recognition’ (see note 17).

Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~ 2005

~~117~~129

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Definitions

~~In this document the following words and expressions shall, unless the context otherwise requires, have the following meanings:~~

In this document the following words and expressions shall, unless the context otherwise requires, have the following meanings:


ADR	American Depositary Receipt evidencing title to an ADS

ADS	American Depositary Share representing 3010 Signet Group plc shares

APB	Accounting Principles Bulletin (US)

c.a.g.r.	~~Compound Annual Growth Rate~~compound annual growth rate

Company	Signet Group plc

Depositary	~~The~~Deutsche Bank ~~of New York,~~Trust Company Americas, depositary under the amended and restated deposit ~~agreement for~~
	agreement for the issue of ADRs

Directors	The directors of the Company

Earnings per share (EPS)	Profit attributable to shareholders divided by the weighted average number of shares in issue

~~EPOS~~	~~Electronic Point of Sale~~

ESOT	Signet Group Employee Share Trust

FAS	Statement of Financial Accounting Standards (US)

FRS	Financial Reporting Standard (UK)

FURBS	Signet Group Funded Unapproved Retirement Benefit Scheme

GAAP (UK or US)	Generally Accepted Accounting Principles


Gearing	Net debt as a percentage of shareholders’ funds

Group	Signet Group plc and its subsidiary undertakings

IAS	International Accounting Standard

IFRS	International Financial Reporting Standard

Independent (directors)	Considered to be independent under the Combined Code

LIBOR	London Inter-Bank Offered Rate

LTIP	Long Term Incentive Plan

NASD	National Association of Securities Dealers

Nasdaq	National Association of Securities Dealers Automated Quotations

NYSE	New York Stock Exchange

Pounds, £, pound sterling, pence or p	Units of UK currency

QUEST	Signet Group Qualifying Employee Share Trust

Return on capital employed (ROCE)	Operating profit divided by monthly average capital employed

SEC	Securities and Exchange Commission

Shares	Ordinary shares of 0.5 pence each in Signet Group plc

SIC	Standard Interpretation Committee

Signet	Signet Group plc and its subsidiary undertakings

~~SEC~~	~~Securities and Exchange Commission~~

SSAP	Statement of Standard Accounting Practice (UK)

UK or United Kingdom	United Kingdom, Channel Islands, Isle of Man and the Republic of Ireland

US or United States	United States of America

US dollar, $ or cents	Units of US currency

~~118~~130

Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005

Back to Contents

Glossary of terms

Terms used in Annual Report & Accounts

Accounts

Allotted

Called up share capital

Capital allowances

Cash at bank

Creditors

Debtors

Finance lease

Freehold

Interest receivable

Interest payable

Like for like sales

Loans

Net asset value

Profit

Profit and loss account

Profit and loss account reserve

Profit attributable to shareholders

Share capital

Share option

Shareholders’ funds

Share premium account

Shares in issue

Stocks

Tangible fixed assets

Value Added Tax (VAT)

US equivalent or brief description

Financial statements

Issued

Shares, issued and fully paid

Tax term equivalent to US tax depreciation allowances

Cash

Payables

Receivables

Capital lease

Ownership with absolute rights in perpetuity

Interest income

Interest expense

Same store sales at constant exchange rates

Long-term debt

Book value

Income

Income statements

Retained earnings

Net income

Capital stock or common stock

Stock option

Shareholders’ equity/net assets

Additional paid-up capital or paid-in surplus (not distributable)

Shares outstanding

Inventories

Property and equipment

UK sales tax

~~Terms used in Annual Report & Accounts~~	~~US equivalent or brief description~~

~~Accounts~~	~~Financial statements~~

~~Allotted~~	~~Issued~~

~~Called-up share capital~~	~~Shares, issued and fully paid~~

~~Capital allowances~~	~~Tax term equivalent to US tax depreciation allowances~~

~~Cash at bank~~	~~Cash~~

~~Creditors~~	~~Payables~~

~~Debtors~~	~~Receivables~~

~~Finance lease~~	~~Capital lease~~

~~Freehold~~	~~Ownership with absolute rights in perpetuity~~

~~Interest receivable~~	~~Interest income~~

~~Interest payable~~	~~Interest expense~~

~~Like for like sales~~	~~Same store sales at constant exchange rates~~

~~Loans~~	~~Long-term debt~~

~~Net asset value~~	~~Book value~~

~~Profit~~	~~Income~~

~~Profit and loss account~~	~~Income statements~~

~~Profit and loss account reserve~~	~~Retained earnings~~

~~Profit attributable to shareholders~~	~~Net income~~

~~Share capital~~	~~Capital stock or common stock~~

~~Share option~~	~~Stock option~~

~~Shareholders’ funds~~	~~Shareholders’ equity / net assets~~

~~Share premium account~~	~~Additional paid-up capital or paid-in surplus~~
	~~(not distributable)~~

~~Shares in issue~~	~~Shares outstanding~~

~~Stocks~~	~~Inventories~~

~~Tangible fixed assets~~	~~Property and equipment~~

~~Value Added Tax (VAT)~~	~~UK sales tax~~

Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~ 2005

~~119~~131

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Shareholder contacts

UK shareholders
Enquiries concerning the following matters should be addressed to:

Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Telephone: 0870 162 3100
Telephone (overseas): +44 208 639 2157
e-mail: ssd@capitaregistrars.com
web site: www.capitaregistrars.com

~~ADS information~~

~~The ADS programme is administered on behalf of the Company by The Bank of New York and any enquiries, including those to do with change of address or dividend payments, should be addressed to:~~

~~The Bank of New York~~

~~Investor Services~~

~~P.O. Box 11258, Church Street Station~~

~~New York, NY 10286-1258~~

~~Telephone toll-free from US: +1 888 269 2377~~

~~Telephone from outside US: +610 382 7836~~

~~e-mail: shareowners@bankofny.com~~

~~web site:~~ ~~www.stockbny.com~~

The Company is subject to the regulations of the United States Securities and Exchange Commission (the “SEC”) as they apply to foreign private issuers and files with the SEC its Annual Report on Form 20-F and other information as required.

~~UK shareholders~~

~~Enquiries concerning the following matters should be addressed to:~~

~~Capita Registrars~~

~~The Registry~~

~~34 Beckenham Road~~

~~Beckenham~~

~~Kent BR3 4TU~~

~~Telephone: 0870 162 3100~~

~~Telephone (overseas): +44 208 639 2157~~

~~e-mail: ssd@capitaregistrars.com~~

~~web site:~~ ~~www.capitaregistrars.com~~


•	Dividend payments

•	Dividend mandate instructions

•	Dividend reinvestment plan

•	Loss of share certificates

•	Notification of change of address or name

•	Transfer of shares to another person

•	Amalgamation of shareholdings: if you receive more than one copy of the full Annual Report & Accounts, you may wish to amalgamate your accounts on the share register.

ADS information
The ADS programme is administered on behalf of the Company by Deutsche Bank Trust Company Americas. Any enquiries, including those to do with change of address or dividend payments, should be addressed to:

Deutsche Bank Trust Company Americas
85 Challenger Road
Ridgefield Park
New Jersey
NJ 07660
USA
Telephone toll-free from US: +1 866 249 2593
web site: www.adr.db.com

The Company is subject to the regulations of the SEC as they apply to foreign private issuers and files with the SEC its Annual Report on Form 20-F and other information as required.

Registered office
Zenith House
The Hyde
London NW9 6EW
Telephone: 0870 909 0301

Investor Relations
Director
Timothy Jackson
~~Investor Relations Director~~
Telephone: 0870 909 0301
e-mail: ~~investorrelations@signet.co.uk~~tim.jackson@signet.co.uk

Group Company Secretary

Mark Jenkins
~~Company Secretary~~
~~Zenith House~~
~~The Hyde~~
~~London NW9 6EW~~
Telephone: 0870 909 0301
e-mail: ~~companysecretary@signet.co.uk~~mark.jenkins@signet.co.uk

Corporate web site
Further information about the Group including the Annual and ~~Interim Reports,~~interim reports, public announcements and share price data are available in electronic format from the Group’s corporate web site at www.signetgroupplc.com.

Unsolicited mail

As the Company’s share register is, by law, open to public inspection, shareholders may receive unsolicited mail from organisations that use it as a mailing list. To limit the amount of unsolicited mail you receive, write to:

Mailing Preference Service
FREEPOST 22
London W1E 7EZ

Documents on display
Documents referred to in this Annual Report are available for inspection at the registered office of the Company.

Printed on Revive Special Silk,
which is FSC accredited and contains a
minimum of 30% post consumer waste.

~~120~~132

Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005

Back to Contents

Index

Page

Accounting policies 62-64
Addresses for correspondence 120
Advisers 35
Annual general meeting 36
Audit Committee
– constitution 38
– members of 34
Auditor’s report 55
Balance sheet
– Company 58
– consolidated 57
Board of directors
– changes in constitution 37
– names and biographical details 34
Cash flow and funding 23
Cash flow statements
– consolidated 59
– notes 83
Chairman’s statement 2
Charitable and community support 106
Commitments
– capital 82
– operating leases 82
Competition 7, 15, 30
Contingent liabilities 83
Corporate governance statement 37-41
Creditors 73
Debtors 72
Deferred taxation 76
Definitions 118
Description of property 20
Directors
– incentive plans 43
– interests in shares 52
– other information 34
– pensions 43, 49

	Page
Accounting policies	72-75
Addresses for correspondence	132
Advisers	42
Annual general meeting	44
Audit Committee
– constitution	46
– members of	41
Auditor’s report	65
Balance sheet
– Company	68
– consolidated	67
Board of directors
– changes in constitution	45
– names and biographical details	41
Cash flow and funding	26
Cash flow statements
– consolidated	69
– notes	93
Chairman’s statement	2
Charitable and community support	118
Commitments
– capital	92
– operating leases	92
Competition	7,17,36
Contingent liabilities	93
Corporate governance statement	45-50
Creditors	84
Debtors	83
Deferred taxation	86
Definitions	130
Description of property	23
Directors
– incentive plans	52
– interests in shares	62
– other information	41-42
– pensions	52,59
– remuneration	4254
– remuneration policy	4251
– share option plans	~~43, 46~~52,60
Directors’ statements of responsibility in relation to the accounts	5464
Dividends	6980
Earnings per share	6980
Employees
– costs	6778
– numbers	6778
Exchange controls	3339
Exchange rates	~~33, 66~~40,77
Financial instruments	8494
Financial review	~~21-28~~24
Financial summary	6
Fixed assets
– intangible	7081
– tangible	7182

	Page
Glossary of terms	~~119~~131
Goodwill	7081
Group Chief Executive’s review	~~3-5~~3
Information systems	~~14, 19~~16,21
Interest payable	6677
Legal proceedings	8393
Marketing and advertising	~~12, 18~~14,21
Net debt	8393
Nomination Committee
– constitution	3947
– members of	3441
Non–executive directors	3441
Notes to the accounts	~~62-93~~72-114
Officers	3542
Operating review
– US	~~7-14~~7-16
– UK	~~15-19~~17-22
Other provisions	7687
Pension schemes	~~43, 79~~

	~~Page~~52,87
Prior year adjustments	85
Profit and loss account
– consolidated	5666
Quarterly results	~~117~~
~~Recognised gains and losses~~
~~– statement of total~~	60129
Regulation	~~14, 19~~16,22
Related part transactions	100
Remuneration Committee
– constitution	4251
– members of	3441
Report of the directors	3643
Reserves	7891
Risk and other factors	~~29-33~~35-40
ROCE	2226
Segment information	6576
Selected financial data	~~115~~127
Share capital	7790
Shareholder
– contacts	~~120~~132
– information	~~107-114~~120
Shareholders’ funds
– movements in	6171
Share options	8595
Share premium account	7891
Share price	~~108~~121
Social, ethical and environmental matters	~~103-106~~115-119
Statement of total recognised gains and losses	70
Stocks	7283
Subsidiary undertakings	90100
Substantial shareholdings	~~109~~123
Taxation	6879
Treasury policies	~~32, 84~~39,77
US accounting principles ~~– material differences from UK GAAP~~	~~94-102~~
– ~~reconciliation to~~summary of differences between UK and US GAAP	~~97, 98~~103-114

~~Design consultants corporateprm~~
~~www.corporateprm.co.uk.~~
~~Printed in England by Royle Corporate Print.~~

Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005

~~121~~133

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Signatures

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and ~~authorised~~authorized the undersigned to sign this annual report on its behalf.

~~SIGNET GROUP plc~~

~~/s/ Walker Boyd~~
~~Walker Boyd~~
~~Group Finance Director~~

~~22 April 2004~~

~~122~~

~~Signet Group plc~~ ~~Annual Report & Accounts year ended 31 January 2004~~

~~Back to Contents~~

~~Exhibits~~

	SIGNET GROUP PLC

	By:	/s/ Walker Boyd
	Name:	Walker Boyd
	Title:	Group Finance Director

Date: May 3, 2005

Exhibits

Number	Description of Exhibit

1.1*	Articles of Association of Signet Group plc, adopted by Special Resolution passed on June 13, ~~June~~ 2002 (incorporated herein by reference to Exhibit 1.1 to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on April 24, ~~April~~ 2003 (File No. 0-16945)).

4.1*	$410 million Multicurrency Revolving Facilities Agreement, dated as of August 30, ~~August~~ 2001, between Signet Group plc, Barclays Capital, HSBC Investment Bank plc, First Union National Bank, The Royal Bank of Scotland plc and HSBC Investment Bank plc (incorporated herein by reference to Exhibit 4.1 to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on May 16, ~~May~~ 2002 (File No. 0-16945)).

4.2*	$60 million Senior Unsecured Loan Notes Agency Agreement, dated as of July 27, ~~July~~ 1998, between Signet Group plc; H.Samuel Limited; Ratners US Holdings, Inc.; Sterling Inc.; Sterling Jewelers Inc.; James Walker, Goldsmith and Silversmith, Limited; Checkbury Limited; Sterling Jewelers LLC; and De Nationale Investeringsbank N.V. (incorporated herein by reference to Exhibit 4.5 to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on May 11, ~~May~~ 2001 (File No. 0-16945)).

4.3*	Deed of Guarantee, dated as of August 12, ~~August~~ 1999, with respect to Signet Group plc U.S. $60,000,000 Senior Unsecured Loan Notes due 2005 (incorporated herein by reference to Exhibit 4.6 to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on May 11, ~~May~~ 2001 (File No. 0-16945)).

4.4*	Letter of NIB Capital Bank to Signet Group plc, dated as of November 24, ~~November~~ 2000, with respect to U.S. $60,000,000 Senior Unsecured Loan Notes due 2005 (incorporated herein by reference to Exhibit 4.7 to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on May 11, ~~May~~ 2001 (File No. 0-16945)).

~~4.5~~4.5*	Transfer and Servicing Agreement, dated as of November 2, 2001, between Sterling Receivables Corp., Sterling Jewelers Inc., and Sterling Jewelers Receivables Master Note ~~Trust.~~	Trust (incorporated herein by reference to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on April 22, 2004) (File No. 0-16945)).

4.6*	Executive Service Agreement, dated as of June 14, ~~June~~ 1995, between the Company and Walker Boyd, as amended May 15, ~~May~~ 2000 (incorporated herein by reference to Exhibit 4.8 to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on May 11, ~~May~~ 2001 (File No. 0-16945)).

*Incorporated by reference.

Back to Contents

Number	Description of Exhibit
4.7 *
4.7 *	Amended and Restated Employment Agreement, dated as of December 20, ~~December~~ 2000, between Sterling Jewelers Inc. and Terry Burman (incorporated herein by reference to Exhibit 4.10 to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on May 11, ~~May~~ 2001 (File No. 0-16945)).

4.8*	Signet Group plc 2000 Long-Term Incentive Plan (incorporated herein by reference to the Company’s Registration Statement on Form S-8, as filed with the Securities and Exchange Commission on July 17, 2000 (File No. 333-12304)).

4.9*	Signet Group plc Employee Stock Savings Plan (incorporated herein by reference to the Company’s Registration Statement on Form S-8, as filed with the Securities and Exchange Commission on November 18, 1998 (File No. 333-9634)).

4.10*	Signet Group plc 1993 Executive Share Option Scheme (incorporated herein by reference to the Company’s Registration Statement on Form S-8, as filed with the Securities and Exchange Commission on June 17, 1998 (File No. 333-8764)).

4.11*	Ratners Group Executive Share Option Scheme for Residents of the United States of America (incorporated herein by reference to the Company’s Registration Statement on Form S-8, as filed with the Securities and Exchange Commission on August 6, 1991 (File No. 033-42119)).

~~8.1~~4.12	$390 million Multicurrency Revolving Facilities Agreement, dated as of September 28, 2004, among Signet Group plc, Barclays Capital, HSBC Bank plc, The Royal Bank of Scotland plc and Wachovia Bank, N.A.

4.13	Employment Agreement between Signet Trading Limited and Robert Anderson dated March 1, 2003

8.1*	List of Significant Subsidiaries of Signet Group plc	(incorporated herein by reference to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on April 22, 2004) (File No. 0-16945)).

12.1	Section 302 Certification of Walker Boyd

12.2	Section 302 Certification of Terry Burman

13.1	Certification of Walker Boyd pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002

13.2	Certification of Terry Burman pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002

14.1	Consent of KPMG Audit plc


~~14.1~~

*Incorporated by reference.

~~Consent of KPMG Audit plc~~

*Incorporated by reference.

~~Signet Group plc~~ ~~Annual Report & Accounts year ended 31 January 2004~~

~~123~~

Back to Contents

Cross reference to Form 20-F

The information in this document that is referenced in the following table shall be deemed to be part of the Annual Report on Form 20-F for the financial year ended 3129 January ~~2004~~2005 and to be filed with the Securities and Exchange Commission.

~~Item~~		~~Page~~

1	~~Identity of directors, senior management and~~
	~~advisors~~
	~~Not applicable~~	–

2	~~Offer statistics and expected timetable~~
	~~Not applicable~~	–

3A	~~Key information – Selected financial data~~
	~~Five year financial summary~~	6
	~~Risk and other factors – Financial market risks~~	32
	~~Selected financial data~~	~~115~~

3B	~~Key information – Capitalisation and indebtedness~~
	~~Not applicable~~	–

3C	~~Key information – Reasons for the offer and use~~
	~~of proceeds~~
	~~Not applicable~~	–

3D	~~Key information – Risk factors~~
	~~Risk and other factors~~	29

4	~~Information on the Company~~
	~~Chairman’s statement~~	2
	~~Group Chief Executive’s review~~	3
	~~US Operating review~~	7
	~~UK Operating review~~	15
	~~Description of property~~	20
	~~Financial review~~	21
	~~Risk and other factors – Seasonality~~	31
	~~Shareholder information~~	~~107~~
	~~Note to the accounts – Note 2~~	65
	~~Note to the accounts – Note 28~~	90

5	~~Operating and financial review and prospects~~
	~~US Operating review~~	7
	~~UK Operating review~~	15
	~~Financial review~~	21
	~~Risk and other factors – Financial market risks~~	32
	~~Note to the accounts – Note 26~~	84

Item		Page	Item		Page
1	Identity of directors,			Description of property	23
	management and			Financial review	24
	Advisors			Risk and other factors -
	Not applicable	-		Raw Materials	37
				Risk and other factors -
2	Offer statistics and			Seasonality	37
	expected timetable			Shareholder information	120
	Not applicable	-		Note to the accounts – Note 2
				(Segment information)	76
3A	Key information -			Note to the accounts – Note 28
	Selected financial data			(Principal subsidiary undertakings)	100
	Five year financial summary	6
	Risk and other factors		5	Operating and financial review
	- Financial market risks	39		and prospects
	Risk and other Factors -			US Operating review	7
	Exchange Rates	40		UK Operating review	17
	Selected financial data	127		Financial review	24
				Risk and other factors -
3B	Key information -			Financial market risks	39
	Capitalisation and			Note to the accounts – Note 26
	Indebtedness			(Financial instruments)	94
	Not applicable	-
			6	Directors, senior management
3C	Key information -			and employees
	Reasons for the offer			Group employees	23
	and use of proceeds			Social, ethical and
	Not applicable	-		environmental matters -
				Employees	116
3D	Key information -			Directors, officers and advisers	41
	Risk factors			Directors’ remuneration report	51
	Risk and other factors	35		Corporate governance statement	45

4	Information on the Company		7A	Major shareholders
	Chairman’s statement	2		Shareholder information -
	Group Chief Executive’s			Nature of trading market	121
	Review	3		Shareholder information -
	US Operating review	7		Substantial shareholdings and
	UK Operating review	17		control of the Company	122

~~Item~~		~~Page~~

6	~~Directors, senior management and employees~~
	~~Group employees~~	20
	~~Social, ethical and environmental matters –~~
	~~Employees~~	~~104~~
	~~Directors, officers and advisers~~	34
	~~Directors’ remuneration report~~	42
	~~Corporate governance statement~~	37

7A	~~Major shareholders~~
	~~Shareholder information – Nature of~~
	~~trading market~~	~~108~~
	~~Shareholder information – Substantial~~
	~~shareholdings and control of the Company~~	~~109~~

7B	~~Related party transactions~~
	~~Note to the accounts – Note 29~~	90

7C	~~Interest of experts and counsel~~
	~~Not applicable~~	–

8	~~Financial Information~~
	~~Consolidated balance sheet~~	57
	~~Consolidated cash flow statement~~	59
	~~Consolidated statement of total recognised~~
	~~gains and losses~~	60
	~~Note of consolidated historical cost profits~~
	~~and losses~~	60
	~~Note to the accounts – Note 25~~	83

9A	~~Offer and listing details~~
	~~Shareholder information – Nature of~~
	~~trading market~~	~~108~~

9B	~~Plan of distribution~~
	~~Not applicable~~	–

9C	~~Markets~~
	~~Shareholder information – Nature of~~
	~~trading market~~	~~108~~

~~124~~

~~Signet Group plc~~ ~~Annual Report & Accounts year ended 31 January 2004~~

Back to Contents

Item		Page	Item		Page
7B	Related party		9F	Expenses of the Issuer
	Transactions			Not applicable	-
	Note to the accounts -
	Note 29 (Related party		10A	Additional information –
	transactions)	100		Share capital
				Not applicable	-
7C	Interest of experts and
	Counsel		10B	Additional information -
	Not applicable	-		Memorandum and Articles
				of Association
8	Financial information			Shareholder information	120
	Consolidated balance sheet	67
	Consolidated cash flow		10C	Additional information -
	statement	69		Material contracts
	Consolidated statement			Financial review – Liquidity
	of total recognised gains			and Capital resources	26
	and losses	70
	Note of consolidated		10D	Additional information -
	historical cost profits			Exchange controls
	and losses	70		Shareholder information -
	Note to the accounts -			Dividends	122
	Note 24 (Contingent –
	liabilities)	93	10E	Additional information -
	Note to the accounts -			Taxation
	Note 25 (Notes to the			Shareholder information -
	consolidated cash flow			Taxation	123
	statement)	93
			10F	Additional information -
9A	Offer and listing details
	Shareholder information			Dividends and paying agents
	- Nature of trading market	121		Not applicable	-

9B	Plan of distribution		10G	Additional information -
	Not applicable	-		Statement by experts
				Not applicable	-
9C	Markets
	Shareholder information		10H	Additional information -
	- Nature of trading market	121		Documents on display
				Shareholder contacts -
9D	Selling shareholders			Documents on display	132
	Not applicable	-
			10I	Additional information -
9E	Dilution			Subsidiary information
	Not applicable	-		Not applicable	-

~~Cross reference to Form 20-F~~ ~~(continued)~~

~~Item~~		~~Page~~

9D	~~Selling shareholders~~
	~~Not applicable~~	–

9E	~~Dilution~~
	~~Not applicable~~	–

9F	~~Expenses of the Issuer~~
	~~Not applicable~~	–

~~10A~~	~~Additional information – Share capital~~
	~~Not applicable~~	–

~~10B~~	~~Additional information – Memorandum and Articles~~
	~~of Association~~
	~~Shareholder information – History~~	~~107~~

~~10C~~	~~Additional information – Material contracts~~
	~~Financial review – Liquidity and capital resources~~	23

~~10D~~	~~Additional information – Exchange controls~~
	~~Shareholder information – Dividends~~	~~109~~

~~10E~~	~~Additional information – Taxation~~
	~~Shareholder information – Taxation~~	~~110~~

~~10F~~	~~Additional information – Dividends and paying agents~~
	~~Not applicable~~	–

~~10G~~	~~Additional information – Statement by experts~~
	~~Not applicable~~	–

~~10H~~	~~Additional information – Documents on display~~
	~~Shareholder contacts~~	~~120~~

~~10I~~	~~Additional information – Subsidiary information~~
	~~Not applicable~~	–

11	~~Quantitative and qualitative disclosures~~
	~~about market risk~~
	~~Financial review~~	21
	~~Note to the accounts – Note 26~~	84

Item Page

12 Description of securities other than
equity securities
Not applicable –

13 Defaults, dividend arrears and delinquencies
None –

14 Material modifications to the rights of
securities holders and use of proceeds
None –

15 Controls and procedures
Corporate governance statement – Internal control 40

16A Audit Committee Financial Expert
Corporate governance statement
– The Audit Committee 38

16B Code of ethics
Corporate governance statement – Code of
Conduct and Code of Ethics 39

17 Financial Statements
Independent auditor’s report 55
Consolidated profit and loss account 56
Consolidated balance sheet 57
Company balance sheet 58
Consolidated cash flow statement 59
Consolidated statement of total recognised
gains and losses 60
Consolidated shareholders’ funds 61

18 Financial Statements
Not applicable –

19 Exhibits 123

~~Signet Group plc~~ ~~Annual Report & Accounts year ended 31 January 2004~~

~~125~~

Back to Contents

~~www.signetgroupplc.com~~

Item		Page	Item		Page
11	Quantitative and		16C	Principal Accountant
	qualitative disclosures			Fees and Services
	about market risk			Note to the accounts -
	Financial review	24		Note 4 (Profit on ordinary
	Note to the accounts -			activities before transaction-Fees
	Note 26 (Financial			payable to KPMG Audit plc and
	instruments)	94		their associates)	77

12	Description of securities		16D	Exemptions from the Listing
	other than equity			Standards for Audit
	securities			Committees	-
	Note applicable	-		Not Applicable

13	Defaults, dividend		16E	Purchase of Equity Securities
	arrears and			by the Issuer and Affiliated
	delinquencies			Purchasers
	None	-		Not applicable	-

14	Material modifications		17	Financial Statements
	to the rights of			Report of Independent Registered
	securities holders and			Public Accounting Firm	65
	use of proceeds			Consolidated profit and loss
	None	-		account	66
				Consolidated balance sheet	67
15	Controls and procedures			Company balance sheet	68
	Corporate governance			Consolidated cash flow
	statement – Internal			statement	69
	control	48		Consolidated statement of total
				recognised gains and losses	70
16A	Audit Committee			Consolidated shareholders’
	Financial Expert			funds	71
	Corporate governance			Note to the accounts –
	statement – The Audit			Note 31 (Summary of
	Committee	46		differences between UK and US
				generally accepted accounting
16B	Code of ethics			principles)	103
	Corporate governance
	statement – Code of		18	Financial Statements
	Conduct and Code of			Not applicable	-
	Ethics	47
			19	Exhibits	134

Back to Contents

Exhibits

	~~Exhibit Index~~Number
~~Exhibit~~
~~Number~~	Description of Exhibit

1.1*		Articles of Association of Signet Group plc, adopted by Special Resolution passed on June 13, ~~June~~ 2002 (incorporated herein by reference to Exhibit 1.1 to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on April 24, ~~April~~ 2003 (File No. 0-16945)).

4.1*		$410 million Multicurrency Revolving Facilities Agreement, dated as of August 30, ~~August~~ 2001, between Signet Group plc, Barclays Capital, HSBC Investment Bank plc, First Union National Bank, The Royal Bank of Scotland plc and HSBC Investment Bank plc (incorporated herein by reference to Exhibit 4.1 to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on May 16, ~~May~~ 2002 (File No. 0-16945)).

4.2*		$60 million Senior Unsecured Loan Notes Agency Agreement, dated as of July 27, ~~July~~ 1998, between Signet Group plc; H.Samuel Limited; Ratners US Holdings, Inc.; Sterling Inc.; Sterling Jewelers Inc.; James Walker, Goldsmith and Silversmith, Limited; Checkbury Limited; Sterling Jewelers LLC; and De Nationale Investeringsbank N.V. (incorporated herein by reference to Exhibit 4.5 to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on May 11, ~~May~~ 2001 (File No. 0-16945)).

4.3*		Deed of Guarantee, dated as of August 12, ~~August~~ 1999, with respect to Signet Group plc U.S. $60,000,000 Senior Unsecured Loan Notes due 2005 (incorporated herein by reference to Exhibit 4.6 to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on May 11, ~~May~~ 2001 (File No. 0-16945)).

4.4*		Letter of NIB Capital Bank to Signet Group plc, dated as of November 24, ~~November~~ 2000, with respect to U.S. $60,000,000 Senior Unsecured Loan Notes due 2005 (incorporated herein by reference to Exhibit 4.7 to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on May 11, ~~May~~ 2001 (File No. 0-16945)).

~~4.5~~4.5*		Transfer and Servicing Agreement, dated as of November 2, 2001, between Sterling Receivables Corp., Sterling Jewelers Inc., and Sterling Jewelers Receivables Master Note ~~Trust.~~	Trust (incorporated herein by reference to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on April 22, 2004) (File No. 0-16945)).

4.6*		Executive Service Agreement, dated as of June 14, ~~June~~ 1995, between the Company and Walker Boyd, as amended May 15, ~~May~~ 2000 (incorporated herein by reference to Exhibit 4.8 to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on May 11, ~~May~~ 2001 (File No. 0-16945)).

*Incorporated by reference.

Back to Contents

Number		Description of Exhibit
4.7 *
4.7 *		Amended and Restated Employment Agreement, dated as of December 20, ~~December~~ 2000, between Sterling Jewelers Inc. and Terry Burman (incorporated herein by reference to Exhibit 4.10 to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on May 11, ~~May~~ 2001 (File No. 0-16945)).

~~8.1~~4.8*	~~List of Significant Subsidiaries of~~	Signet Group plc	2000 Long-Term Incentive Plan (incorporated herein by reference to the Company’s Registration Statement on Form S-8, as filed with the Securities and Exchange Commission on July 17, 2000 (File No. 333-12304)).

~~12.1~~4.9*	~~Section 302 Certification of Walker Boyd~~	Signet Group plc Employee Stock Savings Plan (incorporated herein by reference to the Company’s Registration Statement on Form S-8, as filed with the Securities and Exchange Commission on November 18, 1998 (File No. 333-9634)).

~~12.2~~4.10*	~~Section 302 Certification of Terry Burman~~	Signet Group plc 1993 Executive Share Option Scheme (incorporated herein by reference to the Company’s Registration Statement on Form S-8, as filed with the Securities and Exchange Commission on June 17, 1998 (File No. 333-8764)).

~~13.1~~4.11*		Ratners Group Executive Share Option Scheme for Residents of the United States of America (incorporated herein by reference to the Company’s Registration Statement on Form S-8, as filed with the Securities and Exchange Commission on August 6, 1991 (File No. 033-42119)).

4.12		$390 million Multicurrency Revolving Facilities Agreement, dated as of September 28, 2004, among Signet Group plc, Barclays Capital, HSBC Bank plc, The Royal Bank of Scotland plc and Wachovia Bank, N.A.

4.13		Employment Agreement between Signet Trading Limited and Robert Anderson dated March 1, 2003

8.1*		List of Significant Subsidiaries of Signet Group plc (incorporated herein by reference to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on April 22, 2004) (File No. 0-16945)).

12.1		Section 302 Certification of Walker Boyd

12.2		Section 302 Certification of Terry Burman

13.1		Certification of Walker Boyd pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002

13.2		Certification of Terry Burman pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002

14.1		Consent of KPMG Audit plc


~~14.1~~	~~Consent of KPMG Audit plc~~


*Incorporated by reference.

*Incorporated by reference.

Title of each class	Name of each exchange on which registered
Ordinary Shares, nominal value £0.005 each	New York Stock Exchange*

American Depositary Shares,	New York Stock Exchange
each representing 10 ordinary shares

	Ordinary Shares of 0.5 pence each		~~1,726,190,848~~
~~Class A Dollar Deferred Shares of $0.01 each~~		0
~~Class B Dollar Deferred Shares of $1.00 each~~		01,735,615,152



~~2003/04~~
~~Group highlights~~			Reported	At constant
		~~reported~~	basis	~~at constant~~
			~~basis~~		exchange rates⁽¹⁾⁽²⁾
•	~~Sales: £1,617.2m~~		~~up 0.6%~~		~~up 7.3%~~

•	~~Operating profit: £222.3m~~Like for like sales:		up ~~3.9%~~5.0%
	Sales:	£1,614.4m	up 0.6%⁽²⁾	up 7.8%
	Operating profit:	£218.9m	up 4.1%⁽²⁾	up 11.3%
	Profit before tax:	£210.3m	up 5.3%⁽²⁾	up 12.1%
	Earnings per share⁽³⁾:	8.2p	up 9.3%⁽²⁾	up 15.5%
	Dividend per share:	3.0p	up 20.0%		~~up 11.2%~~


•	~~Profit before tax: £211.9m~~Return on capital employed⁽³⁾	26.5%	up from 25.9%⁽²⁾
	~~up 6.0%~~Gearing⁽³⁾	11.3%	down from11.8%⁽²⁾		~~up 13.0%~~


•	~~Earnings per share~~⁽³⁾~~: 8.0p~~	~~up 6.7%~~⁽²⁾	~~up 12.7%~~


•	~~Dividend per share: 2.501p~~	~~up 18.5%~~

•	~~Return on capital employed~~⁽³⁾~~up from 24.1%~~⁽²⁾~~to 24.8%~~

•	~~Gearing~~⁽³⁾~~down from 20.7%~~⁽²⁾~~to 11.0%~~



	Registration statement pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934

	Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the fiscal year ended January ~~31, 2004~~29, 2005

	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	~~For the transition period from ________ to ________.~~


*	Not for trading, but only in connection with the registration of the ADSs pursuant to the requirements of the Securities and Exchange Commission.

	(1)	See page 2529 for reconciliation to Generally Accepted Accounting Principles (“GAAP”) figures.
	(2)	~~1999/00~~2000/01 to ~~2002/03~~2003/04 restated for the implementation in 2004/05 of the amendment to FRS 175, ‘Application Note G – ~~‘Retirement Benefits’~~Revenue Recognition’.
	(3)	Earnings per share, return on capital employed and gearing are defined on page ~~118.~~130.
	(4)	53 week year.



Signet Group plc Annual Report & Accounts year ended 3129 January ~~2004~~2005	3

	Total		Kay		Regional		Jared

1 February 2003	1,050		676		307		67
Openings	69		49	⁽¹⁾	8		12
Closures	(16	)	(8	)	(8	)	–

31 January 2004	1,103		717	⁽¹⁾	307		79

	2003/04		2002/03⁽¹⁾		Change	Like for like change

	£m		£m		%	%

Sales
H.Samuel	285.8		279.1		+2.4	+3.5
Ernest Jones	209.4		188.0		+11.4	+8.4
Other	5.8		6.5

Total	501.0		473.6		+5.8	+5.5

Operating profit	76.6		64.7		+18.4
Operating margin	15.3	%	13.7	%
ROCE	47.1	%	41.2	%

	Number of stores	2004/05	2003/04	2002/03	2001/02	2000/01

	Store refurbishment
	and relocations	76	61	71	91	99
	New mall stores	44	47	36	41	40
	New off-mall Kay stores	10	10	–	–	–
	New Jared stores	14	12	12	12	15
	Store fixed capital
	investment	$53m	$42m	$38m	$51m	$60m
	Store total investment⁽¹⁾	$140m	$98m	$92m	$96m	$107m

(1) Fixed and working capital investment in new space and refurbishments/relocations.

							Like
							for like
		2004/05		2003/04		Change	change
		£m		£m		%	%

	Sales
	H.Samuel	285.5		285.8		–0.1	+1.9
	Ernest Jones	223.4		209.4		+6.7	+4.5
	Other	5.5		5.8

	Total	514.4		501.0		+2.7	+3.0

	Operating profit	78.2	⁽¹⁾	76.6		+2.1
	Operating margin	15.2	%⁽¹⁾	15.3	%
	ROCE	44.7	%	47.1	%

(1) After charging a restructuring expense of £1.7 million.

(1)	Amounts in pounds sterling are translated into US dollars solely for the convenience of the reader, at a rate of £1.00 to ~~$1.82,~~$1.89, the Noon Buying Rate on 3028 January ~~2004.~~2005.
(2)	~~During 2003/04~~Restated for the ~~Group adopted FRS17~~implementation in 2004/05 of the amendment to FRS 5, ‘Application Note G – ~~‘Retirement Benefits’~~Revenue Recognition’. The adoption of the standard resulted in a prior year adjustment (see note 17 on page ~~75)~~85).
(3)	53 week year. The impact of the additional week on sales was £22.4 million, operating profit £4.0 million, net interest payable £0.4 million and profit before tax £3.6 ~~million~~million.
(4)	~~During 2001/02 the Group adopted FRS19 – ‘Deferred Tax’. The adoption of the standard resulted in a prior year adjustment (see note 17 on page 75).~~
~~(5)~~	Earnings per share, gearing and return on capital employed are defined on page ~~118.~~130.
~~(6)~~(5)	Including only stores operated for the full financial period.

•	~~Merchandising~~
~~Management believes that in comparison to its competitors Signet has greater capacity and expertise to direct source~~

•	~~Store operations~~
The sales associate’s ability to communicate and explain the value and quality of the merchandise plays a significant part in a retail jewellery purchase. Therefore, the US division has developed specialised training for its retail personnel, and its size provides leverage of training resources and systems.

•	~~Marketing~~
• Marketing Kay is one of a very limited number of US speciality retail jewellery brands with a presence large enough to justify national network television advertising, the most cost effective way to attract customers, enter new markets and increase brand recognition.

•	~~Real estate~~
~~Strict criteria are followed when evaluating real estate investment, and management believes that the quality of its store portfolio is superior to that of its competitors.~~

Store operations and personnel
•	strengthened field recruitment organisation
•	enhanced diamond selling skills of store personnel
•	developed systems for greater operational efficiency in special orders and repairs

Real estate
•	increased number of Jared openings and testing of new locations
•	expanded testing of Kay off-mall store format by opening ten additional stores

Merchandising
•	improved supply chain efficiency and pricing changes
•	further developed the diamond ranges, including expansion of the Leo Diamond, ~~range,~~diamond right-hand rings and solitaire diamonds
•	~~expansion of~~introduced new programmes to reinvigorate the gold category
•	further expanded the Jared luxury watch range
•	~~record level of training,~~

Marketing
•	further ~~development of systems for greater operational efficiency,~~
•	increased national TV advertising for Kay
•	expansion of Jared TV advertising programme
•	~~space increase of 7%, and~~
•	~~test of Kay off-mall store format.~~

	Number of stores

	2003/04	2002/03	2001/02


Store refurbishments and relocations	61	71	91
New mall stores	47	36	41
New off-mall stores
– Jared stores	12	12	12
– Kay off-mall stores	10	–	–

Fixed capital expenditure	$42m	$38m	$51m
Total investment⁽¹⁾	$98m	$92m	$96m

(1) Fixed and working capital investment in new space and refurbishments/relocations.

~~(1)~~	~~Figures for stores opened during the year are adjusted for the impact of conversions of format between Kay and regional chains.~~
~~(2)~~	~~Includes test of Kay stores in off-mall shopping centres.~~
~~(3)~~	~~Based upon stores operated for the full financial year.~~

(1)	Figures for stores opened during the year are adjusted for the impact of conversions of format between Kay and regional chains.
(2)	Includes test of Kay stores in off-mall shopping centres.
(3)	Based upon stores operated for the full financial year.
(4)	Restated for the implementation of the amendment to FRS 5, ‘Application Note G – Revenue Recognition’.

Merchandise mix
	Percentage of sales

	2003/04	2002/03	2001/02
	%	%	%

Diamonds and diamond jewellery	70	69	67
Gold jewellery	8	8	10
Gemstone jewellery	10	10	10
Watches	6	6	6
Repairs	6	7	7

	100	100	100


(1)	Before a $2.2 million benefit from the better than anticipated performance of the residue of the acquired Marks & Morgan receivables portfolio.

•	~~Merchandising~~
Management believes that the division’s capacity to contract with jewellery manufacturers to assemble products utilising directly sourced loose polished diamonds and gold allows for delivery of better value to the customer.

•	~~Store operations~~
The sale of diamond jewellery requires increased standards of product knowledge and customer service from sales associates. The division develops and invests in training procedures and materials tailored to its own requirements to help achieve this. In addition it can take advantage of economies of scale in recruitment and store administration.

•	~~Marketing~~
~~The UK division has strong and well established brands and leverages them with print and television advertising and marketing catalogues.~~

•	~~Real estate~~
The competitive advantage of national coverage for both brands and the prime locations of stores is being enhanced by the rollout of a new format designed to increase the sale of diamonds and fine jewellery, thereby increasing sales per store.

•	~~development~~increased by over 10% the proportion of ~~branded diamonds,~~store managers and assistant store managers with externally accredited jewellers qualifications
•	tested new sales commission system

Real estate
•	~~improvement in visual merchandising,~~rolled-out revised store design to an additional 90 stores
•	opened three retail park locations

Merchandising
•	~~test~~increased the size, quality and range of settings of diamond jewellery
•	further widened the Leo Diamond range in Ernest Jones
•	expanded the Forever Diamond range from 120 stores to all H.Samuel stores

Marketing
•	expanded the television advertising for H.Samuel and Ernest Jones
•	introduced customer relationship marketing by Ernest Jones
•	~~further~~continued the development of catalogue design and distribution

•	~~enhancement of selection and training processes for sales associates and management,~~

•	~~introduction of enhanced computer systems accessible from all stores, which help automate and standardise processes, facilitate training and improve communication, and~~

•	~~extension of new store design to an additional 35 stores.~~

H.Samuel store data
	2004/05		2003/04		2002/03

Number of stores:
Opened during year	2		–		4
Closed during year	(11	)	(11	)	(8	)
Open at end of year	398		407		418
Percentage increase in like for like sales	1.9	%	3.5	%	2.6	%
Average retail price of items sold⁽¹⁾	£37		£35		£33
Average sales per store
in thousands (exc. VAT)⁽²⁾	£723		£707		£677