27th Sep 2005 07:02
Vedanta Resources PLC27 September 2005 27 September 2005 Vedanta Resources plc Adoption of International Financial Reporting Standards Vedanta will report its results for the six months to 30 September 2005 andsubsequent periods in accordance with International Financial ReportingStandards ("IFRS"). This statement presents the Group's IFRS balance sheets asat 30 September 2004 and 31 March 2005 together with the Group's IFRS resultsand cash flows for the periods then ended. It also presents and explains thedifferences between the Group's results and shareholders' equity under IFRS andthe amounts previously reported for these periods under UK Generally AcceptedAccounting Principles ("UK GAAP"). Salient points for year ended 31 March 2005:- • The change to reporting under IFRS does not affect the cash flow generation of Vedanta's businesses and hence will not affect any commercial decisions.• 2004-05 IFRS reported EBITDA(1) is almost unchanged at $454 million as compared to $455 million under UK GAAP• IFRS Profit for the year was $64.6 million higher than under UK GAAP (principally due to a $56.5 million write back of negative goodwill under IFRS).• To enhance understanding of the performance of Vedanta's businesses an alternative earnings measure, Underlying profit(2), will be presented in addition to Profit for the year.• IFRS Underlying profit for 2004-05 was $140.1 million which compares with $137.7 million for UK GAAP underlying profit for the year (which included the amortisation of goodwill).• Shareholders' equity at 31 March 2005 under IFRS is $1,110.5 million which is six per cent higher than under UK GAAP. (1) EBITDA represents operating profit before exceptional items plus depreciation and amortisation(2) Underlying Profit excludes the effects of exceptional items and their tax and minority interest impact, and is a more informed measure of the recurring performance of the Group. For further information, please contact: John Smelt, Head of Investor Relations Tel: +44 20 7659 4734Vedanta Resources plc +44 787 964 2675 Ajay Paliwal, Deputy Chief Financial Officer Tel: +44 20 7659 4735Vedanta Resources plc +44 7760 178 530 Robin Walker Tel: +44 20 7251 3801Finsbury Reconciliation of Profit for the year from UK GAAP to IFRS(excluding IAS 32/39) Year ended 31 March 2005US$ millions Profit for the year UK GAAP 234.7 Negative goodwill arising during the year 56.5Deferred tax 10.6Reversal of amortisation of goodwill (0.4)Share based payments (2.5)Capitalisation of major overhaul expenses 1.8Depreciation on capitalisation of major overhaulexpenses (1.9)Capitalisation of interest income and expense relatedto projects 0.9Inventory valuation (0.4) 64.6 --------- IFRS 299.3 ========= Reconciliation of "shareholders' equity" under UK GAAP to "equity attributableto equity holders of the parent" under IFRS (excluding IAS 32/39) US$ millions 31 March 2005 30 September 01 April 2004---------------------------------------------------------------------------------------------Shareholders' equity under UK GAAP 1047.1 956.2 990.9Reversal of negative goodwill and amortisation 64.6 8.2 8.6Post retirement benefits (6.6) (6.2) (6.6)Deferred tax (88.6) (94.8) (100.3)Interim dividend (15.8) - -Proposed dividend 48.9 15.8 15.8Minority interest 45.3 52.3 56.3Capitalisation of trial run expenses 12.8 12.1 12.9Capitalisation of major overhaul expenses 0.5 1.1 0.6Capitalisation of interest cost 0.8 0.9 0.3Depreciation (1.2) (1.1) (1.2)Discounting of long term provision 0.8 0.8 0.3Dismantling cost 0.4 0.4 0.5Inventory valuation 1.5 1.6 1.7---------------------------------------------------------------------------------------------Equity attributable to equity holders of theparent under IFRS 1,110.5 947.3 979.8--------------------------------------------------------------------------------------------- The Group's effective transition date for IFRS is 1 April 2004. The principaldifferences between UK GAAP and IFRS, as applicable to Vedanta, are describedbelow. Negative goodwill Opening negative goodwill of $8.6 million has been credited to reserves andnegative goodwill arising during the year 2004-05, amounting $56.5 million onacquisition of Konkola Copper Mines has been credited to the income statement. Reversal of goodwill amortisation The systematic amortisation of goodwill under UK GAAP, by an annual charge tothe profit and loss account, has ceased under IFRS. It has been replaced byannual impairment reviews of the carrying value of goodwill. Impairment chargesrelating to goodwill may occur in future reporting periods, due to the finitelife of the associated ore body and variation of commodity prices. The impact on Profit for the year in 2004-05 of the reversal of the goodwillamortisation charge under UK GAAP was $0.4 million. The reversal of negativegoodwill has resulted in an adjustment to the UK GAAP balance sheet at 31 March2005 of $8.5 million. Share based payments Under UK GAAP, the estimated cost of employee share awards made by the Group ischarged to the profit and loss account over the relevant performance period.IFRS requires the economic cost of share option plans to be recognised byreference to fair value on the grant date, and charged to the Income Statementover the expected vesting period. Under IFRS, the additional charge in 2004-05was $2.5 million. Post-retirement benefits Under UK GAAP, the Group applied SSAP 24, 'Accounting for Pension Costs' underwhich post retirement benefit surpluses and deficits were spread over theexpected average remaining service lives of relevant, current employees. UnderIAS 19 the basis of calculating the surplus or deficit differs from SSAP 24. Inaddition, IAS 19 permits three alternative ways in which the surplus or deficitcan be recognised. The Group has chosen to recognise actuarial gains and lossesdirectly in shareholders' equity via the Statement of Recognised Income andExpense as at date of adoption of IFRS and going forward to expense the fullannual cost as per the actuarial valuation of the Group's post retirementbenefit plans. The impact on retained earnings on the date of adoption of IFRS i.e. as at 1April 2004 was a $6.6 million reduction due to the charge for post retirementbenefits as per IAS 19. Deferred tax UK GAAP follows the income statement method of tax effect accounting where asIFRS requires deferred tax to be based on a balance sheet liability method.Temporary differences are recognised as the differences between the tax base ofthe asset or liability and its carrying amount in the balance sheet. UK GAAP requires the recognition of deferred tax on all fair value adjustmentsto monetary items and on fair value adjustments which reduce the carrying valueof non-monetary items. IFRS requires deferred tax to be recognised on all fairvalue adjustments, other than those recorded as goodwill. IFRS profit for theyear will therefore benefit as the additional deferred tax provisions on upwardrevaluations of non-monetary items are released to the income statement in linewith the amortisation of the related fair value adjustments. For future acquisitions, these additional deferred tax provisions will be offsetby increases to the value of goodwill or other acquired assets. For acquisitionsprior to 1 April 2004, the increase in provisions has been reflected as areduction in opening shareholders' equity. The impact on IFRS Profit for the year for 2004-05 was a reduction of $10.6million. At 31 March 2005, the IFRS balance sheet includes additional provisionsof $88.6 million relating to deferred tax on fair value adjustments for prioryear acquisitions. Dividends Under IFRS, dividends that do not represent a present obligation at thereporting date are not included in the balance sheet. Hence, the Company'sproposed dividends are not recognised in the Group accounts until the period inwhich they are declared by the directors. This has no effect on Profit for the year or Underlying Earnings, but increasesshareholders' equity at 31 March 2005 by $33.1 million (31 March 2004:$15.8million). IAS 39 and IAS 32 The Group has elected to adopt IAS 32 "Financial Instruments: Disclosure andPresentation" and IAS 39 "Financial Instruments: Recognition and Measurement"with effect from 1 April 2005 with no restatement of comparative information.The financial information for 30 September 2004 and 31 March 2005 does nottherefore incorporate the effect of these Standards and is therefore presented under UK GAAP. Investments Under IFRS, all investments have been carried at market value and consequently any notional gain or loss has been taken to revenue reserve, until disposal; these investments were held at cost under UK GAAP. The net impact of this adjustment at 1 April 2005 is US$1.3 million to the opening revenue reserves. Mark to market of derivative contracts It remains the Group's policy to generally hedge the ongoing exposures, arisingon account of fluctuations in exchange rates, prices or interest rates. All thederivative contracts are marked-to-market and the mark-to-market difference forall the hedges, which does not qualify for hedge accounting as per IAS 39, areimmediately recognised in the income statement. The mark-to market differencefor all qualifying fair value hedges is taken to the income statement andmark-to-market difference for all qualifying cash flow hedges is recognised inthe balance sheet and released to the income statement upon the occurrence ofthe underlying transaction. At 1 April 2005, the marked to market value of derivative contracts, under IFRSdecreases shareholders' equity by $7.4 million. CONTENTS Page1 Introduction 72 Basis of preparation 73 Accounting policies under IFRS 104 Group Financial Information restated for IFRS 4.1 Group financial information for year ended 31 March 2005: 4.1.1 Group Income Statement 18 4.1.2 Group cash flow statement 19 4.1.3 Group balance sheet 20 4.1.4 Statement of changes in equity 21 4.1.5 Reconciliation of tax 22 4.1.6 EBITDA reconciliation 22 4.1.7 Reconciliation of underlying profit 22 4.1.8 Notes to financial information 23 4.2 Group financial information for six months ended 30 September 2004: 4.2.1 Group Income Statement 25 4.2.2 Group cash flow statement 26 4.2.3 Group balance sheet 27 4.2.4 Statement of changes in equity 28 4.2.5 EBITDA reconciliation 28 4.3 Group balance sheet as at 1 April 2004 29 4.4 Group Balance Sheet as at 1 April 2005 (including IAS 32/39) 30 4.5 Reconciliation of profit for the period ended 30 September 2004 31 4.6 Group net asset as at 30 September 2004 32 4.7 Reconciliation of profit for the year ended 31 March 2005 33 4.8 Group net asset as at 31 March 2005 34 4.9 Group net asset as at 1 April 2005 (including IAS 32/39) 355 Directors' Responsibility statement 366 Special purpose audit report from Deloitte and Touche for year ended 37 31 March 20057 Special purpose review report from Deloitte and Touche for six months 39 ended 30 September 2004 Vedanta restatement of 2004-05 Financial Information under IFRS 1. INTRODUCTION The European Union (EU) approved a Regulation in 2002 that requires listedcompanies in the EU to prepare consolidated financial statements for accountingperiods beginning on or after 1 January 2005 in accordance with the Standardsand Interpretations included within International Financial Reporting Standards(IFRS) that have been endorsed by the EU. Konkola Copper Mines plc, the Group'sZambian subsidiary, which already reports under IFRS in Zambia and theAustralian companies (Copper Mines of Tasmania and Thalanga Copper Mines) arerequired to adopt IFRS from 1 April 2005. Accordingly, Vedanta will prepare itsconsolidated accounts for the six months ending 30 September 2005 and subsequentreporting periods on the basis of the Standards and Interpretations within IFRSthat have been (or, in the case of the interim accounts, are expected to be)endorsed by the EU. As part of the Group's transition to IFRS, the directors have prepared IFRSfinancial information for the opening balance sheet as at 1 April 2004, sixmonths ended 30 September 2004 and the year ended 31 March 2005 ("the 2004-05IFRS financial information"), which is included on pages 19 to 36 of this PressRelease. It is intended that this financial information will be included as thecomparative information in the Group's half year report for the period ending 30September 2005 and its financial statements for the year ending 31 March 2006respectively. The basis of preparation and accounting policies used in preparing the 2004-05IFRS financial information are set out below, which describe how IFRS has beenapplied under IFRS 1, including the assumptions made by the Group about theStandards and Interpretations expected to be effective, and the policiesexpected to be adopted, when the Group issues its first complete set of IFRSfinancial statements for the year ending 31 March 2006. However, the basis ofpreparation and accounting policies may require certain adjustment before theGroup issues its first complete set of IFRS financial statements. This isbecause the standards currently in issue and endorsed by the EU are subject toInterpretations issued from time to time by the International FinancialReporting Interpretations Committee ('IFRIC'), and further Standards may beissued by the International Accounting Standards Board ('IASB') that will beadopted by the Group in its first complete set of IFRS financial statements forthe year ending 31 March 2006. Additionally, IFRS is currently being applied in a large number of countries forthe first time. Due to a number of new and revised Standards included withinIFRS, there is not yet a significant body of established practice on which todraw in forming opinions regarding interpretation and application. Accordingly,practice is continuing to evolve. At this preliminary stage, therefore, the full financial effect of reportingunder IFRS as it will be applied in the Group's first complete set of IFRSfinancial statements for the year ending 31 March 2006 may be subject to change. 2. BASIS OF PREPARATION Except as described below, the 2004-05 IFRS financial information on pages 19 to36 has been prepared on the basis of all IFRS Standards and Interpretationspublished by 31 March 2005. A number of IFRS Standards and Interpretations are not yet mandatory but can beadopted early under their respective transition arrangements. The Group hasearly adopted IFRS 6 'Exploration for and Evaluation of Mineral Resources' andIFRS 2 'Share-based Payment'. The Group's transition date to IFRS is 1 April 2004. The rules for first-timeadoption of IFRS are set out in IFRS 1 'First-time adoption of InternationalFinancial Reporting Standards'. In preparing the 2004-05 IFRS financialinformation, these transition rules have been applied to the amounts reportedpreviously under generally accepted accounting principles in the United Kingdom('UK GAAP'). IFRS 1 generally requires full retrospective application of the Standards andInterpretations in force at the first reporting date. However, IFRS 1 allowscertain exemptions in the application of particular Standards to prior periodsin order to assist companies with the transition process. Vedanta has appliedthe following exemptions: • The Group has not restated business combinations that occurred before the date of transition to comply with IFRS 3 'Business Combinations'. This means that: - The 2003 merger of the economic interests of Vedanta and Twin Star into the listed company structure continues to be accounted for as a merger; - Additional deferred tax provisions in respect of upward revaluations of non-monetary assets held by previously acquired entities have been recognised as a reduction of equity attributable to equity holders of the parent on the date of transition; • The Group has deemed cumulative translation differences for foreign operations to be zero at the date of transition. Any gains and losses on subsequent disposals of foreign operations will not therefore include translation differences arising prior to the transition date; • The Group has elected to adopt IAS 32 'Financial Instruments: Disclosure and Presentation' and IAS 39 'Financial Instruments: Recognition and Measurement' with effect from 1 April 2005, with no restatement of comparative information for 2004-05. Accounting policy note 3 explains the basis of accounting for financial instruments in the 2004-05 IFRS financial information; and • The Group has applied IFRS 2 'Share-based Payment' retrospectively to all share-based payments which had not vested at 1 April 2004, the date chosen by the Group as the effective date for application of IFRS 2. In addition, IFRS 1 requires that estimates made under IFRS must be consistentwith estimates made for the same date under UK GAAP except where adjustments arerequired to reflect any differences in accounting policies. UK GAAP FINANCIAL INFORMATION The UK GAAP financial information for the year ended 31 March 2005, presented onpages 19 to 25, is based on the Group's full financial statements for that year,which were prepared in accordance with UK GAAP and on the historical cost basis.These financial statements have been filed with the Registrar of Companies. The auditors' report on the financial statements for the year ended 31 March2005 was unqualified and did not contain statements under section 237(2) of theUnited Kingdom Companies Act (regarding adequacy of accounting records andreturns) or under section 237(3) (regarding provision of necessary informationand explanations). The UK GAAP financial information for the period ended 30 September 2004,presented on page 26 to 33, is based on the Group's half year report for thatperiod, which was prepared using accounting policies consistent with thoseapplied in the Group's full financial statements for the year ended 31 March2005. This interim financial information is unaudited but reviewed. Certain changes have been made to the presentation of the UK GAAP financialinformation reported in the Group's full financial statements for the year ended31 March 2005 and half year report for the period ended 30 September 2004, asfollows: • The formats of the balance sheet, profit and loss account and cash flow statement have been modified to align them with the IFRS formats, to simplify presentation of the adjustments required to arrive at the IFRS figures; and • Operating profit has been restated to present the net impact of the share of profit/ (loss) of associate after tax as a separate line item. This has no effect on total equity, Profit for the year or Underlying earnings; • Items of income and expense that are material and require separate disclosure, in accordance with IAS 1.87, are classified as "exceptional items" on the face of the income statement. Exceptional items that relate to the underlying performance of the business are classified as "Operating exceptional items" and include impairment charges and reversals. Exceptional items not relating to underlying business performance are classified as "non-operating exceptional items" and are presented below "Total profit from operations and associates" on the income statement. Non-operating exceptional items include profits and losses on disposals of investments, fixed assets and businesses, and costs of, or reversals of, provisions for fundamental reorganisations or restructuring. An analysis of exceptional items is provided in the notes to the financial information. 3. ACCOUNTING POLICIES ADOPTED UNDER IFRS First time adoption of IFRS The transition date to IFRS for the Group is 1 April 2004 and the end of thelast period presented under previous GAAP (UK GAAP) shall be 31 March 2005. Therules for first-time adoption of IFRS are set out in IFRS 1 'First-time adoptionof International Financial Reporting Standards'. These transition rules havebeen applied to the amounts reported previously under UK GAAP to arrive at theIFRS financial statements. While the applicable Standards and Interpretations inforce at the first reporting date, 1 April 2004, have been applied to financialstatements from that date, the Group has availed itself of certain exemptionsgiven under IFRS 1 in application of particular Standards to prior periods.These exemptions are: • The Group has elected to adopt IAS 32 and IAS 39 with effect from 1 April 2005 with no re-statement of comparative information for 2004-05. • The Group will not restate business combinations that occurred before the transition date in order to comply with IFRS 3 'Business Combinations'. • The Group will set the cumulative translation differences arising on translation of net assets of foreign operations to zero at the date of transition. In the event that a foreign subsidiary is disposed of then cumulative translation differences arising after the transition date will be taken to the profit and loss account as part of gains and losses that arise on disposal. • The Group has recognised in full all actuarial gains and losses on defined benefit pension schemes and similar benefits as at the date of transition to IFRS. The following Standards have been adopted early by the Group: • IFRS 6 'Exploration for and Evaluation of Mineral Resources' is applicable to the Group from 1 April 2006. However, the Group has adopted this standard early from 1 April 2004. • IFRS 2 'Share based payments' has been adopted early by the Group from 1 April 2004, for its grant of equity instruments to its employees. All other Standards and Interpretations issued up to 31 March 2005 have beenapplied in the preparation of the financial statements for year the ended 31March 2005 and the interim accounts for the six months ended 30 September 2004. Principal Accounting Policies Basis of preparation The consolidated financial statements have been prepared on a historical costbasis, except for derivative financial instruments and available-for-salefinancial assets that have been measured at fair value. The carrying values ofrecognised assets and liabilities that are hedged are adjusted to record changesin the fair values attributable to the risks that are being hedged. Theconsolidated financial statements are presented in US dollars and all values arerounded to the nearest million except where otherwise indicated. Basis of Consolidation The consolidated financial information incorporates the results of the Companyand all its subsidiaries, being the companies that it controls. This control isnormally evidenced when the Group is able to govern a company's financial andoperating policies so as to benefit from its activities or where the Group owns,either directly or indirectly, the majority of a company's equity voting rightsunless in exceptional circumstances it can be demonstrated that ownership doesnot constitute control. The financial statements of subsidiaries are prepared for the same reportingyear as the parent company, using consistent accounting policies. Adjustmentsare made to bring into line any dissimilar accounting policies that may exist. All intercompany balances and transactions, including unrealised profits arisingfrom intra-group transactions, have been eliminated in full. Unrealised lossesare eliminated unless costs cannot be recovered. Acquisitions and Disposals The results of subsidiaries acquired or sold during the year are consolidatedfor the periods from, or to, the date on which control passed. Acquisitions areaccounted for under the acquisition method. Excess purchase consideration, being the difference between the fair value ofthe consideration given and the fair value of the identifiable assets andliabilities acquired, is capitalised as an asset on the balance sheet. To the extent that such excess purchase consideration relates to the acquisitionof mining properties and leases, that amount is capitalised within tangiblefixed assets as "mining properties and leases". Other excess purchaseconsideration relating to the acquisition of subsidiaries is capitalised as"goodwill" within intangible fixed assets. Goodwill arising on acquisitions isreviewed for impairment annually. Goodwill relating to associates is included within the carrying value of theassociate. The unamortised balance is reviewed for impairment on a annual basis. Where the fair values of the identifiable assets and liabilities exceed the costof acquisition, the surplus (negative goodwill) is credited to the incomestatement in the period of acquisition. Goodwill arising on acquisitions before 1 April 2004, the date of transition toIFRS, has been retained at the previous UK GAAP amounts as at that date, subjectto being tested for impairment at that date. Where it is not possible to complete the determination of fair values by thedate on which the first post-acquisition financial statements are approved, aprovisional assessment of fair values is made and any adjustments required tothose provisional fair values, and the corresponding adjustments to purchasedgoodwill, are finalised within 12 months of the acquisition date. Internally generated goodwill is not recognised. Investments in Associates In the consolidated financial information, investments in associates areaccounted for using the equity method. An associate is an entity over which theGroup exercises significant influence and normally owns between 20% and 50% ofthe voting equity but is neither a subsidiary nor a joint venture. Goodwillarising on the acquisition of associates is accounted for in accordance with thepolicy set out above and is included in the carrying value of investments inassociate. The consolidated income statement includes the Group's share of associatesresults. The investment is initially recorded at the cost to the Group in theconsolidated Balance Sheet and then, in subsequent periods, the carrying valueof investment is adjusted to reflect the Group's share of the associate'sprofits or losses and for impairment of goodwill and any other changes to theassociate's net assets. Other Investments Fixed asset investments, other than investments in subsidiaries and associates,are recorded at cost less provision for impairment. Property, plant and equipment - Mining Properties and Leases Exploration and Evaluation expenditure is written off in the year in which it is incurred. The costs of mining properties and leases, which include the costs of acquiringand developing mining properties and mineral rights, are capitalised as tangiblefixed assets under the heading 'Mining Properties and Leases' in the year inwhich they are incurred. When a decision is taken that a mining property is viable for commercialproduction, all further pre-production primary development expenditure otherthan land, buildings, plant and equipment, etc is capitalised as part of thecost of the mining property until the mining property is capable of commercialproduction. Capitalisation of pre-production expenditure ceases when the miningproperty is capable of commercial production. From that point, capitalisedmining properties and lease costs are amortised on a unit-of-production basisover the total estimated remaining commercial reserves of each property or groupof properties. Stripping costs/secondary development expenditure incurred during the productionstage of operations of an ore body are charged to the income statementimmediately. Exploration and Evaluation assets acquired are recognised as assets at theircost of acquisition subject to meeting the commercial production criteriamentioned above and are subject to impairment review. In circumstances where a property is abandoned, the cumulative capitalised costsrelating to the property are written off in the period. Commercial reserves are proved and probable reserves. Changes in the commercialreserves affecting unit of production calculations are dealt with prospectivelyover the revised remaining reserves. Other property, plant and equipment The initial cost of property, plant and equipment comprises its purchase price,including import duties and non-refundable purchase taxes, and any directlyattributable costs of bringing an asset to working condition and location forits intended use. Expenditure incurred after the fixed assets have been put intooperation, such as repairs and maintenance, are normally charged to the profitand loss account in the period in which the costs are incurred. Major shut-downand overhaul expenditure is capitalised. Assets in the Course of Construction Assets in the course of construction are capitalised in the capitalwork-in-progress account. Upon completion, the cost of construction istransferred to the appropriate category of tangible fixed assets. Costsassociated with the commissioning of an asset are capitalised where the asset isavailable for use but incapable of operating at normal levels until a period ofcommissioning has been completed. Depreciation Mining properties and other assets in the course of development or construction,and freehold land, are not depreciated. Capitalised mining properties and leasecosts are amortised once commercial production commences, as described in"Property, plant and equipment - Mining Properties and Leases". Leasehold landand buildings are depreciated over the period of the lease. Other buildings, plant and equipment, office equipment and fixtures, and motorvehicles are stated at cost less accumulated depreciation and any provision forimpairment. Depreciation commences when the assets are ready for their intendeduse. Depreciation is provided at rates calculated to write off the cost, lessestimated residual value, of each asset on a straight-line basis over itsexpected useful life, as follows: Buildings: Operations 30 years Administration 50 yearsPlant and equipment 10 - 20 yearsOffice equipment and fixtures 3 - 20 yearsMotor vehicles 9 - 11 years Major overhaul costs are depreciated over the estimated life of the economicbenefit derived from the overhaul. The carrying amount of the remaining previousoverhaul cost is charged to income statement if the next overhaul is undertakenearlier than the previously estimated life of the economic benefit. Property, plant and equipment held for sale or which is part of a disposal groupheld for sale is not depreciated. Property, plant and equipment held for sale iscarried at the lower of its carrying value and fair value less disposal cost andis presented separately on the face of the balance sheet. Non-current assets and disposal groups are classified as held for sale if theircarrying amount will be recovered through a sale transaction rather than throughcontinuing use. This condition is regarded as met only when the sale is highlyprobable and the asset (or disposal group) is available for immediate sale inits present condition. Management must be committed to the sale which should beexpected to qualify for recognition as a completed sale within one year from thedate of classification. Impairment The carrying amounts of property, plant and equipment, investments inassociates, other investments and goodwill are reviewed for impairment if eventsor changes in circumstances indicate that the carrying value of an asset may notbe recoverable. If there are indicators of impairment, an assessment is made todetermine whether the asset's carrying value exceeds its recoverable amount.Whenever the carrying value of an asset exceeds its recoverable amount, animpairment loss is charged to the income statement. For mining properties and leases, investments in associates, other investmentsand goodwill, the recoverable amount of an asset is determined on the basis ofits value in use, being the present value of estimated future cash flowsexpected to arise from the continuing use of an asset and from its disposal atthe end of its useful life, discounted using a market-based, risk-adjusted,discount rate. For other property, plant and equipment, the recoverable amount of an asset isalso considered on the basis of its net realisable value, where it is possibleto assess the amount that could be obtained from the sale of an asset in anarm's length transaction, less the cost of disposal. Recoverable amounts are estimated for individual assets or, if this is notpossible, for the relevant cash-generating unit. Government Grants Government grants relating to tangible fixed assets are treated as deferredincome and released to the income statement over the expected useful lives ofthe assets concerned. Other grants are credited to the income statement as therelated expenditure is incurred. Stocks Stocks and work-in-progress are stated at the lower of cost and net realisablevalue, less any provision for obsolescence. Cost is determined on the following bases: • purchased concentrate is recorded at cost on a first-in, first-out ("FIFO") basis; all other materials including stores and spares are valued on weighted average basis; • finished products are valued at raw material cost plus costs of conversion, comprising labour costs and an attributable proportion of manufacturing overheads based on normal levels of activity; and • by-products and scrap are valued at net realisable value. Net realisable value is determined based on estimated selling price, lessfurther costs expected to be incurred to completion and disposal. Taxation Current tax is provided at amounts expected to be paid (or recovered) using thetax rates and laws that have been enacted or substantively enacted by thebalance sheet date. Deferred income tax is provided, using the balance sheet method, on alltemporary differences at the balance sheet date between the tax bases of assetsand liabilities and their carrying amounts for financial reporting purposes.Exceptions to this principle are: • tax payable on the future remittance of the past earnings of subsidiaries, associates and joint ventures except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; • deferred income tax is not recognised on goodwill impairment which is not deductible for tax purposes or on the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and • deferred tax assets are recognised only to the extent that it is more likely than not that they will be recovered. Deferred income tax assets and liabilities are measured at the tax rates thatare expected to apply to the year when the asset is realised or the liability issettled, based on tax rates (and tax laws) that have been enacted orsubstantively enacted at the balance sheet date. Income tax relating to itemsrecognised directly in equity are recognised in equity and not in the incomestatement. Pensions The Group operates or participates in a number of pension schemes, the assets ofwhich are (where funded) held in separately administered funds. The cost ofproviding benefits under the plans is determined each year separately for eachplan using the projected unit credit method by independent qualified actuaries. Actuarial gains and losses arising in the year are recognised in full in theincome statement of the year. For defined contribution schemes, the amount charged to the income statement inrespect of pension costs and other post-retirement benefits is the contributionspayable in the year. Employee Share Awards Certain employees (including directors) of the Group receive part of theirremuneration in the form of share-based payment transactions, whereby employeesrender services in exchange for shares or rights over shares ('equity-settledtransactions'). The cost of equity-settled transactions with employees is measured at fair valueat the date at which they are granted. The fair value of share awards withmarket-related vesting conditions has been determined by an external valuer andthe fair value is expensed on a straight-line basis over the vesting periodbased on the Group's estimates of shares that will eventually vest. The estimateof the number of awards likely to vest is reviewed at each balance sheet date upto the vesting date at which point the estimate is adjusted to reflect thecurrent expectations. No adjustment is made after the vesting date even if theawards are forfeited or not exercised. Provisions for Liabilities and Charges Provisions are recognised when the Group has a present obligation (legal orconstructive), as a result of past events, and it is probable that an outflow ofresources, that can be reliably estimated, will be required to settle such anobligation. If the effect of the time value of money is material, provisions aredetermined by discounting the expected future cash flows to net present valueusing an appropriate pre-tax discount rate that reflects current marketassessments of the time value of money and, where appropriate, the risksspecific to the liability. Unwinding of the discount is recognised in the incomestatement as a borrowing cost. Provisions are reviewed at each balance sheetdate and are adjusted to reflect the current best estimate. Restoration, Rehabilitation and Environmental Costs An obligation to incur restoration, rehabilitation and environmental costsarises when environmental disturbance is caused by the development or ongoingproduction of a mine. Costs arising from the installation of plant and othersite preparation work, discounted to net present value, are provided for and acorresponding amount is capitalised at the start of each project, as soon as theobligation to incur such costs arises. These costs' are charged to the incomestatement over the life of the operation through the depreciation of the assetand the unwinding of the discount on the provision. The cost estimates arereviewed periodically and are adjusted to reflect known developments which mayhave an impact on the cost estimates or life of operations. The cost of therelated asset is adjusted for changes in the provision due to factors such asupdated cost estimates, changes to lives of operations, new disturbance andrevisions to discount rates. The adjusted cost of the asset is depreciatedprospectively over the lives of the assets to which they relate. The unwindingof the discount is shown as a financing cost in the income statement. Costs for restoration of subsequent site damage which is caused on an ongoingbasis during production are provided for at their net present values and chargedto the profit and loss account as extraction progresses. Where the costs of siterestoration are not anticipated to be material, they are expensed as incurred. Revenue Recognition Turnover represents the net invoice value of goods and services provided tothird parties after deducting discounts, volume rebates, outgoing sales taxesand duties, and is recognised usually when all significant risks and rewards ofownership of the asset sold are transferred to the customer and the commodityhas been delivered to the shipping agent. Revenues from sale of materialby-products are included in turnover. Dividend income is recognised when the shareholders' rights to receive paymentis established. Interest income is recognised on an accrual basis in the income statement. Leases Rentals under operating leases are charged on a straight-line basis over thelease term, even if the payments are not made on such a basis. Foreign Currency Translation In the financial statements of individual group companies, transactions incurrencies other than the local functional currency are translated into localcurrency at the exchange rates ruling at the date of transaction. Monetaryassets and liabilities denominated in other currencies are translated into localcurrency at exchange rates prevailing on the balance sheet date. For the purposes of consolidation, the income statement items of those entitiesfor whom the US dollar is not the reporting currency are translated into USdollars at the average rates of exchange during the period. The related balancesheets are translated at the rates ruling at the balance sheet date. Exchangedifferences arising on translation of the opening net assets and results of suchoperations, and on foreign currency borrowings to the extent that they hedge theGroup's investment in such operations, are reported in the consolidatedstatement of total recognised income and expense. All other exchange differencesare included in the income statement. On disposal of a foreign entity, the deferred cumulative exchange differencesrecognised in equity relating to that particular foreign operation would berecognised in the income statement. Borrowing costs Interest on borrowings directly relating to the financing of a qualifyingcapital project under construction is capitalised and added to the project costduring construction until such time the assets are substantially ready for theirintended use i.e. when they are capable of commercial production. Where fundsare borrowed specifically to finance a project, the amount capitalisedrepresents the actual borrowing costs incurred. Where the funds used to financea project form part of general borrowings, the amount capitalised is calculatedusing a weighted average of rates applicable to relevant general borrowings ofthe Group during the period. All other borrowing costs are recognised in the income statement in the periodin which they are incurred. Cash and cash equivalents Cash and cash equivalents in the balance sheet comprise cash at bank and in handand short-term deposits with banks and short-term, highly liquid investmentsthat are readily convertible into cash and which are subject to insignificantrisk of changes in the principal amount. Derivative Financial Instruments In order to hedge its exposure to foreign exchange, interest rate and commodityprice risks, the Group enters into forward, option, swap contracts and otherderivative financial instruments. The Group does not hold nor issue derivativefinancial instruments for speculative purposes. The Group uses the derivative financial instruments described above to manageexposure to foreign exchange, interest rate and commodity price risks. The policy for accounting for financial instruments from 1 April 2005 is asfollows: Derivative financial instruments are initially recorded at their fair value onthe date of the derivative transaction and are re-measured at their fair valueat subsequent balance sheet dates. Changes in the fair value of derivatives that are designated and qualify as fairvalue hedges are recorded in the income statement. The hedged item is recordedat fair value and any gain or loss is recorded in the income statement and isoffset by the gain or loss from the change in the fair value of the derivative. Changes in the fair value of derivatives that are designated and qualify as cashflow hedges are recorded in equity. Amounts deferred to equity are recycled inthe income statement in the periods when the hedged item is recognised in theincome statement. Derivative financial instruments that do not qualify for hedge accounting aremarked to market at the balance sheet date and gains or losses are recognised inthe income statement immediately. Hedge accounting is discontinued when the hedging instrument expires or is sold,terminated or exercised, or no longer qualifies for hedge accounting. At thattime, any cumulative gain or loss on the hedging instrument recognised in equityis kept in equity until the forecast transaction occurs. If a hedged transactionis no longer expected to occur, the net cumulative gain or loss recognised inequity is transferred to net profit or loss for the year. Derivatives embedded in other financial instruments or other host contracts aretreated as separate derivatives when their risks and characteristics are notclosely related to those of host contracts and the host contracts are notcarried at fair value with unrealised gains or losses reported in the incomestatement. 4. Group financial information restated for IFRS4.1.1 Group Income StatementYear ended 31 March 2005 (excluding IAS 32/39) US$ million---------------------------------------------------------------------------------------------- 31 March 2005 31 March 2005 UK GAAP Adjustments IFRS----------------------------------------------------------------------------------------------RevenueContinuing operations 1,635.0 - 1,635.0Acquisitions 249.2 - 249.2----------------------------------------------------------------------------------------------Group Revenue 1,884.2 - 1,884.2Cost of sales (1,414.8) (0.9) (1,415.7)----------------------------------------------------------------------------------------------Gross profit 469.4 (0.9) 468.5---------------------------------------------------------------------------------------------- Other operating income 25.9 - 25.9Distribution costs (51.5) - (51.5)Administrative Expenses (90.1) (2.5) (92.6)Operating exceptional items (21.9) - (21.9)----------------------------------------------------------------------------------------------Operating profit 331.8 (3.4) 328.4----------------------------------------------------------------------------------------------Investment revenues 41.3 (3.8) 37.5Finance costs (37.7) 7.6 (30.1)Share of loss of associate (2.7) (2.9) (5.6)Non-operating exceptional item (0.4) 56.5 56.1Profit before taxation 332.3 54.0 386.3Income tax expense (97.6) 10.6 (87.0)----------------------------------------------------------------------------------------------Profit for the year 234.7 64.6 299.3---------------------------------------------------------------------------------------------- Attributable to:Equity holders of the parent 120.0 58.9 178.9Minority interest 114.7 5.7 120.4---------------------------------------------------------------------------------------------- 234.7 64.6 299.3---------------------------------------------------------------------------------------------- Basic earnings per ordinary share (US Cents) 41.9 20.6 62.5Diluted earnings per ordinary share (US Cents) 41.0 20.5 61.5 4.1.2 Group Cash Flow StatementFor year ended 31 March 2005 (excluding IAS 32/39) US$ million UK GAAP Adjustments IFRS----------------------------------------------------------------------------------------------Operating activitiesProfit before taxation 332.3 54.0 386.3Adjustments for:Depreciation 101.7 2.1 103.8Goodwill amortisation (0.4) 0.4 -Investment income (41.3) 3.8 (37.5)Interest expense 37.7 (7.6) 30.1Other non-cash items 28.3 (55.6) (27.3)Others 3.1 2.9 6.0---------------------------------------------------------------------------------------------- 461.4 - 461.4Increase in trade and other receivables (79.1) - (79.1)Increase in Inventories (61.0) - (61.0)Decrease in trade payables (18.1) - (18.1)----------------------------------------------------------------------------------------------Cash generated from operations 303.2 - 303.2Interest / investment income received 60.6 - 60.6Interest paid (64.1) - (64.1)Income taxes paid (65.8) - (65.8)Dividends paid (15.8) - (15.8)----------------------------------------------------------------------------------------------Net cash from operating activities 218.1 - 218.1---------------------------------------------------------------------------------------------- Cash flows from investing activitiesPurchase of subsidiary company (28.3) - (28.3)Payment to acquire tangible fixed assets (535.3) - (535.3)Proceeds from sale of fixed assets 14.1 - 14.1Dividends paid to minority interest of subsidiary companies (7.7) - (7.7)Purchase of current asset investments (193.4) - (193.4)Investment in associate (6.2) - (6.2)Buyback of shares from minorities (2.3) - (2.3)Cash acquired with subsidiary 41.2 - 41.2Other movements - 29.4 29.4----------------------------------------------------------------------------------------------Net cash used in investing activities (717.9) 29.4 (688.5)---------------------------------------------------------------------------------------------- Cash flows from financing activitiesIssue of ordinary shares 0.1 - 0.1Decrease in short term borrowings (96.6) - (96.6)Increase in long term borrowings 607.0 - 607.0Issue of shares to subsidiary undertakingsto Minority interests 1.7 - 1.7----------------------------------------------------------------------------------------------Net cash from financing activities 512.2 - 512.2Net increase in cash and cash equivalents 12.4 29.4 41.8----------------------------------------------------------------------------------------------Exchange Difference (3.5) - (3.5)Cash and cash equivalents at beginning of period 52.7 1,094.6 1,147.3----------------------------------------------------------------------------------------------Cash and cash equivalents at end of period 61.6 1,124.0 1,185.6============================================================================================== 4.1.3 Group Balance SheetAs at 31 March 2005 (excluding IAS 32/39) US$ million UK GAAP Adjustments IFRS----------------------------------------------------------------------------------------------ASSETSNon-current assetsGoodwill 10.8 1.4 12.2Negative goodwill (63.4) 63.4 -Property, plant and equipment 2,275.0 13.6 2,288.6Investment in associate 3.3 - 3.3Other investments 24.8 - 24.8Other non-current assets - 34.6 34.6Deferred tax asset 90.0 - 90.0---------------------------------------------------------------------------------------------- 2,340.5 113.0 2,453.5----------------------------------------------------------------------------------------------Current assetsInventories 336.3 1.4 337.7Trade and other receivables 374.2 (34.6) 339.6Current asset investments 1,386.0 (1,124.0) 262.0Cash and cash equivalents 61.6 1,124.0 1,185.6---------------------------------------------------------------------------------------------- 2,158.1 (33.2) 2,124.9----------------------------------------------------------------------------------------------TOTAL ASSETS 4,498.6 79.8 4,578.4----------------------------------------------------------------------------------------------Current liabilitiesShort term loans 194.7 - 194.7Convertible loan notes 23.7 - 23.7Other current liabilities 708.1 (33.1) 675.0Provisions 37.0 - 37.0Income tax payable 15.1 - 15.1---------------------------------------------------------------------------------------------- 978.6 (33.1) 945.5----------------------------------------------------------------------------------------------Net current assets/(liabilities) 1,179.5 (0.1) 1,179.4----------------------------------------------------------------------------------------------Non-current liabilitiesCreditors falling due after more than one year 1,344.7 - 1,344.7Deferred tax liabilities 146.3 88.6 234.9Provisions 240.9 6.3 247.2Non equity minority interests 59.4 - 59.4---------------------------------------------------------------------------------------------- 1,791.3 94.9 1,886.2----------------------------------------------------------------------------------------------Total liabilities 2,769.9 61.8 2,831.7----------------------------------------------------------------------------------------------Net Assets 1,728.7 18.0 1,746.7==============================================================================================Equity--------Share capital 28.7 - 28.7Shares to be issued 0.9 (0.9) -Share based payment reserve - 2.5 2.5Share premium account 18.6 - 18.6Other reserves 31.3 12.6 43.9Profit and loss Account 967.6 49.2 1,016.8----------------------------------------------------------------------------------------------Equity attributable to equity holders of the parent 1,047.1 63.4 1,110.5Minority interest 681.6 (45.4) 636.2----------------------------------------------------------------------------------------------Total Equity 1,728.7 18.0 1,746.7============================================================================================== 4.1.4 Statement of changes in equity under IFRSYear ended 31 March 2005 US$ million Shares based Profit Share payment Share Other and Loss Capital reserve Premium reserves* Reserves Total--------------------------------------------------------------------------------------------------------As at 1 April 2004 28.6 - 18.6 12.7 919.9 979.8Profit for the year - - - - 178.9 178.9Loss on reduction of minority interest - - - - (32.4) (32.4)CTA reserve - - - 13.2 - 13.2Transfers - - - 18.0 (18.0) -Shares issued under reward plan 0.1 - - - - 0.1Share based payment reserve - 2.5 - - - 2.5Dividends paid - - - - (31.6) (31.6)--------------------------------------------------------------------------------------------------------As at 31 March 2005 28.7 2.5 18.6 43.9 1,016.8 1,110.5======================================================================================================== *As at 31 March 2005, other reserves comprise merger reserve of US$4.4 million and the general reserves established in the statutory accounts of the Group's Indian subsidiaries. Under Indian law, a general reserve is created through a year on year transfer from the profit and loss account. The amount transferred is 5% of the profits for the year for each Indian company as stated in Indian GAAP. The purpose of these transfers is to ensure that distributions in a year are less than the total distributable results for that year. This general reserve becomes fully distributable in future periods. IAS 21 - Recycling of consolidated currency translation adjustments from non USdollar operations on their disposalIAS 21 requires cumulative currency translation adjustments ("CTA") arising ontranslation of a foreign operation to be recycled through the income statementwhen that entity is disposed of. Currently, under UK GAAP, the CTA is notincluded in the gain or loss calculated if that operation is sold. In accordancewith IFRS 1, the Group has taken the exemption from recycling foreign currencygains or losses arising before 1 January 2004. The translation adjustmentarising during the year is US$13.3 million, being included in other reserves. 4.1.5 Tax reconciliation under IFRS for year ended 31 March 2005-------------------------------------------------------------------------------- IFRS US$ million--------------------------------------------------------------------------------Profit before tax 386.3--------------------------------------------------------------------------------At Indian statutory income tax rate of 36.59% 141.7Accelerated capital allowances 1.2Utilisation of tax losses (3.0)Disallowable expenses 12.4Non-taxable income (26.5)Impact of tax rate differences (15.4)Tax holiday and similar exemptions (27.5)Dividend distribution tax on overseas subsidiaries 3.0Minimum alternative tax 1.1--------------------------------------------------------------------------------At effective income tax rate of 22.5% 87.0================================================================================ 4.1.6 EBITDA Reconciliation under UK GAAP and IFRS for year ending 31 March 2005 2004-05 $ million-------------------------------------------------------------------------------- EBITDA as per UK GAAP 455.0IAS 16- Overhaul expenses capitalised 1.9IAS 2- Share based payment (2.5)IAS 2 - Inventory Valuation (0.4)--------------------------------------------------------------------------------EBITDA as per IFRS 454.0--------------------------------------------------------------------------------EBITDA represents operating profit before exceptional items plus depreciationand amortisation 4.1.7 Reconciliation of underlying (1) profit for the year under UK GAAP to IFRSfor year ended 31 March 2005 US$ million UK GAAP Adjustments IFRS----------------------------------------------------------------------------------------------Equity shareholders share of profit for the financial year 120.0 58.9 178.9Operating exceptional items 21.9 - 21.9Tax effect on operating exceptional items (1.5) - (1.5)Minority interest effect of operating exceptional items (3.1) - (3.1) Non-operating exceptional items 0.4 (56.5) (56.1)Tax effect on non-operating exceptional items (0.1) - (0.1)Minority interest effect of non-operatingexceptional items 0.1 - 0.1----------------------------------------------------------------------------------------------Underlying profit as per IFRS 137.7 2.4 140.1---------------------------------------------------------------------------------------------- (1) Underlying Profit excludes the effects of exceptional items and their tax and minority interest impact. 4.1.8 Notes to financial informationSegment AnalysisYear ended 31 March 2005 Business segments The following tables present revenue and profit information and certain assetand liability information regarding the Group's business segments for the yearended 31 March 2005. ($ million) Year ended 31 March 2005 Total Continuing Operations Operations Aluminium Copper Zinc Other Elimination-----------------------------------------------------------------------------------------------------------RevenueSales to external customers 281.7 1,014.7 486.4 101.4 - 1,884.2Inter-segment sales 26.3 193.0 - - (219.3) ------------------------------------------------------------------------------------------------------------Segment revenue 308.0 1,207.7 486.4 101.4 (219.3) 1,884.2===========================================================================================================ResultOperating profit 57.4 105.0 189.2 (23.2) 328.4Non-operating exceptional items 56.1 -----------Operating profit after exceptional 384.5Net finance income 7.4 Share of associate's loss (5.6) -----------Profit before taxation 386.3 -----------Income tax expense (87.0) -----------Profit for the year 299.3 =========== Assets and liabilities Segment assets 965.9 1,703.2 877.5 712.0 - 4,258.6 Investment in an associate 3.3 Unallocated assets 316.5 Total assets 4,578.4 Segment liabilities 694.7 1,081.2 337.8 552.4 - 2,666.1 Unallocated liabilities 165.6 Total liabilities 2,831.7 Other segment informationCapital expenditure:Tangible fixed assets 438.3 49.5 245.8 70.7 - 804.3Depreciation 18.3 55.9 28.8 0.8 - 103.8Impairment losses - - - 17.8 - 17.8 Operating exceptional Items 2004-05 $ million--------------------------------------------------------------------------------Restructuring and redundancies (4.1)Impairment of assets (17.8)-------------------------------------------------------------------------------- (21.9)-------------------------------------------------------------------------------- Non-operating exceptional Items 2004-05 $ million--------------------------------------------------------------------------------Loss on sale of assets (0.4)Release of negative goodwill 56.5-------------------------------------------------------------------------------- 56.1-------------------------------------------------------------------------------- 4.2 Group financial information for six months ended 30 September 2004 4.2.1 Group Income StatementSix months ended 30 September 2004 US$ million-------------------------------------------------------------------------------- UK GAAP Adjustments IFRS--------------------------------------------------------------------------------RevenueGroup Revenue 677.4 - 677.4Cost of sales (507.5) 1.0 (506.5)--------------------------------------------------------------------------------Gross profit 169.9 1.0 170.9-------------------------------------------------------------------------------- Other operating income 9.7 - 9.7Distribution costs (18.7) - (18.7)Administrative Expenses (38.2) (1.8) (40.0)Operating exceptional items (2.6) - (2.6)--------------------------------------------------------------------------------Operating profit 120.1 (0.8) 119.3--------------------------------------------------------------------------------Investment income 20.3 (3.2) 17.1Finance costs (28.9) 4.8 (24.1)Share of loss of associate (0.8) (1.0) (1.8)Non-operating exceptional item 1.4 - 1.4--------------------------------------------------------------------------------Profit before taxation 112.1 (0.2) 111.9Income tax expense (41.5) 0.2 (41.3)--------------------------------------------------------------------------------Profit for the period 70.6 - 70.6================================================================================ Attributable to:Equity holders of the parent 34.9 (0.6) 34.3Minority interest 35.7 0.6 36.3-------------------------------------------------------------------------------- 70.6 - 70.6================================================================================ Basic earnings per ordinary share (US Cents) 12.2 (0.2) 12.0Diluted earnings per ordinary share (US Cents) 11.6 (0.2) 11.4================================================================================ 4.2.2 Group Cash Flow StatementFor the six months ended 30 September 2004 US$ million Particulars UK GAAP Adjustment IFRS--------------------------------------------------------------------------------Operating activitiesProfit before taxation 112.1 (0.2) 111.9Adjustments for:Depreciation 37.1 1.0 38.1Goodwill amortisation 0.2 (0.2) -Investment income (20.3) 3.2 (17.1)Interest expense 28.9 (4.8) 24.1Others (0.6) (1.0) (1.6)Other non-cash items 0.2 2.0 2.2-------------------------------------------------------------------------------- 157.6 - 157.6Increase in trade and other receivables (38.2) - (38.2)Increase in Inventories (79.6) - (79.6)Increase in trade payables 57.0 - 57.0--------------------------------------------------------------------------------Cash generated from operations 96.8 - 96.8Interest / investment income received 33.1 - 33.1Interest paid (31.8) - (31.8)Income taxes paid (15.0) - (15.0)Dividends paid (15.8) - (15.8)--------------------------------------------------------------------------------Net cash from operating activities 67.3 - 67.3-------------------------------------------------------------------------------- Cash flows from investing activitiesPurchase of additional holding in subsidiarycompanies (4.4) - (4.4)Payment to acquire tangible fixed assets (270.2) - (270.2)Proceeds from sale of fixed assets 1.6 - 1.6Dividends paid to minority interest ofsubsidiary companies (1.7) - (1.7)Sale of current asset investments 0.2 - 0.2Purchase of fixed asset investment (0.2) - (0.2)Sale of current asset investments 207.1 - 207.1Other movements - (281.6) (281.6)--------------------------------------------------------------------------------Net cash used in investing activities (67.6) (281.6) (349.2)-------------------------------------------------------------------------------- Cash flows from financing activitiesProceeds from rights issue of subsidiary company 0.6 - 0.6Decrease in short term borrowings (195.8) - (195.8)Increase in long term borrowings 169.0 - 169.0--------------------------------------------------------------------------------Net cash used in financing activities (26.2) - (26.2)----------------------------------------------------------------------------------------------------------------------------------------------------------------Net decrease in cash and cash equivalents (26.4) (281.6) (308.0)Exch Diff (1.1) (0.1) (1.2)Cash and cash equivalents at beginning of 52.7 1,094.6 1,147.3period -------------------------------------------------------------------------------- Cash and cash equivalents at end of period 25.2 812.9 838.1================================================================================ 4.2.3 Group Balance SheetAs at 30 September 2004 US$ million UK GAAP Adjustment IFRS--------------------------------------------------------------------------------ASSETSNon-current assetsGoodwill 11.2 0.3 11.5Negative goodwill (7.9) 7.9 -Property, plant and equipment 1,520.2 13.4 1,533.6Investment in associate 5.1 - 5.1Other investments 23.5 - 23.5Other non-current assets - 23.4 23.4-------------------------------------------------------------------------------- 1,552.1 45.0 1,597.1--------------------------------------------------------------------------------Current assetsInventories 263.6 1.6 265.2Trade and other receivables 265.3 (23.4) 241.9Current asset investments 945.8 (812.9) 132.9Cash and cash equivalents 25.2 812.9 838.1-------------------------------------------------------------------------------- 1,499.9 (21.8) 1,478.1--------------------------------------------------------------------------------TOTAL ASSETS 3,052.0 23.2 3,075.2--------------------------------------------------------------------------------Current liabilitiesShort term loans 198 - 198.0Convertible loan notes 49.5 - 49.5Other current liabilities 599.6 (15.8) 583.8Provisions 11.6 - 11.6Income tax payable 23.6 - 23.6-------------------------------------------------------------------------------- 882.3 (15.8) 866.5--------------------------------------------------------------------------------Net current assets/(liabilities) 617.6 (6.0) 611.6--------------------------------------------------------------------------------Non-current liabilitiesCreditors falling due after more than one year 621.9 - 621.9Deferred tax liabilities 131.3 94.8 226.1Provisions 16.6 5.4 22.0-------------------------------------------------------------------------------- 769.8 100.2 870.0--------------------------------------------------------------------------------Total liabilities 1,652.1 84.4 1,736.5--------------------------------------------------------------------------------Net assets/(liabilities) 1,399.9 (61.2) 1,338.7================================================================================ EquityShare capital 28.6 - 28.6Share premium account 18.6 - 18.6Other reserves 12.8 - 12.8Profit and loss Account 896.2 (8.9) 887.3--------------------------------------------------------------------------------Equity attributable to equity holders of theparent 956.2 (8.9) 947.3Minority interest 443.7 (52.3) 391.4--------------------------------------------------------------------------------Total Equity 1,399.9 (61.2) 1,338.7================================================================================ 4.2.4 Statement of changes in equity under IFRS Period ended 30 September 2004 US$ million Share Cap Share Premium Other reserves P&L reserves Total-----------------------------------------------------------------------------------------------------------As at 1 April 2004 28.6 18.6 12.7 919.9 979.8Profit for the period - - - 34.3 34.3Loss on reduction of minority interest - - - (19.5) (19.5)CTA reserve (33.4) (33.4)Foreign exchange differences - - 0.1 - 0.1Dividend paid - - - (15.8) (15.8)Reward plan and LTIP credited to reserves - - - 1.8 1.8-----------------------------------------------------------------------------------------------------------As at 30 September 2004 28.6 18.6 12.8 887.3 947.3========================================================================================================== 4.2.5 EBITDA(1) Reconciliation from UK GAAP to IFRS for period ending 30 September 2004 2004-05 $ million-------------------------------------------------------------------------------- EBITDA under UK GAAP 160.0IAS 16- Overhaul expenses capitalised 1.5IAS 2- Share based payment (1.7)IAS 2 - Inventory Valuation 0.2--------------------------------------------------------------------------------EBITDA under IFRS 160.0--------------------------------------------------------------------------------(1) EBITDA represents operating profit before exceptional items plus depreciation and amortisation 4.3 Group Balance SheetAs at 1 April 2004 (excluding IAS 32/39) US$ million-------------------------------------------------------------------------------- UK GAAP Adjustments IFRS--------------------------------------------------------------------------------ASSETSNon-current assetsGoodwill 12.2 - 12.2Negative goodwill (8.6) 8.6 -Property, plant and equipment 1,268.4 13.1 1,281.5Investment in associate 2.7 - 2.7Other investments 27.5 (2.3) 25.2Other non-current assets - 22.3 22.3-------------------------------------------------------------------------------- 1,302.2 41.7 1,343.9--------------------------------------------------------------------------------Current assetsInventories 199.9 1.7 201.6Trade and other receivables 245.5 (22.4) 223.1Current asset investments 1,188.5 (1,092.2) 96.3Cash and cash equivalents 52.7 1,094.6 1,147.3-------------------------------------------------------------------------------- 1,686.6 (18.3) 1,668.3--------------------------------------------------------------------------------TOTAL ASSETS 2,988.8 23.4 3,012.2--------------------------------------------------------------------------------Current liabilitiesShort term loans 245.8 - 245.8Convertible loan notes 49.5 - 49.5Other current liabilities 575.3 (15.8) 559.5Provisions 25.3 - 25.3Income tax payable 11.2 - 11.2-------------------------------------------------------------------------------- 907.1 (15.8) 891.3--------------------------------------------------------------------------------Net current assets/(liabilities) 779.5 (2.5) 777.0--------------------------------------------------------------------------------Non-current liabilitiesCreditors falling due after more than one year 529.9 - 529.9Deferred tax liabilities 123.2 100.3 223.5Provisions 14.4 6.3 20.7-------------------------------------------------------------------------------- 667.5 106.6 774.1--------------------------------------------------------------------------------Total liabilities 1,574.6 90.8 1,665.4--------------------------------------------------------------------------------Net Assets/(liabilities) 1,414.2 (67.4) 1,346.8================================================================================EquityShare capital 28.6 - 28.6Share premium account 18.6 - 18.6Other reserves 12.7 - 12.7Profit and loss account 931.0 (11.1) 919.9--------------------------------------------------------------------------------Equity attributable to equity holders of theparent 990.9 (11.1) 979.8Minority interest 423.3 (56.3) 367.0--------------------------------------------------------------------------------Total Equity 1,414.2 (67.4) 1,346.8================================================================================ 4.4 Group Balance SheetAs at 1 April 2005 (including IAS 32/39) US$ million----------------------------------------------------------------------------------- IFRS IFRS 31 March 1 April 2005 IAS 32/39 2005-----------------------------------------------------------------------------------ASSETSNon-current assetsGoodwill 12.2 - 12.2Property, plant and equipment 2,288.6 - 2,288.6Investment in associate 3.3 - 3.3Other investments 24.8 1.3 26.1Other non-current assets 34.6 - 34.6Deferred tax asset 90.0 - 90.0----------------------------------------------------------------------------------- 2,453.5 1.3 2,454.8-----------------------------------------------------------------------------------Current assetsInventories 337.7 - 337.7Trade and other receivables 339.6 - 339.6Other financials asset (derivatives) 2.5 2.5Current asset investments 262.0 - 262.0Cash and cash equivalents 1,185.6 1.0 1,186.6----------------------------------------------------------------------------------- 2,124.9 3.5 2,128.4-----------------------------------------------------------------------------------TOTAL ASSETS 4,578.4 4.8 4,583.2-----------------------------------------------------------------------------------Current liabilitiesShort term loans 194.7 - 194.7Convertible loan notes 23.7 (17.7) 6.0Other current liabilities 675.0 (3.2) 671.8Other financials liabilities (derivatives) 42.1 42.1Provisions 37.0 - 37.0Income tax payable 15.1 - 15.1----------------------------------------------------------------------------------- 945.5 38.7 984.2-----------------------------------------------------------------------------------Net current assets/(liabilities) 1,179.4 (35.2) 1,144.2-----------------------------------------------------------------------------------Non-current liabilitiesCreditors falling due after more than one year 1,344.7 (22.0) 1,322.7Other financials liabilities (derivatives) 17.5 17.5Deferred tax liabilities 234.9 (6.6) 228.3Provisions 247.2 - 247.2Non equity minority interests 59.4 - 59.4----------------------------------------------------------------------------------- 1,886.2 (11.1) 1,875.1-----------------------------------------------------------------------------------Total liabilities 2,831.7 19.0 2,850.7-----------------------------------------------------------------------------------Net Assets 1,746.7 (14.2) 1,732.5=====================================================================================Equity--------Share capital 28.7 - 28.7Shares to be issued - - -Share based payment reserve 2.5 - 2.5Share premium account 18.6 - 18.6Other reserves 43.9 - 43.9Hedging reserves - (3.2) (3.2)Profit and loss Account 1,016.8 (8.9) 1,007.9-----------------------------------------------------------------------------------Equity attributable to equity holders ofthe parent 1,110.5 (12.1) 1,098.4Minority interest 636.2 (2.1) 634.1-----------------------------------------------------------------------------------Total Equity 1,746.7 (14.2) 1,732.5===================================================================================== 4.5 Reconciliation of profit for the periodSix months ended 30 September 2004 ------------------------------------------------------------------------------------------------------------------------US$ million IAS-23 Capitalisation IFRS-1 IAS-16 IAS-2 of interest IAS-12 Reversal of IAS 28 IAS -2 Overhaul Share based income/ Deferred goodwill Associate Inventory Total UK GAAP expenses payment expense tax amortisation reporting valuation adjustment IFRS------------------------------------------------------------------------------------------------------------------------RevenueContinuingoperations 677.4 - - - - - - - - 677.4Cost of sales (507.5) 0.6 - - - 0.2 - 0.2 1.0 (506.5)------------------------------------------------------------------------------------------------------------------------Gross profit 169.9 0.6 - - - 0.2 - 0.2 1.0 170.9------------------------------------------------------------------------------------------------------------------------Other operatingincome 9.7 - - - - - - - - 9.7Distributioncosts (18.7) - - - - - - - - (18.7)AdministrativeExpenses (38.2) - (1.8) - - - - - (1.8) (40.0)Operatingexceptional item (2.6) - - - - - - - - (2.6)------------------------------------------------------------------------------------------------------------------------Operatingprofit 120.1 0.6 (1.8) - - 0.2 - 0.2 (0.8) 119.3------------------------------------------------------------------------------------------------------------------------Investmentincome 20.3 - - (3.2) - - - - (3.2) 17.1Finance costs (28.9) - - 3.8 - - 1.0 - 4.8 (24.1)Share loss of associate (0.8) - - - - - (1.0) - (1.0) (1.8)Non-operatingexceptional item 1.4 - - - - - - - - 1.4------------------------------------------------------------------------------------------------------------------------Profit beforetaxation 112.1 0.6 (1.8) 0.6 - 0.2 - 0.2 (0.2) 111.9Income taxexpense (41.5) - - - 0.2 - - - 0.2 (41.3)------------------------------------------------------------------------------------------------------------------------Profit for theperiod 70.6 0.6 (1.8) 0.6 0.2 0.2 - 0.2 - 70.6======================================================================================================================== 4.6 Group Net Assets As at 30 September 2004 ------------------------------------------------------------------------------------------------------------------------ IAS-37 IAS-2 IAS-23 Discoun- IAS-7 Inven- IAS-10 Capitalis- IAS-19 capital- IAS-12 ting of IFRS-1 Cash&cash tory Total UK Proposed ation of Employee isation of Deferred long term Presen- equiva- valu- adjust- US$m GAAP dividend expenses benefits interest tax provision tation alent ation ment IFRS ------------------------------------------------------------------------------------------------------------------------ Non-current assetsG'will 3.3 - - - - - - 8.2 - - 8.2 11.5Property,plant &equi-pment 1,520.2 - 12.5 - 0.9 - - - - - 13.4 1,533.6Invest-ment inassociate 5.1 - - - - - - - - - - 5.1Otherinvest-ments 23.5 - - - - - - - - - - 23.5Othernon-currentassets - - - - - - - 23.4 - - 23.4 23.4------------------------------------------------------------------------------------------------------------------------ 1,552.1 - 12.5 - 0.9 - - 31.6 - - 45.0 1,597.1Current assetsInven-tories 263.6 - - - - - - - - 1.6 1.6 265.2Trade andotherreceiv-ables 265.3 - - - - - - (23.4) - - (23.4) 241.9Current assetinvest-ments 945.8 - - - - - - - (812.9) - (812.9) 132.9Cash & cashequiva-lents 25.2 - - - - - - - 812.9 - 812.9 838.1------------------------------------------------------------------------------------------------------------------------ 1,499.9 - - - - - - (23.4) - 1.6 (21.8) 1,478.1------------------------------------------------------------------------------------------------------------------------ TOTAL ASSETS 3,052.0 - 12.5 - 0.9 - - 8.2 - 1.6 23.2 3,075.2------------------------------------------------------------------------------------------------------------------------Currentliabil-itiesShorttermloans 198.0 - - - - - - - - - - 198.0Conver-tibleloan notes 49.5 - - - - - - - - - - 49.5Other currentliabil-ities 599.6 (15.8) - - - - - - - - (15.8) 583.8Pro-visions 11.6 - - - - - - - - - - 11.6Incometaxpayable 23.6 - - - - - - - - - - 23.6------------------------------------------------------------------------------------------------------------------------ 882.3 (15.8) - - - - - - - - (15.8) 866.5------------------------------------------------------------------------------------------------------------------------Net currentassets 617.6 15.8 - - - - - (23.4) - 1.6 (6.0) 611.6------------------------------------------------------------------------------------------------------------------------Non-currentliabil-itiesCreditorsfallingdue aftermore than1 year 621.9 - - - - - - - - - - 621.9Deferred taxliabil-ities 131.3 - - - - 94.8 - - - - 94.8 226.1Pro-visions 16.6 - - 6.2 - - (0.8) - - - 5.4 22.0------------------------------------------------------------------------------------------------------------------------ 769.8 - - 6.2 - 94.8 (0.8) - - - 100.2 870.0------------------------------------------------------------------------------------------------------------------------TotalLiabil-ities 1,652.1 (15.8) - 6.2 - 94.8 (0.8) - - - 84.4 1,736.5------------------------------------------------------------------------------------------------------------------------Net Assets 1,399.9 15.8 12.5 (6.2) 0.9 (94.8) 0.8 8.2 - 1.6 (61.2) 1,338.7======================================================================================================================== 4.7 Reconciliation of profit for the yearYear ended 31 March 2005 IFRS-1 Negative IAS-23 IAS-16 Goodwill IAS-2 Capitalisation IFRS-1 IAS-2 UK Overhaul KCM Share of interest IAS-12 Rev.Good- IAS 28 Inevtory Total US$m GAAP Expenses Acqui- based income/ Deferred will Amort- Associate valua- Adjust- sition payment expense Tax isation Reporting tion ment IFRS------------------------------------------------------------------------------------------------------------------------Contin-uingoper-ations 1,635.0 - - - - - - - - - 1,635.0Acqui-sitions 249.2 - - - - - - - - - 249.2------------------------------------------------------------------------------------------------------------------------GroupRevenue 1,884.2 - - - - - - - - - 1,884.2Cost of sales (1,414.8) (0.1) - - - - (0.4) - (0.4) (0.9)(1,415.7)------------------------------------------------------------------------------------------------------------------------Gross profit 469.4 (0.1) - - - - (0.4) - (0.4) (0.9) 468.5------------------------------------------------------------------------------------------------------------------------Otheroperatingincome 25.9 - - - - - - - - 25.9Distri-butioncosts (51.5) - - - - - - - - - (51.5)Admini-strativeExpenses (90.1) - - (2.5) - - - - - (2.5) (92.6)Operatingexcep-tionalitems (21.9) - - - - - - - - - (21.9)------------------------------------------------------------------------------------------------------------------------Operatingprofit 331.8 (0.1) - (2.5) - - (0.4) - (0.4) (3.4) 328.4------------------------------------------------------------------------------------------------------------------------Investmentincome 41.3 - - - (3.8) - - - - (3.8) 37.5Finance costs (37.7) - - - 4.7 - - 2.9 - 7.6 (30.1)Share ofresult ofassociate (2.7) - - - - - - (2.9) - (2.9) (5.6)Non-operatingexcept-ionalitem (0.4) - 56.5 - - - - - - 56.5 56.1Profit beforetax-ation 332.3 (0.1) 56.5 (2.5) 0.9 - (0.4) - (0.4) 54.0 386.3Income taxexpense (97.6) - - - - 10.6 - - - 10.6 (87.0)------------------------------------------------------------------------------------------------------------------------Profit for theyear 234. (0.1) 56.5 (2.5) 0.9 10.6 (0.4) - (0.4) 64.6 299.3======================================================================================================================== 4.8 Group Net Assets As at 31 March 2005 IAS-37 IAS-23 Discount- IAS-10 Capitali- IAS-19 Capitali- IAS-12 ing of IFRS-1 IAS-7 cash IAS-2 Total UK Proposed sation of Employee sation of Deferred long term Presen- & cash Inventory adjust-US$m GAAP dividend expenses Benefits expenses tax provision tation equivalent Equivalent ment IFRS------------------------------------------------------------------------------------------------------------------------Non-currentassets Goodwill 10.8 - - - - - - 1.4 - - 1.4 12.2Negativegoodwill (63.4) - - - - - - 63.4 - - 63.4 -Property,plantand equip-men 2,275.0 - 12.7 - 0.9 - - - - - 13.6 2,288.6Invest-ment inasso-ciate 3.3 - - - - - - - - - - 3.3Otherinvest-ments 24.8 - - - - - - - - - - 24.8Othernon-currentassets - - - - - - - 34.6 - - 34.6 34.6Deferred taxasset 90.0 - - - - - - - - - - 90.0------------------------------------------------------------------------------------------------------------------------ 2,340.5 - 12.7 - 0.9 - - 99.4 - - 113.0 2,453.5------------------------------------------------------------------------------------------------------------------------CurrentassetsInven-tories 336.3 - - - - - - - - 1.4 1.4 337.7Trade andotherreceiv-ables 374.2 - - - - - - (34.6) - - (34.6) 339.6Current assetinvest-ments 1,386.0 - - - - - - - (1,124.0) - (1,124.0) 262.0Cash &cashequiva-lents 61.6 - - - - - - - 1,124.0 - 1,124.0 1,185.6------------------------------------------------------------------------------------------------------------------------ 2,158.1 - - - - - - (34.6) - 1.4 (33.2) 2,124.9------------------------------------------------------------------------------------------------------------------------TOTAL ASSETS 4,498.6 - 12.7 - 0.9 - - 64.8 - 1.4 79.8 4,578.4------------------------------------------------------------------------------------------------------------------------Currentliabil-itiesShorttermloans 194.7 - - - - - - - - - - 194.7Convert-ibleloannotes 23.7 - - - - - - - - - - 23.7Other currentliabil-ities 708.1 (33.1) - - - - - - - - (33.1) 675.0Pro-visions 37.0 - - - - - - - - - - 37.0Income taxpayable 15.1 - - - - - - - - - - 15.1------------------------------------------------------------------------------------------------------------------------ 978.6 (33.1) - - - - - - - - (33.1) 945.5------------------------------------------------------------------------------------------------------------------------Net currentassets 1,179.5 33.1 - - - - - (34.6) - 1.4 (0.1) 1,179.4------------------------------------------------------------------------------------------------------------------------Non-currentliabil-itiesCreditors dueafter ayear 1,344.7 - - - - - - - - - - 1,344.7Deferred taxliabil-ities 146.3 - - - - 88.6 - - - - 88.6 234.9Pro-visions 240.9 - - 6.6 - - (0.3) - - - 6.3 247.2Non-equityminorityinterest 59.4 - - - - - - - - - - 59.4------------------------------------------------------------------------------------------------------------------------ 1,791.3 - - 6.6 - 88.6 (0.3) - - - 94.9 1,886.2------------------------------------------------------------------------------------------------------------------------Totalliabil-ities 2,769.9 (33.1) - 6.6 - 88.6 (0.3) - - - 61.8 2,831.7------------------------------------------------------------------------------------------------------------------------Net Assets 1,728.7 33. 12.7 (6.6) 0.9 (88.6) 0.3 64.8 - 1.4 18.0 1,746.7======================================================================================================================== 4.9 Group Net Assets As At 1 April 2005 (including IAS 32/39 Adjustments) Fair Value ofUS$ million IFRS pre Cash Flow Fair Value Financial Convertible Total IFRS post 32/39 Hedge Hedge Derivatives Asset debt Adjustments 32/39------------------------------------------------------------------------------------------------------------------------Non-current assets Goodwill 12.2 - - - - - - 12.2Property,plant andequipment 2,288.6 - - - - - - 2,288.6Investment inassociate 3.3 - - - - - - 3.3Other investments 24.8 - - - 1.3 - 1.3 26.1Other non-currentassets 34.6 - - - - - - 34.6Deferred tax asset 90.0 - - - - - - 90.0------------------------------------------------------------------------------------------------------------------------ 2,453.5 - - - 1.3 - 1.3 2,454.8------------------------------------------------------------------------------------------------------------------------Current assetsInventories 337.7 - - - - - - 337.7Trade and otherreceivables 339.6 - - - - - - 339.6Other financialassets (derivatives) - 1.5 0.6 0.4 - - 2.5 2.5Current asset investments 262.0 - - - - - - 262.0Cash and cashequivalents 1,185.6 - 1.0 - - - 1.0 1,186.6------------------------------------------------------------------------------------------------------------------------ 2,124.9 1.5 1.6 0.4 - - 3.5 2,128.4------------------------------------------------------------------------------------------------------------------------TOTAL ASSETS 4,578.4 1.5 1.6 0.4 1.3 - 4.8 4,583.2------------------------------------------------------------------------------------------------------------------------Current liabilitiesShort term loans 194.7 - - - - - - 194.7Convertible loan notes 23.7 - - - - (5.4) (5.4) 18.3Other currentliabilities 675.0 - (3.2) - - - (3.2) 671.8Other financialliabilities (derivatives) - 7.9 15.7 0.8 - 14.3 38.7 38.7Provisions 37.0 - - - - - - 37.0Income tax payable 15.1 - - - - - - 15.1------------------------------------------------------------------------------------------------------------------------ 945.5 7.9 12.5 0.8 - 8.9 30.1 975.6------------------------------------------------------------------------------------------------------------------------Net current assets 1,179.4 (6.4) (10.9) (0.4) - (8.9) (26.6) 1,152.8------------------------------------------------------------------------------------------------------------------------Non-current liabilitiesCreditors falling dueafter more than one year 1,344.7 - (21.3) (0.7) - - (22.0) 1,322.7Other financialliabilities(derivatives) - - 17.5 - - - 17.5 17.5Deferred tax liabilities 234.9 (2.1) (2.0) 0.1 0.4 (3.0) (6.6) 228.3Provisions 247.2 - - - - - - 247.2Non equity minorityinterests 59.4 - - - - - - 59.4------------------------------------------------------------------------------------------------------------------------ 1,886.2 (2.1) (5.8) (0.6) 0.4 (3.0) (11.1) 1,875.1------------------------------------------------------------------------------------------------------------------------Total liabilities 2,831.7 5.8 6.7 0.2 0.4 5.9 19.0 2,850.7------------------------------------------------------------------------------------------------------------------------Net Assets 1,746.7 (4.3) (5.1) 0.2 0.9 (5.9) (14.2) 1,732.5======================================================================================================================== 5. Directors' responsibilities The directors are required by United Kingdom company law to prepare financialstatements for each financial period which give a true and fair view of thestate of affairs of the Group as at the end of the financial period and of theprofit or loss and cash flows for that period. To ensure that this requirementis satisfied the directors are responsible for establishing and maintainingadequate internal controls and procedures for financial reporting throughout theGroup. For the year ending 31 March 2006, the directors will be preparing the Group'sfinancial statements in accordance with International Financial ReportingStandards (IFRS) for the first time. As part of the transition to IFRS, thedirectors are presenting financial information prepared under IFRS for theopening balance sheet as at 1 April 2004, year ended 31 March 2005 and the sixmonths ended 30 September 2004. The directors are responsible for the selection and consistent application ofthe accounting policies and the selection of transition options under IFRS 1,including the assumptions made about the standards and interpretations expectedto be effective, and the policies expected to be adopted, when the Group's firstcomplete set of IFRS financial statements are prepared. The directors are responsible for maintaining proper accounting records and theyhave a general responsibility for taking such steps as are reasonably open tothem to safeguard the assets of the Group and to prevent and detect fraud andother irregularities. The directors are also responsible for the maintenance and integrity of theGroup's website. The work carried out by the independent accountants does notinvolve responsibility for any changes that may have occurred to the IFRSfinancial information since it was initially loaded on to the website. Directors' declaration The IFRS financial information for the year ended 31 March 2005 and period ended30 September 2004 has been prepared in accordance with the basis of preparationand accounting policies set out on pages 10 to 20. We consider that theaccounting policies and transition options we have selected are appropriate forVedanta's business and supported by reasonable and prudent judgements. The IFRS financial information has been prepared on the going concern basissince, in our opinion, each of the Vedanta Group companies has adequatefinancial resources to continue in operational existence for the foreseeablefuture and to pay its debts as and when they become due and payable. By order of the board K.K. Kaura26 September 2005 6. INDEPENDENT AUDITORS' REPORT TO THE BOARD OF DIRECTORS OF VEDANTA RESOURCESPLC ON THE PRELIMINARY IFRS FINANCIAL INFORMATION We have audited the accompanying non-statutory preliminary consolidated balancesheet of Vedanta Resources plc ("the Company") and its subsidiaries (togetherthe "Group") prepared in accordance with International Financial ReportingStandards ("IFRS") as at 1 April 2004 (the "opening balance sheet") and thenon-statutory preliminary comparative IFRS financial information for the yearended 31 March 2005, which comprises the consolidated income statement preparedin accordance with IFRS, the consolidated balance sheet prepared in accordancewith IFRS and certain information set out in Section 4 (the "comparative IFRSfinancial information") (together "the preliminary IFRS financial information"). This report is made solely to the Board of Directors, in accordance with ourengagement letter dated 4 August 2005 and solely for the purpose of assistingwith the transition to IFRS. Our audit work will be undertaken so that we mightstate to the company's board of directors those matters we are required to stateto them in an auditors' report and for no other purpose. To the fullest extentpermitted by law, we will not accept or assume responsibility to anyone otherthan the company for our audit work, for our report, or for the opinions we haveformed. Respective responsibilities of directors and auditors The Company's directors are responsible for ensuring that the Company and theGroup maintains proper accounting records and for the preparation of thepreliminary comparative on the basis set out in Section 2, which describes howIFRS will be applied under IFRS 1, including the assumptions the directors havemade about the standards and interpretations expected to be effective, and thepolicies expected to be adopted, when the Company prepares its first completeset of IFRS financial statements as at 31 March 2006. Our responsibility is to audit the the preliminary IFRS financial information inaccordance with relevant United Kingdom legal and regulatory requirements andauditing standards and report to you our opinion as to whether the preliminarycomparative IFRS financial information is prepared, in all material respects, onthe basis set out in Section 2. Basis of audit opinion We conducted our audit in accordance with United Kingdom auditing standardsissued by the Auditing Practices Board. An audit includes examination, on a testbasis, of evidence relevant to the amounts and disclosures in the comparativeIFRS financial information. It also includes an assessment of the significantestimates and judgements made by the directors in the preparation of the thepreliminary IFRS financial information and of whether the accounting policiesare appropriate to the circumstances of the group, consistently applied andadequately disclosed. We planned and performed our audit so as to obtain all the information andexplanations which we considered necessary in order to provide us withsufficient evidence to give reasonable assurance that the the preliminary IFRSfinancial information is free from material misstatement, whether caused byfraud or other irregularity or error. In forming our opinion, we also evaluatedthe overall adequacy of the presentation of information in the preliminary IFRSfinancial information. Without qualifying our opinion, we draw attention to Section 2 "Basis of preparation" which explains why there is a possibility that the preliminaryIFRS financial information may require adjustment before constituting the finalIFRS financial information. Moreover, we draw attention to the fact that, underIFRSs, only a complete set of financial statements comprising a balance sheet,income statement, statement of changes in equity, cash flow statement, togetherwith comparative financial information and explanatory notes, can provide a fairpresentation of the Company's financial position, results of operations and cashflows in accordance with IFRSs. Opinion In our opinion the preliminary IFRS financial information is prepared, in allmaterial respects, on the basis set out in Section 2, "Basis of preparation",which describes how IFRS will be applied under IFRS 1, including the assumptionsthe directors have made about the standards and interpretations expected to beeffective, and the policies expected to be adopted, when the Company preparesits first complete set of IFRS financial statements as at 31 March 2006. Deloitte & Touche LLP Chartered AccountantsLondon 26 September 2005 7. INDEPENDENT REVIEW REPORT TO THE BOARD OF DIRECTORS OF VEDANTA RESOURCES PLCON THE PRELIMINARY COMPARATIVE FINANCIAL INFORMATION FOR THE SIX MONTHS ENDED 30SEPTEMBER 2004 We have reviewed the accompanying preliminary International Financial ReportingStandards (IFRS) consolidated financial information of Vedanta Resources plc("the Company") and its subsidiaries (together, "the Group") for the six monthsended 30 September 2004 which comprises the consolidated income statement, theconsolidated balance sheet, the consolidated statement of changes in equity, theconsolidated cash flow statement and related notes set out in Section 4 (hereinafter referred to as "preliminary financial information"). This preliminary financial information is the responsibility of the Company'sdirectors. It has been prepared as part of the Company's conversion to IFRS inaccordance with the basis set out in Section 2 which describes how IFRSs have beenapplied under IFRS 1, including the assumptions the directors have made aboutthe standards and interpretations expected to be effective, and the policiesexpected to be adopted, when the company prepares its first complete set of IFRSfinancial statements as at 31 March 2006. Our responsibility is to express anopinion on this preliminary IFRS comparative financial information based on ourreview. Our review report is made solely to the Company in accordance with Bulletin 1999/4 issued by the Auditing Practices Board. Our work has been undertaken so thatwe might state to the Company those matters we are required to state to them inan independent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe Company, for our review work, for this report, or for the conclusions wehave formed. Review work performed We conducted our review in accordance with Bulletin 1999/4 issued by theAuditing Practices Board. A review consists principally of making enquiries ofmanagement and applying analytical procedures to the preliminary financialinformation and underlying financial data and, assessing whether the accountingpolicies and presentation have been consistently applied unless otherwisedisclosed. A review excludes audit procedures such as tests of control andverification of assets, liabilities and transactions. It is substantially lessin scope than an audit performed in accordance with United Kingdom auditingstandards and therefore provides a lower level of assurance than an audit.Accordingly, we do not express an opinion on the preliminary financialinformation. Emphasis of matter Without modifying our review conclusion, we draw attention to the fact that Section2 explains why there is a possibility that the accompanying preliminaryfinancial information may require adjustment before constituting the final IFRScomparative information for the six months ended 30 September 2004. Moreover, wedraw attention to the fact that, under IFRSs, only a complete set of financialstatements comprising an income statement, balance sheet, statement of changesin equity, cash flow statement, together with comparative financial informationand explanatory notes, can provide a fair presentation of the Group's financialposition, results of operations and cash flows in accordance with IFRSs. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the preliminary financial information for the six months ended30 September 2004 which has been prepared in accordance with the basis set outin Section 2. Deloitte & Touche LLPChartered AccountantsLondon26 September 2005 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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